Meridian generates interest in Southern Hydro

NEW Zealand government-owned Meridian Energy wants to have the sale of its Australian renewable energy subsidiary Southern Hydro concluded by mid-October.
Meridian generates interest in Southern Hydro Meridian generates interest in Southern Hydro Meridian generates interest in Southern Hydro Meridian generates interest in Southern Hydro Meridian generates interest in Southern Hydro

The company is expected to sell for about A$1.5 billion and Meridian has said it has already received unsolicited approaches from potential buyers.

The recent bidding war over Pacific Hydro sale has illustrated the market interest in renewable energy generation, and Southern Hydro is a much larger company than PacHydro.

Last week, Southern Hydro commissioned Australia's largest wind farm, the 91MW Wattle Point facility on South Australia’s Yorke Peninsula, bringing its total generating capacity up to 763 megawatts, compared with Pacific Hydro’s 230MW of generating assets.

Southern Hydro’s 646MW of hydro power resources draw from nine separate catchment areas and provide peaking power to the Australian national grid. New wind and hydro developments are expected to add another 566MW over the next three years to Southern Hydro’s total capacity.

Potential Austrealian buyers include Origin Energy and AGL.

While Meridian is not yet naming any likely bidders, a Reuters report says several Asian and European companies, including the losing bidder for Pacific Hydro, Spanish company Acciona and Hong Kong utility China Light & Power (CLP) are candidates.

CLP Asian business head Richard McIndoe has said CLP is definitely interested in evaluating Southern Hydro, acccording to Reuters.

McIndoe said CLP also needed to consider any regulatory issues there might be with the Australian Competition and Consumer Commission.

He added that CLP was aiming to build the renewable energy component of its portfolio to 5% of the group's total generating capacity by 2010. CLP owns over 7000MW of capacity outside its home base, including plant in Australia, Thailand, Taiwan and India, and it derived about 20% of its HK$8.61 billion 2004 net profit from offshore.

In another twist, the successful bidder for Pacific Hydro, Industry Funds Management, could become a bidder for Southern Hydro, according to a Sydney Morning Herald report.

Following its $788 million takeover of PacHydro,

IFM which handles billions of dollars for industry superannuation funds, was "potentially interested", chairman Gary Weaven said yesterday.

But Southern Hydro was very different to PacHydro, according to Weaven, as its asset base was entirely in Australia where growth in renewable energy projects was restricted by low government subsidy targets.

Australian renewable assets were unable to participate in international carbon trading as the country had not signed the Kyoto Protocol.

These constraints could also limit Accciona's interest in Southern Hydro.

Meanwhile, the Australian reports that Meridian's advisers - Credit Suisse First Boston and First NZ Capital - have begun circulating a nine-page briefing on the company and will release a formal information memorandum next month.

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