CKI and Hongkong Electric Won Tender to Become Melbourne Electricity Distributor
19 July, 2002 -- Hong Kong
Cheung Kong Infrastructure Holdings Limited (CKI) and Hongkong Electric Holdings Limited (HEH) consolidated their position as Australia's leading energy distributor with the successful acquisition of CitiPower I Pty Ltd (CitiPower), the electricity utility which serves Melbourne, Victoria, and its surrounding suburbs for a net A$1.418 billion (approximately HK$6.2 billion).
CitiPower distributes approximately 5,300 GWh of electricity to around 265,000 connected customers with concentration aggregated in the densely populated Melbourne central business district and inner suburban areas. Within its distribution region are the headquarters of some of Australia's largest and most reputable companies, and cultural and sporting icons.
CitiPower consists of the network distribution business as well as the retail operation. The total consideration for the CitiPower tender is A$1.555 billion. CKI/HEH partnership will take up the distribution business of CitiPower, valued at A$1.418 billion, and onsell CitiPower's retail business to Origin Energy, a leading listed Australia energy provider, for a consideration of A$137 million. This follows the practice seen in both the ETSA and Powercor transactions, in which CKI and HEH have focused on building strong critical mass in power distribution, while disposing of related retail busine which require strong local retail reach and may involve higher levels of business risk.
CKI/HEH Emerges as Australia's Largest Electricity Distributor
The acquisition, from AEP Resources Inc, the wholly-owned Australian subsidiary of American Electric Power Company Inc, follows the purchase by the CKI/HEH venture of Powercor Australia, Victoria's largest power distributor and retailer, in September 2000, and of the ETSA Utilities at the end of 1999.
Together with Powercor, CKI/HEH will own two out of five electricity distributors in the state of Victoria, supplying almost 14,000 GWh to 880,000 customers in Victoria. In South Australia, ETSA Utilities accounts for a further supply of 10,000 GWh to approximately 747,000 customers. The three together make CKI/HEH the biggest electricity distributor in Australia in terms of customers served.
This latest transaction also consolidates the position of CKI and HEH as one of Australia's leading international investors. They now have three partnership ventures, with an aggregate investment being close to A$7 billion, providing the majority of power distribution in the state of Victoria and the entire state of South Australia, serving a total of more than 1.6 million customers.
"We have been very pleased with our experience with Powercor and ETSA Utilities and are confident this further investment will permit greater operating efficiencies and allow the various companies to provide better service to our customers," said Mr H L Kam, Group Managing Director of CKI.
Mr K S Tso, Group Managing Director of Hongkong Electric Holdings, added: "Victoria and South Australia provide a stable and familiar regulatory environment within which to build strong and predictable power distribution businesses. We regard Australia as an excellent investment destination and look forward to strong business growth as we develop synergies and hone efficiencies in this high-density customer region."
For CKI, the CitiPower venture is the second Australian investment this year. In spring, it was named a preferred tenderer to construct the Cross City Tunnel, a two- kilometer tunnel in Sydney in New South Wales.
CKI/HEH emphasized that the new electricity distribution venture, as a stable existing business, would generate immediate revenues and is expected to provide steady and assured returns going forward.
"Both Cheung Kong Infrastructure and Hongkong Electric will continue to look for prime investment opportunities with stable, steady and assured income as the CitiPower investment in markets across the world," said Mr Kam.
Cheung Kong Group is one of Australia's Biggest Foreign Investors
Cheung Kong Group is currently one of the biggest foreign investors of Australia. Apart from the power distribution businesses, Hutchison Telecom has invested in a telecommunications venture in Australia, while CKI is the largest stakeholder in Envestra, Australia's largest gas supply company. Including this latest CitiPower acquisition, the Group's total investment in Australia amounts to A$9 billion; serving about 2.8 million customers and employing around 5,000 staff the country.
Cheung Kong Infrastructure Holdings Limited (CKI) is the largest publicly listed infrastructure company in Hong Kong with investment in Hongkong Electric, infrastructure investments, infrastructure materials and infrastructure-related businesses. The Company has operations in Hong Kong, Mainland China, Australia, Canada and the Philippines.
HEH, which is also listed on the Hong Kong stock exchange, is the listed vehicle of the Hongkong Electric Group of companies, which includes the Hongkong Electric Company (HEC). The principle activity of HEC is to generate and supply electricity in Hong Kong, where it was first established in 1889.