Infratil tipped to make $1.8b in selloff

Last updated 05:00 19/07/2014

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Infratil Energy Australia (IEA), which is under strategic review and may be sold, has been valued at up to A$675 million (NZ$726m) by Goldman Sachs.

The global research company sees NZX-listed Infratil selling up to four entities - including IEA, NZ Bus, and its 20 per cent share in Z Energy - which would potentially earn the infrastructure company up to $1.8 billion.

There are three businesses under the IEA banner - retailers Lumo Energy, IEA Generation which owns four small-scale "peaker generators" in South Australia and New South Wales, and utilities connection service Direct Connect.

Goldman Sachs estimated IEA's value to be between A$620m (NZ$666m) and $675m (NZ$726m).

"More stringent regulation has increased the barriers to [and] costs of customer growth, and therefore we believe the value of existing customers.

"We do recognise a finite potential buyer pool may be a barrier to divestment," they said in their research report.

The report said Infratil had signalled further asset sales are possible within the next 18 months, following the company's selldown of Z Energy shares.

"The escrow on Infratil's remaining 20 per cent stake ends in November 2014 . . . We presume Infratil's selldown is only a work in progress given its stated preference for managing 100 per cent of an investment."

Infratil's 20 per cent share in Z was valued at NZ$313m.

NZ Bus is also in line to be sold, according to Goldman Sachs, but it may be a slow process.

"We believe growth is likely limited due to central and local government constraints on both funding and operating returns and exhibited strong preferences to fund alternative transport options [such as] rail.

"We expect value maximisation and therefore timing of any divestment likely requires the formation of new contracts under the new public transport regime, which to date has advanced at a glacial pace."

The company was valued at between NZ$260m and NZ$340m.

Goldman Sachs said the Snowtown wind farm, 170km south of Adelaide, was the fourth Infratil entity likely to go on the block. It had a total valuation of A$1 billion (NZ$1.08b), with Infratil's share valued at around NZ$550m.

The valuation came before the Australian government repealed the carbon price so its impact is unknown. However, the Sydney Morning Herald reported the effects of the Senate's repeal of the carbon price - $25.40 a tonne as of July 1 - would take some time to play out.

It went on to explain that since the carbon price fell most directly on the power sector, its removal should produce winners in that industry, save for the hydro plants and wind farms which operate at near-zero emissions.

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- BusinessDay.co.nz

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