ALINTAGAS fired up investor interest last week through a deal with AMP Henderson to take over the Australian assets of US utility Aquila.
Just a fortnight before its scheduled AGM, AlintaGas all but shed concerns that its future was limited as an influential operator in an isolated energy market about to come under increasing competition.
The WA utility has pulled off one marketing coup after another since its privatisation and public listing in 2000, but last week’s deal will place the new AMP Henderson Utilities Fund on its register at an initial 25 per cent, and offer other institutional investors 22.5 per cent.
With AMP Henderson Utilities Fund’s option for 49.9 per cent, institutions could hold more than 70 per cent of the utility.
At an estimated cost of $610 million – almost last month’s market capitalisation – AlintaGas also becomes a national distributor and services outfit.
Its gas customer tally will jump 142 per cent to 1,000,000 across two States, and half a million electricity customers in Melbourne will be added to its books.
Further, the utility will earn good income from a management contract covering all associated network assets.
Without full ownership, AlintaGas gets to manage $4 billion of assets in a move that had its beginnings two years ago.
In March 2001, Bob Browning came in as CEO under an operating services agreement from then cornerstone shareholder Aquila* (formerly UtiliCorp).
During that year, gas sales of 60 petajoules went to 450,000 customers, with 27PJ supplied through the company’s own networks.
Mr Browning began talking of a three-pronged strategy – optimisation of the company’s core business, pursuit of new growth opportunities, and delivering consistent shareholder returns.
Favourite themes included “aggressive cost management”, “staff engagement”, “restructuring the business”, and “improved, flexible and scalable systems and processes”.
But it was the defending and growing customer base, the building of scale – in energy assets products and services – and the leveraging customer relationships and core competencies phrase-ology on which the market appeared most keen to see tangible progress. Customer, sales and network growth continued into 2002, along with staff rationalisation.
The result was a 21 per cent increase in net profit, and a $25 million calendar year fall in operating costs, but the major public relations coups were related to diversification.
During 2002 AlintaGas engineered a 50 per cent stake in construction and maintenance network services business National Power Services (WA), announced an MOU for a possible 10-module co-generation project with Alcoa, and began taking on electricity sales and development staff.
Ahead of full retail contestability in the gas market by the end of 2003, AlintaGas was also instrumental in establishing rules and systems and in forming independent retail market operator REMCo.
Mid October 2002, Aquila and Australian affiliated United Energy were free of obligation to retain a combined 45 per cent stakeholding, and AlintaGas had secured a Government deal preventing Western Power from competing for retail gas customers until at least 2007.
The market had its wires crosseda bit when Alinta began the new year reporting a reduction in gross profit of 11.8 per cent, a fall in sales revenue of 6.2 per cent, minimal growth in networks throughput, and only a 3.9 per cent increase in customer connections.
However, forward talk was of a pre-booked 100 megawatts for the imminent final sign-off for the first Pinjarra co-generation plant, a proposed name-change to better reflect the new Alinta, a neutral-to-positive Dampier-to-Bunbury pipeline access arrangement, and 12-month-old negotiations to capitalise on Aquila’s assets sale and exit from Australia.
The Aquila matter was executed with PR finesse last week – and by the end of next week, the market is likely to have the remaining trifecta – the Pinjarra announcement, a DBNGP decision, and an approved new name.
Six months ago Alinta shares were trading at around $4.10. Last week they were 90 cents higher, before settling earlier this week at around $4.85.
Speculation will continue, however, over Alinta’s interest in the DBNGP, potential sales arrangements with Wesfarmers, and Alinta’s register.
· Mr Browning has been employed directly by AlintaGas since December 2002.
