Utility consolidation round the world
Here are two big utility deals that are further indications of worldwide trend to utility consolidation, along with one takeover attempt that failed, but led to a deal between the two companies.
Babcock & Brown buying spree
Australia's Babcock & Brown Infrastructure Ltd. recently announced the acquisition of US utility company NorthWestern Corp. With the $2.2 billion deal, Babcock & Brown Infrastructure Ltd acquired a regional gas and electrical utility serving parts of Nebraska, Montana, and South Dakota. The Australians outbid another US utility (Black Hills) and a consortium of cities in Montana. NorthWestern emerged from bankruptcy in 2004.
Babcock & Brown owns utilities in Australia, New Zealand, and the US (where it won an electrical cable network). Its parent company, Babcock & Brown LP, has wide interests in real estate, transport, and other investments around the world.
Even more recently, Babcock & Brown buys energy assets of NRG Flinders, an Australian company, for $385 million. These include power plants, a coal mine, and natural gas contracts, all in South Australia.
The company has also been investing in the largest wind farms in Australia, one of largest in the world. It recently contracted to add 50 new turbines.
Malaysian deal
MMC Corp, a Malaysian infrastructure group, reached an agreement to buy Malaysian power company Malakoff Bhd. for around $2.5 billion. The deal will be the biggest in Malaysian history.
MMC is a conglomerate with interests in power plants, ports, and construction. It has major natural gas distribution assets in Malaysia. Malakoff generate electric power through coal plants and is the company's largest private generator. One of Malakoff's major stockholders is International Power, a British-based conglomerate with interests in power plants across the world. Both companies supply energy to Tenaga Nasional Bhd., the troubled majority state-owned utility.
AGL and Alinta make piece
Australia utilities AGL (Australian Gas Light) and Alinta, after each threatening to take over the other, instead have made up with a $5.1 billion asset swap. The details are spelled out in a Wall Street Journal article ("AGL-Alinta Tussle Ends With Asset Swap", 4/27/06):
Alinta will buy AGL's infrastructure assets -- excluding the Papua New Guinea gas pipeline -- for A$6.45 billion, with AGL shareholders holding 46% of the enlarged Alinta. AGL will buy 33% of Alinta's retail and cogeneration business for A$367 million and will have the right to buy the balance over five years.
Meanwhile, the Australian state of Queensland announced it would sell off parts of its power companies Energex and Ergon. The deal is expected to reach A$1 billion.
In a further development, the Australian newspaper reported on May 5 that Babcock & Brown may want to spoil the AGL-Alinta deal by building a stake in Alinta. Other regulatory concerns may cause the deal
