Standard & Poor’s credit rating agency says Meridian Energy’s purchase of the 70MW Mt Millar windfarm in South Australia will “modestly add” to Meridian’s business risk, and has reduced already tight balance sheet headroom to fund other developments. S&P warned last month offshore expansion plans for some electricity SOEs could stretch their balance sheets, especially as the forthcoming electricity reforms “are likely to have significant business and financial implications for generator-retailers, which it had not yet been able to quantify.” S&P described Meridian as having “small geographical diversity and presence in Australia.”

While the SOE’s balance sheet can accommodate the $A191m transaction, it will “have to moderate its financial risk” when it pursues other projects both in NZ and offshore. Meridian’s current BBB+ stable rating remains in place in anticipation of the company taking “a prudent approach” to timing and funding of future developments to ensure it managed financial and liquidity risk.The deal raised eyebrows in Wellington because of perceived Govt antipathy to the company and a strong desire to see its low commercial rates of return improve. However, Meridian says the business case went past shareholding Ministers, and will have been vetted by the Treasury’s CCMAU replacement, the Crown Ownership Monitoring Unit.

- – -NOT A SUBSCRIBER? – - – - – - – - – - – - – - – - – - – - – - – - – - –

NZ’S LEADING INFORMATION SOURCE FOR ANALYSIS AND INTERPRETATION OF THE CRUCIAL ENERGY AND ENVIRONMENT ISSUES AHEAD.

NEW ZEALAND ENERGY & ENVIRONMENT BUSINESS WEEK
Powerful and up-to-date, it covers Emissions Trading Scheme, Climate Change & Carbon Trading, the Resource Management Act, the Kyoto Protocol, Energy Supply Security, Electricity Generation, Renewable Energy, Oil & Gas Exploration, Energy Efficiency, Water Management, Sustainability. Covers policy announcements, draft legislation, amendments to Acts and regulations. Also includes NZ Energy & Environment Weekly Digest. Published every Tuesday. 46 issues per year.

http://nzenergy-environment.co.nz/home/special-introductory-offer
- – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – -

For its part, Meridian is resolute this is a good investment, although there are no synergies with its NZ turbines and none as yet with a proposed 365MW windfarm construction the company is exploring in an $A800m joint venture in Victoria with Aust generator-retailer, AGL, to create what could be the southern hemisphere’s largest windfarm to date. Mt Millar’s output is fully contracted through 2012, and Meridian’s CEO Tim Lusk expects “when the power purchase agreements expire we can take advantage of stronger market prices.”

Meridian has over 1,000MW of NZ development opportunities in the resource consent pipeline, and its other overseas interests include the purchase of San Francisco-based Cleantech America for US$5.4m in August 2009, and the construction of a 5MW photovoltaic solar facility in Mendota, which went live last week. The Mt Millar sale was a key part of capital restructuring programme by the Transfield Infrastructure Fund, which said the Meridian deal represented a return of 13 times on ebitda.

The S&P warning could also apply to MightyRiverPower, which is close to green-lighting a large, prototype geothermal project in Chile. While the value of that potential deal is unknown, MRP has already spent $US20m of $US100m offshore development fund mainly to explore the Chilean option with its 25%-owned partner, GeoGlobal Energy of the US. Meanwhile, Fitch Ratings has issued a new report on Aust wind energy, saying regulatory uncertainty continues to dog the sector, despite improving economics and the attractiveness of wind against other renewable energy forms. Among changes announced in last week’s federal Budget is a reduced benefit under renewable subsidy schemes for photovoltaics, helping make wind more attractive. Fitch says “proposed changes to the national renewable energy target scheme are a key issue for 2010.”

 Copyright © Media Information Ltd
NZ Energy & Environment Business Week