Meridian Energy is considering the sale of its 50 percent stake in the $A1 billion Macarthur wind farm in the Australian state of Victoria to book gains made available by the global drop in interest rates.
The state-owned enterprise's chief executive Mark Binns told BusinessDesk the company stood to earn a "bond-like" return over the 25-year life of its joint venture arrangements for the massive 420 megawatt windfarm, which it is building with Australian energy generator and retailer AGL.
The project is expected to be producing full power early this year and will be the largest in the southern hemisphere.
Meridian won an international award for the way the finance arrangements were structured in a ground-breaking deal announced in September 2011 under previous CEO Tim Lusk, whom Mr Binns replaced almost a year ago.
"The way Macarthur is structured, we don't participate in the ups and downs of the electricity market," says Mr Binns, who confirmed Meridian was "considering exiting" its stake in talks that include AGL. "It's an AGL risk. It doesn't totally fit with our strategy."
By comparison, its 70MW Mt Millar windfarm in South Australia is wholly-owned and operated by Meridian.
A timeframe for decisions is uncertain, but "not imminent", he says. "We can stay in the 25-year deal or we can look at selling. While interest rates are low, there's a profit to be made."
He would not be drawn on whether an exit from Macarthur could see a capital return to the government ahead of the proposed partial privatisation of Meridian, the most valuable of the three SOE power companies, independently valued at $6.5 billion in 2011 in work undertaken for the Treasury's Crown Ownership Monitoring Unit.
Assuming legal challenges are overcome, the sale of up to 49 percent of MightyRiverPower is planned in the second quarter of this year, with a second partial float of either Meridian or Genesis Energy possible by the end of the year.
Treasury papers released over the Christmas break warned the government that capital markets would struggle to absorb three partial SOE floats in one year.
There was "no link" between thinking on Macarthur and the asset sales programme, Mr Binns says, and capital returns from the partially debt-funded investment could be used for balance sheet strengthening.
He declined to comment on the extent of debt and equity components in the Macarthur funding arrangements, although statements at the time of the deal cited "term facilities totalling $A386 million to complete Meridian's funding commitment to the project".
"The addition of the Macarthur investment to Meridian Energy Australia's portfolio of operating and development assets represents a further step in developing Meridian Energy Australia as an integrated energy participant in the Australian market," the company said at the time.
As well as Mt Millar, Meridian is due to start construction of a wholly-owned 131MW windfarm at Mt Mercer in Victoria. The company's website says construction was due to start last month, with first power forecast in 2014.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Orion Health first-half loss widens in line with expectations, revenue climbs 26%,
- Dunne warns government of 'consequences' of RMA reform
- Wellington Airport sees $2 billion net benefit in longer runway
- Snowball runs first wholesale offer for SOS Hydrate
- If Goff could choose Mt Roskill successor, it'd be Wood
Most listened to
- James Mayo talks about SOS Hydration's growth plans after Snowball offer
- Michael Wood on whether he would run in Mt Roskill
- SAFE's Abi Izzard quizzed over protest of a caged hen operation at Pukekohe
- Nevil Gibson talks about Editor's Insight on the planned $US150 million merger between Pfizer and Allergan
- Taupo Beef’s Mike Barton on how to extract sustainable profit from farming
- Will the government lose on RMA reform? Rob Hosking outlines the PM's speech
- How could bookmakers recoup $16 million? Racing Board chief executive John Allen explains
- Nevil Gibson breaks down the latest aviation news
- BusinessNZ manager of energy, environment and infrastructure John Carnegie talks about the climate change survey
- Wayne Evans explains SBS bank's plan to make money for its 3.99% home loan rate
- Nevil Gibson discusses his latest Editor's Insight on demographics
- First NZ Capital economist Chris Green gives his verdict on house prices