SPAus – BT

SP AusNet to buy assets from Singapore Power for A$8.14b

(SYDNEY) SP AusNet has agreed to buy assets from parent Singapore Power Ltd for A$8.14 billion (S$10.4 billion), including debt, to become Australia’s largest energy transmission company.

The acquisition will be funded by a mix of debt and equity, Melbourne-based SP AusNet said yesterday in a statement to the Australian Stock Exchange. It will pay the same price, plus unspecified transaction costs, for the Alinta Ltd assets that Singapore Power did when it, together with Babcock & Brown Ltd, bought the Western Australian utility earlier this month.

Singapore Power said in May it would offer its share of Perth-based Alinta to its Australian unit, allowing it to benefit from energy demand forecast to rise by 2 per cent a year till 2011. Since then, a credit crisis increased the cost of borrowing, while a regulator in SP AusNet’s home state of Victoria proposed bigger- than-expected cuts in gas network charges.

‘Circumstances have changed since the parent company agreed to buy these assets,’ said Paul Johnston, a utilities analyst at Commonwealth Securities Ltd in Melbourne.

‘They are quality assets and it is a great opportunity to increase their size, but I’m just doubting the price and the value they’re actually going to get.’ SP AusNet fell five Australian cents, or 3.6 per cent, to A$1.34 in Sydney trading, lagging a 0.1 per cent decline in the exchange’s benchmark utilities index.

SP AusNet will get gas and electricity distribution networks in New South Wales and Victoria states, two natural gas pipelines and an energy asset management unit in eastern Australia. It did not split the purchase price between equity and assumed debt, or quantify the transaction costs.

Chief financial officer Geoff Nicholson declined on a conference call to estimate the effect of the purchase on cash flows, quantify savings from merging the assets, or the size of the share sale and debt raising that will be required.

SP AusNet agreed on Wednesday night with Singapore Power on the transaction and needed to release a statement even though financial details are not yet available, he said.

The lack of financial information prompted criticism on the call from analysts including David Leitch at UBS AG and Matthew Spence at Merrill Lynch & Co. ‘I have to regard this as one of the most useless announcements I’ve ever come across,’ Mr Leitch said on the call. ‘What on earth are analysts supposed to make of it? You’ve said you’re going to have to raise a lot more equity without explaining in any financial sense how it’s going to benefit security holders.’

Singapore Power intends to buy shares in the equity raising to keep a 51 per cent stake in SP AusNet, the Australian company said. The purchase needs to be approved by SP AusNet shareholders at a meeting targeted for late this year.

SP AusNet maintained a forecast increase of about 2.5 per cent in the full-year dividend in the year ending March 31.

‘These assets provide a strong fit with our existing portfolio of energy transmission and distribution assets,’ Nino Ficca, managing director of SP AusNet, said in the statement. ‘The opportunity to expand our operations outside the geographic boundaries of Victoria, as well as into the area of gas transmission, is something that we have been working on for some time.’ – Bloomberg

Leave a Reply