The announcement that Eastland Group Ltd is putting half its energy generation business on the market will not excite anything like the community opposition that its proposal to sell Eastland Network did last year. Hopefully it will attract similarly strong investor interest.
EGL’s ambitions in geothermal power generation have looked like
they could do with an equity partner for some time, but also that it was first wanting to scale up the business to be a larger investment opportunity.
Its goal used to be to reach 100MW of renewable generation by 2025; the capital raise plan announced this week has that pushed out to 2027.
Ten years ago EGL and its sole shareholder Eastland Community Trust (since renamed Trust Tairāwhiti) went to market seeking a minority equity partner in EGL itself and did not receive an offer that was attractive enough. EGL’s interest back then in a geothermal venture in Hawaii, and recent exit from struggling aviation businesses, probably didn’t help.
Last year the main reasons given for the sale of Eastland Network (ENL) were that after two decades of growth for EGL, the trust wanted to release funds from its dominant asset to invest in community wellbeing projects, and EGL wanted to recycle capital for renewable generation projects.
While it was highly controversial to sell the trust’s foundation asset, built up over 99 years and responsible for keeping the power on for us all, it did make some sense and the decision had been approved unanimously by the trust and the EGL boards.
It made even more sense for both parties when a sale price of
$260 million was announced late last year — $75m more than the network’s asset book value at March 31, 2022.
While ENL was a solid performer with steady, regulated profits, Eastland Generation has significant growth opportunities. It has three geothermal plants (total generation 59MW) in the Bay of Plenty and plans for more, a 5MW hydropower station near Wairoa, a 5MW solar farm alongside Gisborne Airport nearing completion, and plans for more solar and wind farms in Tairāwhiti. The key driver for seeking an equity partner now is advanced planning for a new 49MW plant on the Kawerau geothermal field.
Eastland Generation’s assets were valued at $338.8m a year ago, earning revenue in the year to March 31, 2022 of $42.3m and earnings before interest and tax of $10.3m. Its revenue was 34 percent of EGL’s total that year (with ENL 23 percent); it accounted for 39 percent of EGL assets (ENL 21 percent) and 32 percent of EGL earnings before interest and tax (ENL 24 percent).
EGL is a smaller operation after the sale of its network business, so Eastland Generation would now be 42-49 percent of EGL on these metrics.
Eastland Group goes to market again . . .
A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.
Opinion
The announcement that Eastland Group Ltd is putting half its energy generation business on the market will not excite anything like the community opposition that its proposal to sell Eastland Network did last year. Hopefully it will attract similarly strong investor interest.
EGL’s ambitions in geothermal power generation have looked like
