Trustpower puts seal on hydro deal

Trustpower has experience with hydro stations. Photo/File

Tauranga-headquartered Trustpower will finalise its A$72.2 million acquisition of hydro power assets in Australia by the end of the month, says chief executive Vince Hawksworth.

The assets, which include the 58 MW Hume hydro power station on the Murray River, the 27.2 MW Burrinjuck hydro power station in southwest NSW, the 7.2 MW Keepit hydro power station, the 9.9 MW Blayney wind farm, and 80 per cent of the 4.2 MW Crockwell wind farm, were acquired from the New South Wales Government, which decided last year to dispose of the assets.

"We had a look and realised these power stations are very similar to the types we had in New Zealand," said Mr Hawksworth. "They fall into that mix of smaller hydro stations, which are our bread and butter and which we operate very well. We firmly believe the acquisition will be earnings accretive."

Mr Hawksworth said the three drivers for the deal were:

The synergy with Trustpower's existing assets

The fact that the opportunity had come up and the company felt it was well placed to win the tender process

The acquisition fitted into Trustpower's overall diversification strategy in Australia, which has been focused on developing wind farms

"There are plenty of people who can handle really big assets, but being to able to get your hands around the smaller stuff is more of an art, which we think we're good at."

Mr Hawksworth said he did not believe the fact that the Abbott government planned to repeal its carbon tax would have an impact on Trustpower's Australian operations.

"It will, at least in theory, reduce to some extent electricity prices, but that's been well signalled and I guess our pricing reflects a post-carbon tax world," he said. The Abbott government was also reviewing its renewable energy target, but the outcome of that would not have any impact on the latest acquisition because the assets were built before the energy target was established.

"All in all, the renewable energy target review has zero impact on this acquisition," he said. "That said, a positive review of the target would be a good thing for Trustpower in general in terms of our future investment in Australia."

Andrew Harvey-Green, a senior equity analyst with Forsyth Barr, described the acquisition as positive, though it was not completely without risk, mainly because Australia's climate was prone to drought and created more volatile conditions for hydro assets.

"It's a nice little add-on. Strategically, it's an interesting move and will probably add a little bit of value, but not a huge amount."