apa bid for env good for spn

With APA bidding for ENV that leaves SPN the next biggest gas utility.
With China's State Grid Corp buying 19.9% at around $1.30 a share this represents a good buying opportunity at current levels.
Current dividend yield 6.7% and on a smaller PE ratio than both APA and ENV.

State Grid Corp. of China, the world's biggest utility by revenue, has
ramped up its international expansion drive with the purchase of power assets in
Australia from Singapore Power Ltd.
State Grid has agreed to buy 60% of Singapore Power's unlisted Australian assets,
which include the Jemena utility business, for an undisclosed price. It has also agreed
to buy 19.9% of listed company SP AusNet Ltd. (SPN.AU) from Singapore Power for 824
million Australian dollars (US$809.7 million).
Spokespeople for both State Grid and Singapore Power said the purchase price for the
unlisted SPI Australia assets has been kept confidential.
According to SPI Australia's most recent annual report, the company made a
full-year net profit of A$191.4 million in the year to March 31. At March 31 the business
had total assets worth A$8.97 billion, including A$5.3 billion in property, plant and
equipment, and total liabilities of A$9.44 billion.
Foreign investments can provide higher returns to State Grid because it is heavily
regulated by Beijing, which often worries about the impact of passing on higher power
prices to consumers and businesses.
State Grid said in November that it aims to more than quadruple its overseas assets
from $8 billion to at least $30 billion by 2020. It also has assets in Brazil, the
Philippines and Portugal. The Chinese utility already has an investment in South
Australia's state electricity transmission network.

Todays ENV bid

APA Group (APA.AU) moved to take full control of Envestra Ltd. (ENV.AU) with a
bid valuing the Australian pipeline operator at 1.98 Australian dollars (U$1.81 billion),
but its hopes hinge on support from Li Ka-Shing's Cheung Kong Infrastructure
Holdings Ltd. (1038.HK) which has been expanding Down Under.
The move underscores how investors are targeting pipeline infrastructure to gain
exposure to an expected surge in demand for natural gas. Australia's ruling Labor
government last year put a price on carbon emissions to encourage greater use of fuels
that burn cleaner than coal, potentially supporting the development of new gas-fired
power stations and renewable energy hubs like wind farms.
The country is also seeing a surge in demand for natural gas from nearby Asian
countries, including China, and has about a dozen gas-export terminals planned for its
coastline.
Sydney-based APA already owns 33% of Envestra, which mostly moves natural gas to
businesses and households in cities like Melbourne and Adelaide. APA is offering 0.1678
of its stapled securities for each Envestra share, plus an annual dividend payment of up
to 3 cents a share.
Based on APA's closing price Monday, the implied value of its offer is A$1.10 per
Envestra share. Shares in Envestra jumped as much as 7.6% in Sydney to rise above the
offer price, signaling expectations that APA may need to raise its bid.
Key to APA's takeover ambitions will be Cheung Kong Infrastructure, a
utility-and-infrastructure company known as CKI that is directly controlled by Li
Ka-Shing's conglomerate Hutchison Whampoa Ltd. CKI owns 17% of Envestra and a range
of power-utility businesses, including SA Power Networks in South Australia state and
CitiPower and Powercor in Victoria state. Earlier this year, Cheung Kong expanded its
footprint with the acquisition of a New Zealand waste management business.
"It's not a surprise that consolidation of the sector is ongoing, and
strategically, we think it makes sense to offer gas transportation across the
country," said Andrew Chambers, a senior research analyst at Legg Mason, which
manages more than A$2 billion in Australian equities and owns stakes in both Envestra and
APA.
A spokesman for CKI wasn't immediately available for comment.
Australian gas demand is forecast to triple in the two decades through 2030, largely
driven by export projects, according to the Grattan Institute, a political think tank.
The Australian Competition & Consumer Commission, the country's competition
watchdog, may take a close look at APA's bid for Envestra, given it has forced APA
to sell assets to allow earlier deals to proceed amid concerns it has too much control of
the country's natural gas infrastructure.
However, APA owns big pipelines that connect major cities to gas fields in the Outback
or in coastal waters, rather than the infrastructure delivering gas to buildings. Also,
residential gas prices are capped by regulators, which will limit APA's ability to
boost returns from charging higher rates to energy retailers.
"The heavy-handed regulated nature of Envestra should alleviate any competition
concerns," said Mr. Chambers, who said APA's offer appeared to be reasonable.
However, RBC Capital Markets Paul Johnston said APA's bid seems opportunistic and
offers a thin premium to the closing price of Envestra shares Monday.