Meridian hopes to get $1bn from sale

Meridian Energy hopes to get $1 billion for its Australian subsidiary, Southern Hydro, which has just been put on the block.

Encouraged by big prices being offered for renewable-energy companies, the country's biggest electricity producer has appointed Credit Suisse First Boston and First NZ Capital to "test the market for a possible trade sale".

Final bids are expected by early October for Southern Hydro, bought for $630 million two years ago. Meridian chief executive Keith Turner said yesterday he had received "quite a number of approaches" from a range of companies during the past few months. These had "recognised the increasing value of renewable energy assets" and wanted to know if the state-owned enterprise was interested in a part or full sale.

Turner was at pains to emphasise that Meridian was happy with the way the company was being run and, therefore, would sell only for a good price.

"Our Australian investment has always been about creating extra value for our shareholder," he said.

"We have a medium-term strategy for growing that value organically but, given the level of informal interest shown already, it is only prudent to test the market now with a comprehensive and transparent process."

He said Meridian might continue as part or full owner of Southern Hydro after the process was completed. It had a clear view of what it wanted to do with the company, with new projects under development.

" ... it will be up to other parties to convince us otherwise with an offer that recognises our view of long-term business value."

Credit Suisse First Boston's Nick Schiffer said he thought there would be global interest in Southern Hydro as it was one of the largest pure renewable businesses in the world.

Southern Hydro was "uniquely positioned to provide capacity insurance products", because of its large peak generation capacity and ability to start generation up quickly.

The 10-station Southern Hydro system in Victoria can generate 500MW of power, or 6 per cent of the state's capacity. It was sold by the US energy giant Alliant, which owns 23.8 per cent of local generator and retailer TrustPower. The Clyde dam can generate 432MW of electricity.

Meridian owns five small hydro stations in Australia - four in NSW and one in Victoria. It also owns Australia's biggest wind farm at Wattle Point, South Australia.

It also has plans to build a new 130MW hydro station in Victoria's Kiewa Valley, a 79MW wind farm at Dollar, south Gippsland, Victoria and another 350MW wind farm at Macarthur, western Victoria, which will be one of the largest in the world.

Last week, Meridian unveiled plans to build this country's biggest wind farm, on the Wellington coastline at Makara.

Right Price

Meridian is "testing the market" for a possible sale of its Australian subsidiary, Southern Hydro.

It bought the company, which has hydro dams and a wind farm, for $630 million two years ago and hopes to get at least $1 billion.

If a recent bidding war for Pacific Hydro is any indication, it should get a good price for the subsidiary.