QIC agrees to buy 50% of Powerco's NZ assets

Tuesday 4th November 2008

Australia's QIC, which has A$80 billion of funds under management, agreed to buy 50% of Powerco's New Zealand assets for about $400 million cash.

The transaction will provide funds to pay debt for owner Babcock & Brown Infrastructure, whose stock has slumped 88% in the past 12 months as the global financial rout eroded the value of assets. The sale price values Powerco New Zealand at an EV/EBITDA multiple of 9.3 times, BBI said in a statement. The sale ascribes the business an enterprise value of $2.05 billion, it said.

Powerco is New Zealand's second-largest electricity and gas distributor after Vector. Last week, the Commerce Commission ordered the two companies to reduce pipeline charges amid concern they were using their monopoly position to gouge customers. Powerco's Tasmanian networks aren't included in the QIC sale.

"Powerco is a core, regulated utility," said QIC head of global infrastructure Ross Israel. "As a mature business we expect it to provide stable, long-term returns."

The transaction is expected to be settled in the first quarter of 2009.

BBI is managed by Babcock & Brown.

By Jonathan Underhill

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