August 3, 2000 - Hong Kong - Cheung Kong Infrastructure Holdings Limited (CKI) and Hongkong Electric Holdings Ltd (HEH) jointly announced today that a 50/50 joint venture formed by the two companies has successfully acquired Powercor Australia Ltd (Powercor), an Australian company engaged in electricity distribution and retail, from UK based ScottishPower plc (ScottishPower). Total consideration is A$2.315 billion (approximately HK$10.65 billion), and completion is expected to take place before September 15, 2000.
Powercor is the largest of five electricity distributor/retailers in the Australian state of Victoria, serving the largest geographic region and the largest number of customers in the state. Its network covers seven of Victoria's eight largest provincial centres, providing electricity to an area of over 150,000 square km, ie over half the state. Powercor has two operating arms: Powercor Network (the distribution arm) and Powercor Retail (the retail arm).
Powercor is CKI/HEH's second investment made in Australia following the earlier acquisition of ETSA, the electricity distribution company which serves the state of South Australia. With Powercor and ETSA, CKI/HEH has become the largest electricity distributor in Australia serving over 1.3 million customer sites in the states of South Australia and Victoria.
"We are very excited about the Powercor acquisition. This is a natural extension to our energy portfolio in Australia. In terms of geography, Powercor's distribution service area is located right next to that of ETSA, and in terms of operations, both Powercor Network and ETSA are in the distribution business, hence we can expect a lot of operational synergies," said Mr H L Kam, Group Managing Director of CKI.
"Powercor is a valuable acquisition for CKI/HEH that complements our existing business perfectly. Just like ETSA, Powercor Network belongs to the regulated industry which by definition is a low risk business providing steady and secured returns. This fits well into CKI's and HEH's stringent investment criteria, and we are confident that Powercor will be another prime asset of CKI/HEH," continued Mr Kam.
"As CKI and HEH have already developed solid project portfolios and expertise in power generation, Powercor is a good strategic move for us in further extending our business from power generation to power distribution. This acquisition together with our investment in ETSA have placed us in the major player league of power distribution," said Mr K S Tso, Group Managing Director of HEH.
Powercor Network covers Victoria's high growth region, which encompasses two of Victoria's major industrial districts, Altona and Geelong, as well as high population growth districts such as Melton and Werribee. At the end of 1999, Powercor's distribution network, which comprises about 129,000 km of distribution lines, supplied around 8,600 GWh of electricity to over 570,000 customer sites. The business is regulated by the Victorian Office of the Regulator-General as it is a virtual monopoly in its service area.
"The Powercor acquisition also provides us with the opportunity to apply Hongkong Electric's extensive customer service experience to the Australian market," said Mr Tso.
Powercor Retail is Victoria's largest electricity retail business with over 570,000 customer sites. In addition to Victoria, the company has retail licences in New South Wales and the Australian Capital Territory. This business arm is mainly involved in reselling electricity purchased on the wholesale market.
As part of the agreement, CKI/HEH may also acquire a 19.9% interest in Hazelwood Power Partnership, which owns a 1600MW power station and a dedicated coal mine. This transaction has yet to be finalized.
The current intention is that funding for the acquisition will initially be provided by bank facilities guaranteed by CKI and HEH. Refinancing will be arranged by way of debt or capital markets soon after completion of the transaction.
Powercor was bought by PacifiCorp in 1995 from Victorian Government as a result of privatization. PacifiCorp was subsequently acquired by ScottishPower which placed Powercor on the market through an international tender process recently.
As a result of the purchase, CKI and HEH have a combined interest of HK$27 billion in Australia, making the country home to CKI/HEH's largest investment outside of Hong Kong.
CKI is a constituent stock of the Hang Seng Index. In terms of market capitalization, CKI is the largest publicly listed infrastructure company in Hong Kong. CKI's three core businesses are infrastructure materials, energy, and transportation. The company has investments in Mainland China, Hong Kong, the Philippines, Australia and Canada.
HEH, another constituent stock of the Hang Seng Index, is the listed vehicle of the Hongkong Electric Group of companies which includes The Hongkong Electric Company Limited (HEC). HEC is an electricity utility first established in 1889. The Company's principal activity is to generate and supply electricity in Hong Kong Island and Lamma Island.
For further enquiries, please contact Mrs Wendy Tong Barnes of Cheung Kong Infrastructure at (852)2122-2150 or Mrs Juliana Ma of Hongkong Electric Holdings at (852)2843-3268.
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