Meridian defends windfarm buy in Oz

Photo / Supplied

Meridian Energy says its $239 million purchase of a windfarm in South Australia will not affect projects in the pipeline in New Zealand despite a warning from a ratings agency.

Standard & Poor's says the taxpayer-owned company will have to take a cautious approach to development after the purchase of the Mt Millar wind farm in South Australia if it wants to retain its credit ratings.

"We've got a massive portfolio so there's no impediment to development in New Zealand arising from this," said Meridian spokesman Alan Seay.

Meridian describes the purchase as a rare opportunity, although this is the second time the windfarm has come on to the market in three years.

Labour says the move could be the start of an accelerating trend by New Zealand power companies to invest in renewable energy in Australia because financial incentives were much greater there.

Meridian bought Mt Millar from debt-laden Australian-based Transfield Services Infrastructure Fund which yesterday also launched a A$110 million ($137 million) capital raising to help strengthen its balance sheet.

Meridian believed it had got the 70MW windfarm - about 220km northwest of Adelaide - for a bargain price, according to Seay.

"We think we've got it at a very good price. Our role is to grow shareholder value and we see this purchase as an opportunity to do that."

S&P said the purchase would have no immediate impact on Meridian's BBB+/Stable/A-2 ratings, despite adding modestly to the company's business risk.

Meridian could accommodate the debt-funded acquisition on its balance sheet, although it would mean it would have to take a more cautious approach to other major projects in and outside New Zealand.

"In this regard, the current ratings and outlook anticipate that Meridian will take a prudent approach to appropriately time and fund future developments so as not to put its financial position or liquidity at risk," S&P said.

The windfarm was built for a Queensland state power company, Tarong Energy, at a cost of A$138 million and commissioned in 2006 before being sold to Transfield a year later.

Meridian has a purchase agreement for Mt Millar's power for the next two years.

The last time Meridian bought - then sold - an existing power scheme across the Tasman it yielded an $800 million windfall dividend for the Government when its investment in Southern Hydro in New South Wales turned out to be a winner.

There were no immediate plans to do the same with Mt Millar, said Seay.

"No, not at this stage. We've got a number of other interests in Australia and I don't think there's any preconceived ideas of what's going to happen to them."

Among those is Meridian's joint venture with Australian energy heavyweight AGL in the proposed Macarthur wind farm in southwest Victoria, which has been permitted for 183 turbines generating up to 450MW and is likely to be the largest wind farm in the Southern Hemisphere.

Political consensus was firming in Australia around the new Renewable Energy Target scheme which requires set amounts of "green" electricity to be bought to reach a target of 20 per cent renewable energy use by 2020.

Labour's energy spokesman Charles Chauvel was on the Meridian board at the time of the Southern Hydro deal and said his party was not against SOEs investing overseas if there was a strong business case.

Wind Energy Association chief executive Fraser Clark said the wind resource was not generally as good in Australia as in New Zealand, hence the need for more government incentives to provide wind power.

"If they [Meridian] can use their expertise to drive that project it could work out well for them."

Domestic Energy Users' Network spokeswoman Molly Melhuish said the move was understandable on one level because renewables got more government support in Australia. But the spending should not be at the expense of New Zealand consumers who were constantly being told more investment was needed here.

"We need to expand the system to meet New Zealand needs - after all, it is our money they're spending."

Farming overseas

* Meridian has bought Mt Millar windfarm in South Australia.

* Its 35 turbines produce enough electricity a year to power on average 36,000 households.

* Listed TrustPower also has a windfarm in South Australia.

- additional reporting: NZPA