SP AusNet plans to raise A$3.02b in share sale

Proceeds will fund purchase of assets from parent

SP AusNet, the Melbourne- based power distributor 51 per cent owned by Singapore Power Ltd, plans to raise A$3.02 billion (S$4.08 billion) by selling shares to help fund the purchase of Australian assets from its parent.

The price of the new shares will be no less than A$1.1 apiece and details of the sale will be announced later, SP AusNet said in a statement to shareholders yesterday.

The utility will borrow A$4.33 billion to contribute to the cost of acquiring the assets, formerly owned by Alinta Ltd.

The A$8.32 billion transaction will make SP AusNet Australia’s largest energy transmission company.

Parent Singapore Power bought the assets from Alinta in August, including Alinta’s energy distribution networks and pipelines in New South Wales, Victoria and Queensland.

‘The transaction is expected to be distributions accretive and have a positive impact for securityholders,’ SP AusNet chairman Ng Kee Choe said in a separate statement.

It ‘provides access to new capabilities and enhanced opportunities for growth through asset expansion, increased energy demand and the provision of asset management services’.

The power distributor’s shares fell 0.4 per cent to A$1.245 by 2.43 pm in Sydney, trailing the 0.1 per cent drop in the exchange’s benchmark utilities index.

The balance of the funds needed for the acquisition will come from the assumption of Alinta debt and hedge liabilities, it said.

Dividend payments will increase by an estimated 2.5 per cent in 2009, SP AusNet said.

Shareholders are scheduled to vote on the transaction on Dec 11 and the transaction is expected to be completed by Dec 21.

SP AusNet’s credit rating will be cut should shareholders approve the transaction and the equity raising proceed to ‘A-‘ from ‘A,’ Standard & Poor’s Ratings Services said yesterday. SP AusNet remains on ‘CreditWatch’ with negative implications.

‘Although SP AusNet will benefit from business, geographic, and regulatory diversity, the group’s cash-flow metrics will deteriorate substantially because of the proposed high debt levels,’ Standard & Poor’s analyst Parvathy Iyer said.

Morgan Stanley Australia Securities Ltd, Goldman Sachs JBWere Pty Ltd and UBS AG are the proposed underwriters of the share sale, SP AusNet said. — Bloomberg

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

Acquisition of Alinta Assets from Singapore Power International

SP AusNet (ASX Code: SPN) today announced it has agreed with Singapore Power International (“SPI”) to acquire the Alinta assets being purchased by SPI. SP AusNet will acquire the assets for $8,142 million, which is the price paid by SPI¹, plus transaction costs and holding costs between the time of the acquisition by SPI and completion of the sale to SP AusNet.

The acquisition is conditional upon SP AusNet obtaining securityholder approval, securing the necessary funding, final documentation, completion of the restructure of Alinta following the scheme of arrangement and any applicable consents or approvals.

The Alinta assets to be acquired comprise:

• The NSW Gas Distribution Network;
• The Alinta Vic Electricity Network;
• A 34.1% stake in the United Energy Distribution Network;
• The Eastern Gas Pipeline;
• The Queensland Gas Pipeline;
• The VicHub;
• A 50% stake in the ActewAGL distribution joint venture;
• A 7.6% stake in TransACT; and
• The Eastern States Asset Management business.

The acquisition will complement SP AusNet’s existing portfolio of high quality energy transmission and distribution assets, substantially increase SP AusNet’s scale and presence across the eastern states of Australia and provide access to higher growth assets.

SP AusNet’s Managing Director, Mr Nino Ficca said, “These assets provide a strong fit with our existing portfolio of energy transmission and distribution assets. 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.”

“A successful acquisition by SP AusNet will create the largest energy transmission and distribution business in Australia with high quality regulated assets and additional growth potential from its pipeline assets and asset management capability. SP AusNet will be one of the largest infrastructure businesses listed on the ASX.”

Acquisition Highlights

• Transformational acquisition positioning SP AusNet as the leading utility business in Australia, with operations in Victoria, NSW, Queensland and the ACT.
• Revenue upside underpinned by predictable cash flows from regulated assets and exposure to higher growth assets and asset management services.
• The addition of significant gas distribution and transmission assets into SP AusNet’s portfolio will further expand and diversify existing capabilities.
• Combined resources across Australia will provide a key strategic platform for SP AusNet to continue developing a competitively focussed services business and provide access to additional skilled resources in a constrained labour market.
• Synergy benefits are expected to be achieved from a combined overhead pool and more
efficient operations.

The acquisition will be funded by a mixture of debt and equity. It is currently proposed that this will include a rights issue to all securityholders. It is SPI’s intention to maintain its 51% holding in SP AusNet.

SP AusNet was established as Singapore Power’s investment vehicle for electricity and gas transmission and distribution assets in Australia and New Zealand. This transaction demonstrates Singapore Power’s commitment to growing SP AusNet and its alignment with all SP AusNet securityholders.

It is intended that the assets will be incorporated into SP AusNet’s existing structure and that the management services arrangement between SPI and SP AusNet will be extended to cover the assets and businesses to be acquired.

Independent Review Process

The offer received from SPI was reviewed by the Independent Directors’ Committee (“the Committee”) comprising Mr Ian Renard, as Chair, Mr Tony Iannello and Mr Martyn Myer. The Committee was assisted by Pacific Road and other external legal and accounting advisers.

The proposed acquisition has been recommended by the Committee and subsequently approved by the Board of SP AusNet.

Next Steps

The acquisition is subject to the approval of the securityholders of SP AusNet at a general meeting. SPI will not be able to vote on the resolution at this meeting.

SP AusNet is seeking to hold the meeting of securityholders before the end of the year. Securityholders will be provided with an explanatory memorandum which will contain all information relevant to the transaction. The explanatory memorandum will include financial forecasts together with information regarding the expected impact on SP AusNet’s yield, gearing and credit rating. An independent expert’s report on the transaction will also be provided to securityholders.

The Directors maintain the full year distribution guidance for 2007/08 and are of the view the acquisition will add to the long term value of SP AusNet.

¹ Subject to finalisation of adjustments and assumption of liabilities at the time of the acquisition by SPI.

Source : SGX