NSW power sell-off a rare chance

The Weekend Australian - Travel - - Resources -

THE NSW Gov­ern­ment’s de­ci­sion to sell elec­tric­ity re­tail­ing busi­nesses and lease power plants will prob­a­bly re­sult in ‘‘ fierce’’ bid­ding from po­ten­tial buy­ers, says JPMor­gan Chase & Co. The re­tail li­censes of En­ergy Aus­tralia, In­te­gral En­ergy and Coun­try En­ergy, which com­prise about 3.3 mil­lion cus­tomers, will be the ‘‘ last size­able lot of re­tail as­sets to be pri­va­tised,’’ JPMor­gan says.

The re­tail and gen­er­a­tion as­sets may fetch as much as $16.4 bil­lion, it says.

AGL En­ergy, Ori­gin En­ergy, CLP Hold­ings’s TRUen­ergy and In­ter­na­tional Power have sig­nalled they may bid for en­ergy units sold by NSW.

Mor­ris Iemma, pre­mier of Aus­tralia’s most pop­u­lous state, says the sales, pos­si­bly in­clud­ing an ini­tial pub­lic of­fer of a com­bined re­tailer and gen­er­a­tor, may oc­cur in the sec­ond half of 2008.

‘‘ Given NSW is the big­gest en­ergy mar­ket in Aus­tralia, we ex­pect that bid­ding will be fierce with a lot to gain for all play­ers con­cerned,’’ JPMor­gan an­a­lysts led by Syd­ney-based Grace Chan say in the re­port.

Bab­cock & Brown Power, Aus­tralia’s big­gest pub­licly traded power pro­ducer, and In­ter­gen, co-owned by an Amer­i­can In­ter­na­tional Group buy­out fund and On­tario Teach­ers’ Pen­sion Plan, may also bid, the an­a­lysts say.

Melbourne-based TRUen­ergy and Syd­ney­based Bab­cock & Brown Power may be un­der more pres­sure to buy as­sets from NSW than the other bid­ders be­cause of the prob­a­ble lack of other op­por­tu­ni­ties to ex­pand their busi­nesses, UBS AG says in a sep­a­rate re­port.

‘‘ Out­side of the Queens­land gen­er­a­tors NSW rep­re­sents one of the last op­por­tu­ni­ties in the Aus­tralian mar­ket fac­ing util­ity busi­nesses,’’ UBS an­a­lysts led by Syd­ney­based David Leitch say in the re­port.

‘‘ Play­ers who don’t get set in NSW will find the scale dif­fi­cult to repli­cate else­where.’’

In­vestors will prob­a­bly be cau­tious in in­vest­ing in the larger po­ten­tial bid­ders such as Ori­gin, AGL and Bab­cock & Brown Power un­til de­tails of the as­sets they may buy, and how much cap­i­tal they may need to raise are de­cided, UBS say.

UBS val­ued the as­sets to be sold or leased at more than $15 bil­lion in­clud­ing debt, while Credit Suisse Group in a sep­a­rate re­port says pro­ceeds may be at the lower end of a $13 bil­lion to $17 bil­lion range.

An in­crease in whole­sale power prices and lower fore­cast growth in NSW than in Queens­land state to the north may crimp the prices that bid­ders are pre­pared to pay for the re­tail­ing com­pa­nies, Fitch Rat­ings says.

En­ergy de­mand in NSW is fore­cast to in­crease at 1.6 per cent a year over the next decade, com­pared with 3.6 per cent in Queens­land, the Na­tional Elec­tric­ity Mar­ket Man­age­ment, op­er­a­tor of the whole­sale power mar­ket, says.

While the in­crease in whole­sale power prices would nor­mally boost of­fer prices for the gen­er­a­tion as­sets, un­cer­tainty over the cost that will be placed on car­bon through Aus­tralia’s planned emis­sions trad­ing sys­tem may re­sult in bid­ders ap­ply­ing a dis­count to the as­sets, Fitch says.

The three gen­er­a­tors to be leased, Mac­quarie Gen­er­a­tion, Delta Elec­tric­ity and Erar­ing En­ergy, have about 11,860 megawatts of power pro­duc­tion ca­pac­ity, mostly fu­elled by coal. Re­sources break This is the last Re­sources edi­to­rial page for 2007. It re­turns on Jan­uary 12

Seller: NSW Pre­mier Mor­ris Iemma wants money for a raft of projects

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