Questions raised on Edison's stake in Contact

American energy giant Edison Mission Energy's frail financial position may threaten its majority stakeholding in New Zealand's Contact Energy.
Questions raised on Edison's stake in Contact Questions raised on Edison's stake in Contact Questions raised on Edison's stake in Contact Questions raised on Edison's stake in Contact Questions raised on Edison's stake in Contact

Earlier this week Edison Mission admitted it was thinking about selling "some or all" of its international operations - intensifying speculation about its $NZ1.5 billion stake in Contact, one of this country's largest energy players.

In its latest quarterly filing with the Securities and Exchange Commission, Edison said the subsidiary that owns its international operations had last week secured a commitment letter for a $US700 million loan that was intended to provide "bridge financing to asset sales, including the sale of some or all of its international operations, depending upon, among other things, market prices".

The $US700 million loan would be largely used to help subsidiary Edison Mission Midwest Holdings meet a December 11 deadline for debt repayment and the repay an overseas subsidiary.

Edison's representatives in Australia have not commented on media speculation and Contact's Steve Barrett has issued no statements.

Edison Mission has a wide range of international assets - power stations in New Zealand, Australia, Britain, Italy, Turkey, Thailand and the Philippines - so it is unclear if Edison would sell its overseas assets as a complete package or individually.

There has been earlier media speculation about Edison Mission's intentions for its international assets and last December Contact moved to strengthen its "insulation" from any action taken by Edison.

Contact introduced tighter governance measures, entrenching existing practices and formalising the independence of the board.

Edison Mission's full takeover bid for Contact last year was not successful when it offered shareholders $NZ4.14 a share. Financial institutions thwarted the bid and Contact shares earlier this week reached an all-time high of $NZ5.30. Edison paid $5 a share for its 51% stake in 1999, when the company was split off from ECNZ, privatised and shares sold to the public at $NZ3.10 each.

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