NGC Becomes Majority Owner Of Transalta NZ
NGC Becomes Majority Owner Of Transalta NZ
NGC BECOMES MAJORITY OWNER OF TRANSALTA NEW ZEALAND
Natural Gas Corporation (NGC) today became the 75.8 percent majority owner of New Zealand's largest energy retailer, TransAlta New Zealand Limited.
NGC has settled, for a total of $824.2 million, the acquisition of TransAlta Canada's majority interests in TransAlta New Zealand, comprising 187.4 million shares at $2.79 each ($523.9 million), 81.4 million of TransAlta New Zealand capital notes for $1.02 each ($83.0 million), and approximately $217.3 million in project debt relating to the Taranaki combined cycle power station at Stratford.
NGC has also paid TransAlta Canada an additional $5 million for the right to use the TransAlta retail brand for up to 12 months.
The Chief Executive Officer, Mr Richard Bentley said that for the
staff and customers of both companies business would continue as normal.
"NGC sees it as critical that this change in ownership does not affect the smooth day-to-day business activities of either company. We are concerned that customers in particular feel a sense of continuity, which is why we see value in the continuation of the familiar TransAlta brand to allow the opportunity for alternative branding to be developed in a progressive and fully considered manner." He noted that, in the absence of the agreement for continuation, TransAlta Canada was entitled to withdraw rights to the use of its brand name immediately it ceased being the majority shareholder.
Following the approval of the transaction and the related debt funding requirements by NGC's shareholders on 21 March, NGC had arranged financing totalling $1.22 billion, comprising a $366 million short-term bridging facility and a $850 million three-year revolving cash advance facility, to enable settlement of the transaction to be effected today. The bridging facility would be repaid from the proceeds of a 4:5 pro-rata renounceable rights issue to NGC's existing shareholders.
Mr Bentley said the revolving cash advance facility was arranged and underwritten by Westpac Banking Corporation, which was also providing the bridging facility.
Mr Bentley said syndication of the facility was highly successful and it had been oversubscribed by a considerable margin. The bank syndicate comprised the ANZ Banking Group (New Zealand), Banque Nationale de Paris, Bank of New Zealand, Commonwealth Bank of Australia, Credit Agricole, the National Bank of New Zealand Limited, Toronto Dominion Australia Limited, and Westpac Banking Corporation.
In addition to providing funding for the acquisition of the TransAlta interests, the facility provided for the refinancing of NGC's existing bank facility, repayment of the maturing Natural Gas Notes in July 2000 and July 2001, liquidity for NGC's existing $200 million Commercial Paper Programme and on-going working capital requirements.
In respect of the 4 : 5 pro-rata renounceable rights issue, shareholders registered as at 5pm today will be eligible to subscribe for the new shares. Letters of entitlement and an investment statement will be sent to shareholders next week. Shareholders may subscribe for all or part of their entitlements and the rights to subscribe will be tradable on the New Zealand Stock Exchange from 3 April to 1 May. The offer closes at 5pm on 3 May and the new shares will be allotted by 9 May. Shareholders who do not act on the offer in any way will forfeit their rights.
A total of 315,504,797 new shares will be offered at an offer price of $1.16 per share. NGC's 71.6% majority shareholder, The Australian Gas Light Company, has committed to subscribe for all of the new shares to which it is entitled and the balance of the issue is underwritten by J B Were & Son (NZ) Ltd, which is also the organising broker.
31 March 2000
Natural Gas Corporation acquisition of Majority Interests in TransAlta NZ
The Natural Gas Corporation (NGC) has acquired from TransAlta Canada the majority interests in TransAlta NZ.
The acquisition price totalled $824.2 million, with the interests acquired comprising:
1. 187.4 million TransAlta ordinary shares, representing 75.8% of
TransAlta's ordinary shares on issue, for $2.79 per share.
Total: $523.9 million
2. 81.4 million TransAlta NZ capital notes, representing 73.4% of
TransAlta NZ capital notes on issue, at $1.02 per note.
Total: $83.0 million
3. Approximately $217.3 million of debt issued by TransAlta NZ
relating to the Taranaki combined power station and held by
TransAlta Canada. In addition, NGC paid TransAlta Canada $5 million for the right to continue use of the TransAlta brand name for up to a year.
The acquisition was approved by the Commerce Commission, the Overseas Investment Commission and NGC's shareholders.
NGC has invested in TransAlta for the following reasons:
* it allows NGC to achieve a critical mass and therefore a
sustainable competitive position in energy retailing;
* it gives NGC access to substantial gas fired generation;
* there are significant synergies in operations between TransAlta
The TransAlta majority acquisition was a rare opportunity in New Zealand to purchase interests in sizeable concentrations of quality energy customers and electricity generating plants.
TransAlta NZ supplies approximately 532,000 energy customers (504,000 electricity and 28,000 gas) representing about 30% of New Zealand's estimated 1.7 million energy consumers.
TransAlta NZ's electricity and gas customers are located predominately in Wellington and the Hutt Valley, in the North Shore, and in Christchurch (the latter two being previously known as the trading operations of Power NZ and SouthPower).
TransAlta NZ also has interests in four electricity generating plants with a total annual capacity of 4,075 GWh, representing approximately 12% of New Zealand's annual electricity demand.
These plants, all operated by TransAlta NZ, are the gas fired generation stations at Southdown (118 MW - 47.5% owned) and at the Taranaki combined cycle power station (TCC) (376 MW - 100%), the Cobb dam and hydro scheme near Nelson (32 MW - 100%), and the Silverstream landfill plant (1.7 MW - 46.5%). Long-term electricity off-take agreements are in place at both the TCC and Southdown stations.
NGC supplies approximately 138,000 customers (70,000 electricity customers in the Hamilton region and 68,000 gas customers, primarily in the Waikato and Bay of Plenty, but also other North Island regions). NGC also distributes gas in these regions and owns and operates the main high pressure transmission pipelines throughout the North Island. NGC has substantial long-term entitlements to both Maui and Kapuni gas and operates the Kapuni Gas Treatment Plant (100% owned) and the cogeneration plant at the site(50% owned). NGC is the second largest distributor and retailer of LPG in New Zealand.
With the acquisition of the majority holding in TransAlta NZ, NGC has an interest in over 670,000 energy customers (574,000 electricity and 96,000 gas).
NGC believes there will be significant developments in the near future as retailers begin to offer new energy products that involve the bundling of electricity and gas (LPG in the South Island) and as the impact of the very substantial improvements in customer care and billing systems currently being implemented takes effect. Those retailers with access to electricity, gas, and LPG at competitive prices and who have a critical mass in operations and marketing will be best placed to lead these developments.
These developments can be compared with the changes and innovation that is being seen in the telecommunications sector, and as are occurring in other energy markets around the world - e.g. in the UK. NGC has access to gas and LPG, and TransAlta has extensive experience in electricity retailing, electricity purchasing and electricity generation. The customer base of NGC and TransAlta is national and located in the larger urban areas. NGC and TransAlta has the appropriate systems and experience, and the critical mass in customers to take a leadership position in the energy market development processes.
Gas fired generation
TransAlta owns the TCC, and a 47.5% share of the Southdown facility. NGC has access to gas and is the current gas supplier to Southdown. NGC and TransAlta have the technology, the gas supplies, and the customer base to take a leading position in the development of new generation capacity.
There are a number of areas where NGC and TransAlta have common activities and where cooperation can improve marketing opportunities and create efficiencies, especially in generation, energy retailing, electricity purchasing, and systems development.
NGC therefore believes that NGC and TransAlta will have a competitive position in each of the three main areas of the group's business i.e. energy retailing, gas fired generation and gas wholesaling, and in gas networks and pipelines: and in each there are opportunities to grow and to release more value for shareholders.
NGC has negotiated use of the name TransAlta for 12 months, but it is likely a review of branding in both TransAlta and NGC will commence immediately with a view to developing and implementing a new retail brand as soon as possible.
As previously announced, NGC will be funding this acquisition through a combination of new debt and a rights issue. The pro-rata renounceable new share issue will be to existing shareholders on the basis of 4 new shares for 5 currently held (as at 31 March). The issue will open and close on 3 April and 3 May respectively. The Australian Gas Light Company (AGL) currently owns 71.6 % of NGC shares and has stated that it will be taking up all of its allocation. The balance of the issue is underwritten by JB Were & Sons (NZ) Ltd.