WELLINGTON: New Zealand power company Contact Energy has agreed to buy smaller rival Manawa Energy to create a business better able to develop the new generation the South Pacific nation requires.
Contact announced a shares-and-cash deal yesterday in Wellington that values Manawa at 1.86 billion New Zealand dollars (US$1.1bil) or 5.95 New Zealand dollars a share.
This was a big premium on Tuesday’s closing price of 4.03 New Zealand dollars.
The amalgamation comes as the electricity industry faces calls for change to address a lack of competition and investment that critics say has contributed to a surge in wholesale power prices in the country.
Winstone Pulp International announced on Tuesday it will close its two New Zealand mills partly because rising energy costs made them uncompetitive.
Contact, which owns hydro plants in the South Island, will add 25 more from Manawa’s portfolio creating geographical diversification and resilience against dry year risk, chief executive officer Mike Fuge said.
In turn, that will allow it to sell larger volumes of fixed-price electricity into the market, he said.
“Access to this type of hedging adds resilience and support for New Zealand’s large energy users and independent retailers to reduce their exposure to spot market prices in dry years,” Fuge said.
“This transaction makes a lot of sense given the strong alignment with the needs of our customers and the wider economy.”
Contact will also get access to a portfolio of future wind and solar power developments within Manawa of more than 1,200MW, it said.
This will sit alongside its own portfolio of renewable generation projects including geothermal. — Bloomberg
