sp ausnet shares at a$1.38 each

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    Q. Did anyone here apply for any?

    Singapore Power Raises A$1.4 Bln in Australia IPO, People Say

    Dec. 7 (Bloomberg) -- Singapore Power Ltd. raised A$1.4 billion ($1 billion) in an initial public offering of its Australian energy unit, less than the maximum amount sought as investors questioned the company's growth prospects.

    SP AusNet sold 1.03 billion shares at A$1.38 each, the people said, declining to be identified before an announcement. Singapore Power offered investors stock between A$1.29 and A$1.57, and will own 51 percent of the operation.

    Energy transmission assets in Australia's eastern states of Queensland and New South Wales, the nation's most populous region, are government owned and not slated for sale, driving up the prices of similar businesses in other parts of the country. That may thwart SP AusNet's plans to grow by acquiring businesses.

    ``The main issue is SP AusNet have to wait for the state governments to privatize the assets, which may take a while,'' said Nick Vidale, who helps oversee $5.5 billion at Deutsche Asset Management in Sydney and holds power and gas company shares. He declined to say whether he purchased SP AusNet stock.

    SP AusNet's businesses include electricity and gas distribution networks in Victoria, and a high-voltage power transmission network. It plans to grow the business by acquiring publicly-owned operations or through potential government sales.


    Sydney-based Australian Gas Light Co., the nation's biggest energy utility, in October agreed to pay A$1.43 billion for Australian hydropower and wind energy generator Southern Hydro Pty. Merrill Lynch & Co. said it was an ``expensive'' acquisition.

    The price paid by Australian Gas Light equates to a 2004 multiple between enterprise value and earnings before interest, tax, depreciation and amortization of 34 times.

    That compares with 19.7 times for the A$788 million takeover of Pacific Hydro Ltd. and 9.7 for Origin Energy Ltd.'s takeover of Contact Energy Ltd., Merrill said in an Oct. 31 report.

    Melbourne-based Industry Funds Management purchase of Pacific Hydro valued the company 58 percent higher than its stock was trading at before it called for takeover offers.

    Vidale said another reason for SP AusNet not attracting higher offers was because ``the appetite for utilities offerings has also come off in the past three months.'' Six out of the eight members in the S&P/ASX 200 Utilities Index have delivered negative returns in the past three months, Bloomberg data show.

    Dividend Yield

    SP AusNet, even at the bottom of its offer range, is more expensive than comparable Australian stocks such as Envestra Ltd., GasNet Australia Group and Diversified Utility & Energy Trusts, Macquarie Equities Ltd., the brokerage arm of Macquarie Bank Ltd., said in a Nov. 22 note. The brokerage based its analysis on the total value of the companies, including debt, compared with the value of their assets as determined by regulators.

    Lauren Thompson, a spokeswoman at SP AusNet in Australia, declined to comment. The share sale is being managed by DBS Group, Morgan Stanley and UBS AG.

    Hugh Fraser, a spokesman for Morgan Stanley in Sydney, could not be reached for comment. Caroline Gurney, a spokesman for UBS in Sydney, also could not be reached. Eileen Lau, spokeswoman for DBS in Singapore, said she couldn't immediately comment.

    SP AusNet forecasts a dividend yield of as much as 8.5 percent in 2006 and 8.7 percent in 2007, more than double the average yield on Australia's benchmark S&P/ASX 200 Index.

    James Holt, who helps manage $1 billion at Zurich Financial Services, said there was a ``hunger for yield assets'' by investors wanting better returns than they could get from bonds.

    Power Demand Rising

    Marc Faber, who oversees about $300 million as the managing director of Hong Kong-based Marc Faber Ltd. said this week longer-maturity U.S. Treasury bonds are a bad investment as inflation will likely accelerate in coming years, eroding the value of bonds' fixed payments.

    SP AusNet has said it plans to investigate electricity and gas transmission acquisitions as regulators forecast peak power demand in eastern Australia to rise 35 percent by 2015. Proceeds from the IPO will go to Singapore Power.

    Other Australian initial offerings planned this month include Li Ka-Shing's Cheung Kong Infrastructure Holdings Ltd.'s A$1.8 billion sale of its Australian power assets, known as Spark Infrastructure Fund, and Sydney-based Burns Philp & Co.'s A$2.1 billion sale of its Goodman Fielder bakery arm.

    ``You've got two IPO's happening at the same time that are of similar assets, so it just comes down to demand and supply,'' said Jason Teh, who helps manage the equivalent of $4.1 billion at Investors Mutual Ltd. in Sydney.

    SP AusNet is slated to start trading on the Australian Stock Exchange and Singapore Exchange Ltd. on Dec. 14.

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