Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Contact Energy Reaches Conditional Agreement

Contact Energy Reaches Conditional Agreement To Acquire Taranaki Combined Cycle Power Station

Contact Energy Ltd today announced it has entered into a conditional agreement with NGC Holdings Ltd to acquire the Taranaki Combined Cycle power station and related interests for $500 million. The purchase price is made up of consideration for the shares in Stratford Power Limited (“SPL”, the NGC subsidiary that owns the station), repayment of existing SPL debt, and the associated forward electricity sale contracts (hedges).

The acquisition is conditional on Contact gaining a clearance from the Commerce Commission. Contact lodged an application for clearance with the Commission in November, and a decision is expected early in the New Year. The agreement is also conditional on NGC shareholder approval and the termination of the cross border leveraged lease currently in existence. NGC’s majority shareholder, The Australian Gas Light Company, has indicated it intends to support the sale to Contact. Subject to the satisfaction of these conditions, settlement date for the transaction is expected to be February 2003.

“Acquisition of TCC would provide a number of important strategic benefits to Contact. It would broaden Contact’s generation base, and allow us to pursue further growth in the downstream electricity business, especially in the sale of contracts to large customers and to the mass retail market,” Contact’s Chairman, Mr Phil Pryke, said.

“Contact has been a major contributor to creating a competitive retail electricity market, achieving 50% growth in our retail customer sales volume in the last three years. More recently, we have put priority on identifying mechanisms to expand our generation capacity, to underpin and enhance our capacity to remain a strong retail competitor”, Mr Pryke said. “This acquisition is key to our achieving this and underlines Contact’s commitment to and confidence in the New Zealand energy sector.”

“Unlike some of our competitors, Contact does not have a sizeable ‘greenfield’ generation development that can be progressed in the near term,” said Contact Chief Executive, Mr Stephen Barrett. “For that reason, we are extremely pleased that a conditional agreement has been reached with NGC to acquire the TCC station.”

SPL achieved earnings before interest, tax and depreciation (“EBITDA”) of $58.2 million in the year to 30 June 2002. The purchase price represents a multiple to this historical EBITDA of 8.6x.

“We believe that the acquisition and integration of TCC within Contact’s generation portfolio will yield significant synergies over time, and will be a major contributor to net earnings in future years. However, the combination of a planned maintenance outage in April 2003 and the fact that Contact will only have owned the plant for eight months at next balance date mean while the acquisition is projected to be cashflow positive from the outset, it is expected to marginally dilute net earnings for this financial year.”

“The TCC station uses a combined cycle gas turbine to achieve a very high level of energy efficiency. The station also has a dedicated fuel contract backed by Shell, which provides a very high degree of fuel supply assurance until 2010. We see this aspect of the deal as especially important, given the increased uncertainty of supply from the Maui field” said Mr Barrett.

TCC is a four year-old, 357MW plant situated near Stratford and will complement Contact’s existing thermal generation fleet at Otahuhu-B (380MW), Otahuhu-A (40MW), New Plymouth (400MW), and Te Rapa (44MW). Contact also has geothermal and hydro power stations capable of producing a total of 996MW.

Contact has no plans to change the size of the workforces of TCC or any Contact generation plant as a result of this acquisition, said Mr Barrett.

“Indeed, Contact sees an enhanced role for its New Plymouth plant as it would be able to act as an integrated back-up not only to Otahuhu-B, but also to TCC.”

Mr Barrett confirmed that Contact had arranged a bridging facility to fund the transaction, and that the company intends to refinance this early in the New Year.

“This acquisition is well within the company’s balance sheet capabilities, and there is no intention to seek additional equity,” Mr Barrett said.

Contact’s financial advisers on the transaction are Deutsche Bank.

© Scoop Media

Business Headlines | Sci-Tech Headlines


Statistics New Zealand: COVID-19 Sees Record 12.2 Percent Fall In New Zealand’s Economy

Gross domestic product (GDP) fell by 12.2 percent in the June 2020 quarter, the largest quarterly fall recorded since the current series began in 1987, as the COVID-19 restrictions in place through the quarter impacted economic activity, Stats NZ said ... More>>


Climate: Scientists Release ‘Blueprint’ To Save Critical Ecosystems And Stabilize The Earth’s Climate

A group of scientists and experts produced the first comprehensive global-scale analysis of terrestrial areas essential for biodiversity and climate resilience, totaling 50.4% of the Earth's land. The report was published in Science Advances ... More>>


MPI: Independent Review Launched Into Assurances For Safe Transport Of Livestock By Sea

The Ministry for Primary Industries (MPI) has launched an independent review of the assurances it receives for the safe transport of livestock by sea. MPI Director-General Ray Smith says Mike Heron QC has been appointed to lead the review, which is expected ... More>>


Computers: New Zealand PC Market Grows Nearly 40% Due To Work From Home Demand

COVID-19 had large impacts on demand for PCs as businesses prepared for lockdowns by purchasing notebooks to mobilise their workforce. In the second quarter of 2020, New Zealand's Traditional PC market experienced a 39.7% year-on-year (YoY) growth ... More>>


Mediaworks: Reaches Agreement To Sell TV Operations To Discovery, Inc.

New Zealand’s largest independent commercial broadcaster MediaWorks and the global leader of real-life entertainment Discovery Inc. (“Discovery”) are pleased to announce they have reached a binding agreement regarding the sale of MediaWorks’ ... More>>


Ministry of Health: Public Transport Distancing Requirements Relaxed

Physical distancing requirements on public transport have been reviewed by the Ministry of Health to determine whether they are still required at Alert Level 2 (or below). The Ministry’s assessment is that mandatory face covering and individuals tracking ... More>>


NZHIA: New Zealand Hemp Industry Set To Generate $2 Billion Per Annum And Create 20,000 Jobs

A new report says a fully enabled hemp industry could generate $2 billion in income for New Zealand by 2030, while also creating thousands of new jobs. Written by industry strategist Dr Nick Marsh, the report has prompted calls from the New Zealand Hemp ... More>>


Stats NZ: One In 14 Employed People Report High Risk Of Losing Jobs

About one in 14 workers say they expect to lose their job or business by mid-2021, Stats NZ said today. A survey of employed people in the June 2020 quarter showed 7 percent felt there was a high or almost certain chance of losing their job or business ... More>>

ASB Quarterly Economic Forecast: NZ Economy Doing Better Than Expected, But Challenges Remain

August lockdown estimated to have shaved 8% off NZ’s weekly GDP, and 0.5% off annual GDP Economy now expected to shrink 5% (year-on-year) by end of 2020 Unemployment rate now expected to peak at 7.2% The latest ASB Quarterly Economic Forecast is less ... More>>


SAFE: Live Export Ship Carrying 5,800 New Zealand Cows Goes Missing In East China Sea

Livestock carrier Gulf Livestock 1 sent a distress signal at 4:45am NZT yesterday in the East China Sea. The area is affected by Typhoon Maysak. At 4pm a patrol plane spotted a lifeboat - with no people in it - and a man in lifejacket nearby. The ship ... More>>


FMA: Kiwisaver Fees Don't Match Performance

The Financial Markets Authority (FMA) today published an independent report into the passive and active investment management styles [i] used by KiwiSaver providers. The FMA commissioned MyFiduciary to test the extent that KiwiSaver providers were ... More>>