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

SP Ausnet to buy Alinta assets for A$8b

SYDNEY – Australian infrastructure firm SP Ausnet said on Thursday it has agreed with Singapore Power to buy some assets of energy firm Alinta for A$8.142 billion (US$6.96 billion).

SP Ausnet, which owns and operates electricity and gas transmission networks in Victoria state, said the acquisition will be funded by a mixture of debt and equity, including a rights issue to security holders.

SP Ausnet reaffirmed its full year distribution guidance for 2007/2008 and said the acquisition of Alinta assets, which include a gas distribution network in the state of New South Wales and a electricity network in Victoria state, would make it one of the largest infrastructure businesses in Australia.

Analysts said the acquisition was too expensive and would dilute SP Ausnet’s value as well as jeopardise the firm’s distribution yield.

‘A rights issue would need to be done at a steep discount given the Alinta deal is dilutive, the size of the rights issue and SP Ausnet’s lacklustre performance since listing in 2005,’ said Merrill Lynch analyst Matthew Spence.

Alinta, previously Australia’s largest energy infrastructure firm, was acquired and carved up by a consortium of investment firm Babcock & Brown Ltd and state-owned utility Singapore Power.

‘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,’ SP Ausnet Managing Director Nino Ficca said in a statement.

The company said the purchase of gas and electricity transmission assets in New South Wales and Queensland would also position it for possible future privatisation of the two states’ energy infrastructure.

Singapore Power owns 51 per cent of SP Ausnet, which was listed in Australia and Singapore in December 2005.

Analysts have raised concerns about the impact on SP Ausnet’s share price and dividends if it bought Alinta assets, given the high price Babcock and Singapore Power paid in their A$8 billion takeover.

Investment banks UBS AG and Morgan Stanley, which will be managing the rights issue, will underwrite the balance of A$1 billion to fund the transaction, the paper said.

SP Ausnet declined to give any financial forecasts for the transaction during a briefing, saying that a detailed report would be issued later this year. SP Ausnet said the acquisition was subject to security holders’ approval. The company plans to hold a meeting with security holders before the end of the year. — REUTERS