Meridian eyes $430m hydro buy in Victoria

By CHRIS DANIELS

State-owned power company Meridian Energy is trying to buy a 10-station hydro electric power scheme in Australia valued at more than $430 million.

Southern Hydro in Victoria is being sold by United States energy giant Alliant. Other possible bidders include Contact Energy, which is refusing to say if it is interested. Contact once owned 27.7 per cent of Southern Hydro.

Southern Hydro's stations have a total capacity of 500MW, equal to 6 per cent of Victoria's capacity. They are peaking stations, meaning their power is sold only when the wholesale price is very high.

In Australia, such peaks occur during summer heatwaves, due to air conditioning use.

The Clyde dam, New Zealand's biggest, can generate 432MW of electricity.

Meridian already owns five small hydro stations in Australia - four in New South Wales and one in Victoria.

It does not own the dams or lake, which have been built primarily for irrigation, but owns small turbines attached to them, from which it generates electricity.

Meridian spokesman Alan Seay said the first investment was "always just a foothold in Australia to acclimatise ourselves to that environment".

"Hydro is our core business, so it makes sense for us to look at this."

Alliant's move raises questions about its continued involvement in New Zealand, where it owns 19.1 per cent of electricity generator and retailer Trustpower.

Other US energy companies, such as Aquila (formerly Utilicorp) and NRG, expanded from their home bases during the 1990s, buying newly privatised utilities around the world.

The recent crash in US energy fortunes has prompted credit downgrades and a rush to sell overseas assets to shore up debt-laden balance sheets.

In November, the Wisconsin-based Alliant announced it would cut its dividend payout by half, sell assets and cut costs. While the sale of Australian assets was announced, no mention was made of its New Zealand investments.

Trustpower is, however, performing well. Last week it announced an after-tax profit of $39 million for the nine months to December, compared with a $1 million loss for the same period the year before. In December it also bought the Cobb hydro station, near Nelson, from NGC for $92.5 million.

Contact sold its 27.7 per cent stake in Southern Hydro in 1999 because of a conflict of interest with its major shareholder, Edison Mission.

Edison Mission already owned and operated the 1000MW Loy Yang coal-fired station in Victoria, so its continued involvement through Contact in the Southern Hydro company was seen as giving it too dominant a position in the state's power market.

Contact has a 25 per cent interest in a gas turbine station at Oakey in Queensland.

Last year it invested $31.8 million in a 300MW peaking plant, Valley Power, in Victoria. It recently failed in an attempt to buy the coal-fired Flinders Power Station in South Australia.

Edison Mission still owns the Loy Yang station and is 60 per cent owner of the Valley Power station.

Contact chief executive Steve Barrett said in December that although the company was disappointed the power station venture had failed, Contact would continue to seek opportunities in Australia.