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Meridian sees Bank, Finance Cos. Gap for REN notes

Meridian sees gap between banks, finance companies for REN notes

Feb. 3 – Meridian Energy’s offer of unsubordinated notes seeks to exploit a gap in the market between the maturities and interest rates paid by banks and finance companies, says chief financial officer Neal Barclay.

The state-owned generator, New Zealand’s biggest, will accept an unspecified quantity of applications for the securities maturing in nine, 12 and 18 months, in what it hopes will be an ongoing and open-ended programme.

The funds raised are for general business purposes including the development of new hydro and wind generating capacity. The utility has about NZ$3 billion worth of projects at various stages of the consenting process. Barclay wouldn’t say how much Meridian hopes to raise.

“We’ve no firm target.” The offer “is likely to accommodate all the applications we will get,” Barclay said. “We’re pitching between the banks and the finance companies.”

The nine-month notes pay 5% annual interest, while 12 and 18-month securities pay 5.25%. The securities aren’t tradable and won’t be listed on the NZX. Meridian has a BBB+ debt rating.

The securities are called Renewable Energy Notes because Meridian is primarily a business generating power through hydro plants and wind mills.

The interest exceeds the 3.5% offered by ANZ Bank for an 18-month term deposit, with a minimum NZ$5,000 investment. Fisher & Paykel Finance has secured first ranking debentures paying 6.5%, according to the website.

Interest rates offered on deposits have fallen as the central bank embarked on its steepest easing cycle since the official cash rate was introduced in 1999.

The minimum investment is NZ$2,000, with additional purchases in NZ$500 increments. Meridian, which has a BBB+ debt rating with Standard & Poor’s, owns the Manapouri hydro power station, New Zealand’s largest, as well as the Tekapo A and B stations which tap the Waitaki River, a system that accounts for 25% of the nation’s power supply. It also owns the Te Apiti wind farm, which at 90 megawatts, is currently the biggest in the country.

The notes were first offered to Meridian’s own staff in late 2008 and the current offer closes on March 31.

The company is gearing up for a series of new construction projects including the 64 MW Te Uku wind farm project near Raglan, the 142 MW West Wind project near Wellington set to come on stream in April, Central Wind and potentially Mill Creek, another wind farm near Wellington.

Meridian also has the 630 MW Project Hayes windfarm in in Central Otago before the Environment Court and is expecting an initial decision on the Mokihinui hydro project on the West Coast. It has also received an initial consent for its planned tunnel-based hydro project on the lower Waitaki River.


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