Friday 15th February 2013
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State-owned electricity company MightyRiverPower is dissolving a five-year-old investment partnership in American and German geothermal developments, taking 100 percent control of development opportunities in Chile and a 20 percent interest in a Californian geothermal producer.
The move comes ahead of next Thursday's half-year profit announcement for the company, which is slated for partial privatisation by mid-year, although those plans may be jeopardised by court action seeking to overturn the government's asset sale plan.
MRP has already committed US$250 million to be the cornerstone investor in the US-based GeoGlobal Energy fund, involving private equity fund managers who worked with MRP to identify global opportunities to invest in geothermal power projects.
MRP operates several geothermal units in the central North Island, but has no new domestic projects on its books beyond the Nga Tamariki station, currently under construction and due for completion mid-2013.
"We do not expect development opportunities in New Zealand within the next three to five years due to market conditions - and international markets offer better opportunities for geothermal growth," said Heffernan.
The five-year GGE partnership had developed one of the largest global portfolios of geothermal opportunities, said Heffernan.
"The structure of the new agreement reflects the respective strategic interests and capabilities of Mighty River Power and GGE and the best way to mobilise further capital to build out the opportunities in each country where the fund's assets are located."
MRP will pay GGE US$24.8 million for its minority interest in the fund, and will retain a 20 percent stake in two geothermal power stations, one operating and the other under construction, being developed by EnergySource, a US company, in the Salton Sea geothermal reservoir in southern California.
The company also gains a 100 percent development option on Chilean geothermal resources, including a 50-strong development team in Santiago, Chile, who will report to MRP's development general manager, Mark Trigg.
"MightyRiverPower's strong New Zealand geothermal operating business and long term strategic horizons can better leverage our capabilities for developments in Chile and we see a lot of potential synergies between our business and EnergySource as an operator and developer of a large brownfield geothermal reservoir in the US," said Heffernan.
The GGE partners would retain interests the fund had developed in Germany, where MRP would retain a passive minority stake at a level yet to be disclosed, and both parties were free to pursue new opportunities in any part of the world.
Heffernan described the Salton Sea resource as large by New Zealand standards, with several geothermal plants already in production from the so-called "brownfields" development, and EnergySource believed there were further opportunities as demand and market conditions permit.
MRP would develop a strategic plan for the business in Chile, utilising the knowledge of the staff in Chile and experience we have gained through the GGE relationship, and from experience gained over the past decade developing a significant geothermal business in New Zealand."
The company would take a measured, prudent approach to international geothermal investments, as part of a strategy begun in 2008 to take its expertise offshore.
Heffernan declined comment on the partial float timetable as a matter for shareholding Ministers, saying that certainty for MRP staff was the most important factor. The company had initially planned for an initial public offering of up to 49 percent of its shares before last Christmas.
A New Zealand Maori Council appeal to the Supreme Court is seeking a halt to asset sales while Treaty of Waitangi claims to freshwater rights are settled. The government had asked the Supreme Court to try and deliver a decision by Feb. 18 in order to meet its objective of completing a share float by June 30.
However, the court issued a minute last night saying it would not meet that date and expected to deliver a judgment by the end of the month, which may indicate a split bench on the contentious issue.
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