Bidders target Pacific Hydro as Kyoto looms By Francesco Guerrera in Hong Kong Published: December 21 2004 02:00 | Last updated: December 21 2004 02:00
Australia's Pacific Hydro, the world's largest independent producer of renewable energy, looks set to be taken over in a deal worth about A$800m (US$606m) after being approached by more than 10 power groups.
The potential bidders include Japan's Kansai Electric Power and International Power of the UK. The US utility MidAmerican, Japan's Mitsui, Hong Kong Electric and its rival China Light & Power and Spain's Energía Hidroeléctrica de Navarra (EHN) are also interested in bidding for the Sydney-listed company, according to people close to the process. The widespread interest in Pacific Hydro highlights the growing importance of renewable energy to international power groups and infrastructure funds as governments move to reduce greenhouse gas emissions.
Analysts said foreign groups were interested in the Australian hydro-electric power generator because of the Kyoto protocol on greenhouse gases which comes into force next year.
Under Kyoto's system of carbon trading emissions, companies producing energy from wind and water sources would gain "credits" enabling them to exceed greenhouse gas emissions quotas without penalty. However, overseas energy groups are likely to face competition from Australian bidders. It is understood that Wesfarmers, the conglomerate; Babcock & Brown and ANZ, financial groups and Hastings Fund Management, an infrastructure fund management group controlled by Westpac, were considering bidding for Pacific Hydro.
Pacific Hydro, which began a strategic review in October after announcing that it had received several "unsolicited approaches" and its advisers, the Australian investment bank Carnegie Wylie, declined to comment.
People close to the process said interested companies had been given until the end of January to submit preliminary bids. Pacific Hydro's senior management is believed to have met several potential bidders over the past few weeks. However, people close to the deal warned that there was no guarantee that all the companies which expressed interest would bid.
A takeover of Pacific Hydro, which had revenues of A$62m and profits of A$32m in the 12 months to June would enable the US utility American Electric Power to sell its 16 per cent stake. AEP has said it wants to divest the stake to reduce debt and focus on the US.
Pacific Hydro shares have risen more than 17 per cent since the strategic review was announced. They closed yesterday at A$3.76.
