Two electricity companies could join forces to become the second largest player. Contact Energy’s CEO & Chairman explain why they’ve been trying to takeover Manawa in secret.
Contact Energy’s $2.3 billion bid to acquire Manawa Energy is the gentailer’s attempt to make its mark in hydroelectricity generation, as it phases out thermal.
“The first thing you’ve got to look at is what this actually produces and putting two sets of diverse hydro-assets together,” Contact chairman Rob McDonald told Markets with Madison.
Contact has seven geothermal and thermal electricity generation plants and two hydro stations including the Clyde Dam on Lake Dunstan in Central Otago – the largest concrete gravity dam in the country.
Manawa has 25 hydro stations nationwide, which would be added to Contact’s portfolio if regulators allowed a merger to proceed.
Manawa's Cobb Power Station in the Tasman region is one of 25 hydroelectricity assets Contact wants to acquire. Photo / Manawa Energy
“Our hydro portfolio in particular is spring, summer weighted and we’ve always made up for that with having thermal peaking,” Contact chief executive Mike Fuge told Markets with Madison.
“We want to phase that out and then you have to turn your mind to ‘Well, how do we make up for that in the winter?’ And you’ve got Manawa with hydro generation, which is both geographically diverse, but also is weighted towards winter.”
“This will help us get to our future faster.”
A merged entity with Manawa, formerly Trustpower, would make it the second largest power company in the country behind Meridian, producing 24% of our total electricity supply annually, or 10.5 terawatt hours.
Contact Energy chief executive Mike Fuge (left) and chairman Rob McDonald talking to Markets with Madison about its powerhouse deal. Photo / Cameron Pitney
But Contact’s chief executive and chairman are assuring consumers, including industrial users, that its proposed deal would not significantly lessen competition in the industry – in fact, they believe it would increase it.
Watch the leaders discuss the details of the deal, and how they plan to get it over the line with the Commerce Commission, in today’s episode of Markets with Madison above.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment and has covered business and economics for television and radio broadcasters.
