Meridian eyes cash for new projects

Keith Turner

State-owned power company Meridian has plans for the $1.5 billion windfall from the sale of its Australian operations but the Government might want a bigger dividend.

Meridian said yesterday that it had sold Southern Hydro to Australian Gas Light (AGL) for A$1.42 billion ($1.5 billion) - a profit of about $640 million.

Chief executive Keith Turner said the proceeds of the sale would help pay for its New Zealand renewable energy plans.

"We have a lot of development on the horizon. This will give us a balance sheet capable of funding that development," he said.

However, new State-Owned Enterprises Minister Trevor Mallard said the Meridian board "will enter into discussions with ministers to determine the most appropriate capital structure going forward".

The Government does not allow its SOEs to sit on large piles of cash, forcing them to carry similar levels of debt as their private sector competitors.

Meridian paid a $100 million special dividend to the Government in 2002, in order to lift its debt-to-assets ratio from 21 to 27 per cent.

Turner said Meridian had put Southern Hydro on the market after approaches from a range of potential buyers. There had been no pressure from the Government to sell it nor to release capital for any purpose.

"We have always said if we had surplus capital we would return it to the shareholder. We've kept an open dialogue with the shareholder but, at the end, it is up to the directors to manage the balance sheet and provide the dividends."

One of Meridian's long-term plans is a huge windfarm in central Otago, which would plug into the national power grid at the Benmore dam, the southern end of the north-south transmission link.

Coupled with the hydro system of the Waitaki River, it would mean intermittent wind power could instantly be substituted by hydro-generated power.

Turner said one of the biggest expenses in building a windfarm was buying the turbines - they accounted for 70 per cent of the total cost of the Te Apiti project. In 2003, Meridian borrowed $500 million to buy Southern Hydro, which was then Australia's largest privately owned hydro-electric company, accounting for 6 per cent of all power generation for Victoria. It added this to the 62MW of small hydro stations in NSW bought two years earlier. It opened a 91MW wind farm in South Australia in May this year and has other, big windfarm projects at various levels of planning and resource consent application.

Meridian said last week that it planned to spend up to $3 billion on renewable energy projects within the next 10 to 15 years.