Patience pays off for Infratil

Utilities investor Infratil has played a game of patience with its stake in Australian company Energy Developments (lifted last month to 19.9 per cent with the purchase of close to $40 million of shares).

Infratil director Lloyd Morrison describes the investment as one which "has not been that happy for us" - but which is starting to come right.

Energy Developments, of Brisbane, generates power from landfill gases and coalmine waste methane in several countries, often in remote areas. The sector has been re-rated upwards by the sharemarket because of the global interest in reducing greenhouse gases and the increased government funding of projects with that aim.

Two years ago, Infratil saw the share price of Energy Developments fall below A$1.80, compared with the A$3.25 a share paid in July 2002 for its initial shareholding.

Christchurch electricity lines company Orion bought a similar stake and both topped up at the lower prices to give an average of about A$3.03 a share.

Currency movements have worked against the investors but, by the time, Energy Developments' share price recovered to above A$4 (it fell 14Ac to A$3.94 yesterday), both were well in the money.

After the work they had put into the company - Orion chief executive Chris Laurie took the top job in Brisbane - it was a surprise when Orion said it was getting out.

Infratil raised its shareholding to 19.9 per cent from 13.6 per cent by paying Orion A$4 a share for a chunk of its stake.

The lines company will clear up to $76 million and has said its profit from the foray will be about $16 million.

Orion is selling for reasons that include debt reduction and a focus on investing closer to home.

Morrison said he would have been just as happy for Orion to stay. "They looked to exit and we had to work out the best arrangement we could."

He describes the transaction as a "very good deal" for Orion.

Energy Developments reported a record interim after tax profit of A$12.1 million for the half year to December 31 and has a string of projects in the pipeline.

Infratil has a reputation for thorough research but, looking back, Morrison said it had not anticipated some of the problems within the company when it invested.

"We weren't given a clear picture of what was happening and we were not happy with that."

Infratil believed the core business was worth more than the price it paid back in July 2002.