State Grid Corp. of China, the world’s largest utility by revenue, is among bidders eying a 42% stake in New Zealand’s second-largest electricity and gas distribution company Powerco worth more than 450 million New Zealand dollars (US$382 million), two people familiar with the matter said Tuesday.
State Grid has appointed Macquarie Group MQG.AU +1.77% as its financial advisor ahead of a late April deadline for indicative bids, in a process run by Barclays BARC.LN -0.66% on behalf of Brookfield Infrastructure Partners LP BIP +1.58%. Shortlisted parties will be notified in May ahead of a final offer deadline in June. Australian investment manager QIC owns the remaining 58% of Powerco, and did not exercise its right of first refusal to buy Brookfield’s stake. Brookfield acquired the stake through its 1.60 billion Australian dollar (US$1.66 billion) acquisition of Australia’s Prime Infrastructure Ltd in 2010. Powerco’s earnings before interest, tax, depreciation, amortization and financial derivatives, or Ebitdaf, for the six months to Sept. 30, was NZ$123.7 million.
The company distributes electricity to 320,000 households and businesses in New Zealand’s North Island through 30,000 kilometers of underground and overhead electricity lines. A power pylon stands in Wellington, New Zealand Bloomberg News It also distributes natural gas to more than 102,000 North Island households. Gas assists with continuous heating and hot water supply, and accounts for around half of New Zealand’s total primary energy usage. State Grid has been active in Australia since buying Powerlink Queensland’s 41.1% stake in South Australia state power-transmission grid operator ElectraNet for around A$500 million last November. In February, The Wall Street Journal reported that State Grid was in talks to buy Hastings Funds Management’s 25% stake in the same asset, though a deal is yet to be struck. Earlier in November, State Grid Corp.’s general manager Liu Zhenya told reporters attending the Communist Party Congress in Beijing that its ambition was to nearly quadruple its overseas assets by 2020 to as much as US$50 billion. The group’s total assets were valued at US$370 billion as at November 30, 2012. “Net asset returns on overseas projects are over a double-digit rate,” Mr. Liu said Nov. 11, adding that the return rate for the company’s offshore investments is three to five times higher than its domestic investments.
The Powerco stake sale comes as New Zealand’s government prepares to sell 49% of Mighty River Power, which generates around 17% of the country’s electricity, in an initial public offering which could raise as much as 1.92 billion New Zealand dollars (US$1.63 billion). Mighty River Power, New Zealand’s first asset privatization in over a decade, is expected to make its market debut on May 10 in both New Zealand and Australia.
