Infratil/NZ Super consortium pays $696.5m for Shell's downstream assets

Shell New Zealand's downstream petro-chemical assets are to be sold to a 50/50 consortium of Infratil and the Guardians of the New Zealand Superannuation Fund in deal worth almost $700 million, Infratil announced this morning. 

"The base purchase price is $696.5 million plus an adjustment for actual net working capital in excess of $208 million at settlement date," said Infratil chief executive Marko Bogoievski. "Normal net working capital levels are estimated to average $250 million during a 12 month period." 

The price includes approximately $190 million for a 17.1% stake in the New Zealand Refining Co’s Marsden Point oil refinery, the country's only refinery, which provides around 75% of the country's annual fuel needs. 

The consortium is also making an advance payment of $13.5 million for "medium term" rights to continue using the Shell retail brand, meaning there will be no immediately visible change for customers while the company puts in place local management and investment plans after what Infratil believes is years of capital constraint and a lack of marketing innovation. Also included in the purchase are Shell's national network of petrol stations, truck-stops, aviation and marine fuel supply facilities, and a 25% stake in the FlyBuys customer loyalty programme.

Total equity provided by Infratil and the NZ Superannuation Fund will amount to $420 million with the balance bank funded, along with a working capital facility to accommodate fluctuating inventory.

It will trade under the name of Greenstone Energy.  The acquisition would have added 6 cents a share to Infratil’s earnings after financing costs in the year ended December 31, it said. Shares of Infratil were unchanged on Friday at $1.65. NZ Refining fell 3 cents to $4.

The businesses being acquired have been built up by Shell over almost a century and their decision to sell due to changes in the global oil market has presented a “once in a generation” opportunity, said Bogoievski. He told an investors' day earlier this month that Infratil foresaw an industry shakeout occurring in fuel retailing. As a dominant player in the sector, Shell fitted Infratil's focus on infrastructural, energy assets in sectors where change was occurring.  

"Over the last year Infratil has divested approximately $400 million of assets and with this transaction, Infratil will have invested over $400 million in new assets," said Bogoievski. "The transactions leave Infratil with a more focused portfolio of investments that is well placed to generate good returns for its shareholders on both a short term and longer term basis." 

Its 50% share of the Shell assets will represent around 10% of Infratil's post-transaction balance sheet, with TrustPower continuing to represent 48% of total assets. 

Businesswire.co.nz

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