UPDATE: NSW Power Auction Delayed Again; Origin Mulls Alternatives
February 18 2010 - 2:42AM
Dow Jones News
The troubled privatization of electricity assets in Australia's
New South Wales state hit a big snag on Thursday, with an expected
key participant, Origin Energy Ltd. (ORG.AU), threatening to
withdraw its interest due to yet another delay in the up to A$10
billion sale process.
In a clear sign that it is losing patience with the government,
Origin said it will consider investing money earmarked for the long
mooted auction elsewhere.
The NSW government on Thursday said due diligence on the assets
up for sale, which includes the state's electricity retailers, will
commence "towards the middle of the year", from previous guidance
of some time this month.
An Origin spokesman said the integrated energy company and
Australia's second biggest electricity retailer is
disappointed.
"Origin has consistently held the view that these reforms are
necessary to encourage increased private sector investment in new
generation capacity," the spokesman said.
"In light of this delay, Origin will continue to be open to
dialogue with the NSW government with respect to the revised
timetable but will also consider other competing investment
options."
Origin has often said it's mulling a range of acquisition
opportunities but this is the first time it's indicated it could
exclude one investment for another due to timing issues.
A spokesman for Australia's biggest electricity retailer, AGL
Energy Ltd. (AGK.AU) said: "The reality is that we are interested
in the sale process, if there is a sale process."
AGL and Origin have enthusiastically expressed their interest in
the auction a number of times and said in November that they lodged
expressions of interest with the government.
A withdrawal from the process by just one of them will be a
major blow for the government because some analysts aren't
expecting many other serious bidders to emerge, apart perhaps from
Hong Kong-listed CLP Holdings Ltd. (CLPHY) subsidiary TRUenergy,
amid concerns a slump in global financial markets and Australia's
proposed carbon trading scheme will deter formal binding
offers.
NSW Treasurer Eric Roozendaal said in a statement Thursday that
the government is confident of achieving a good outcome, "having
received expressions of interest from a strong field of qualified
and capable domestic and international bidders".
The state government said late last year that it expects any
sales to be completed in the second half of 2010, back from the end
of 2009. It reiterated Thursday that any transactions "are expected
to be completed later this year".
Australia's most populous state is selling the retail arms of
Energy Australia, Integral Energy and Country Energy. It is keeping
the generators and instead offering generation trading contracts in
what it calls a gentrader model, and is also selling future power
station development sites.
Some analysts have estimated the sale could raise as much as
A$10 billion but the government is reluctant to provide
guidance.
New Zealand's Infratil Ltd. (IFT.NZ) also lodged an expression
of interest in November, although a spokesman for the company
stressed at the time that the privatization process is in its
"early stages".
U.K-based International Power Plc (IPR.LN) has been touted as a
possible outside chance but has declined to comment if it's
involved, as has TRUenergy.
Former New South Wales Finance Minister Joe Tripodi, who was
stood down last year, said in September that private equity
companies and offshore interests in Asia, the U.S. and Europe had
expressed some form of interest in the assets.
The government is being advised by Lazard and Credit Suisse.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
ross.kelly@dowjones.com
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