Contact float could force Australian sale

By Mark Reynolds


Contact Energy may be forced to sell one of its big Australian investments when Edison Mission becomes its major shareholder following the Government's sale of the remaining 60 per cent in the power firm next month.

Contact owns nearly 28 per cent of Southern Hydro in Victoria, paying $A43.8 million for the stake last year.

Its other partners in the project are Infratil Australia and Australian pension fund Unisuper. Under an agreement the three companies have, the partnership can be terminated if control of one of the partners changes hands.

Contact is of the view that Edison Mission's acquisition of 40 per cent of its shares does not equal a change in its control.

However it points out in its prospectus that its partners might take a different view.

Contact chief executive Paul Anthony said last evening the company was obliged to note in its prospectus that there was a risk that it might be forced to sell.

"This is a technical risk but so far there is nothing concrete," he said.
Southern Hydro has been an important part of Contact's international expansion strategy. The investment has given it exposure to the Australian wholesale electricity market, where it had considered expansion.

Mr Anthony said international expansion remained an important part of the company's future growth. Edison Mission's interests in Australia would not inhibit that.

"The scale on which they operate is different and we can still have a strong platform elsewhere."

Contact's overseas investments would not be limited to Australia, he said.