Press Release
April 16, 2001, Hong Kong - Cheung Kong Infrastructure Holdings Limited (CKI) and Hongkong Electric Holdings Limited (HEH) announced that their associate company in Australia - Powercor Australia Limited (Powercor) has entered into an agreement to dispose of its electricity retail business to an Australian listed company Origin Energy Limited (Origin Energy) at A$315 million. The transaction is expected to complete around June 1, 2001.
Powercor will also receive from Origin Energy a revenue of A$55 million for its provision of transitional services for 12 months. On top of that, under a revenue sharing arrangement, Powercor may enjoy further profit from additional margins due to tariff adjustments for the first year after completion.
Powercor is the largest of five electricity distributors/retailers in the state of Victoria, Australia, serving the largest geographic region and the largest number of customers in the state. When it was acquired by CKI and HEH in September 2000, the two groups' interest in Powercor was mainly in the regulated electricity distribution business which is of low risk and secure returns in nature. The electricity retail operation, which commands a higher risk and requires a lot of local knowledge, does not fall in line with the current CKI/HEH's business focus. After the disposal of the retail business, Powercor will continue to operate as Victoria's largest electricity distributor.
This is the second time CKI/HEH dispose of electricity retail business in Australia. In January 2000, the two groups disposed of the electricity retail unit of ETSA to an Australian energy operator Australian Gas Light Company, two weeks prior to the completion of acquiring ETSA from the State Government of South Australia. In both cases, CKI/HEH firstly acquired the business consisting of both distribution and retail operations, and thereafter disposed of the non-core retail units to domestic operators. Unlike the last time when the premium generated from ETSA's retail unit disposal was passed to the State Government of South Australia in accordance with the term as set, the proceeds from Powercor's retail business disposal will be kept with the company.
"All along our interest is in the capital intensive regulated electricity distribution business. We therefore are pleased to have disposed of Powercor's retail business, which not only will improve our investment return, but also enable the management to focus on the electricity distribution business, the low risk and secure returns investment that fits well into the respective core business of both CKI and HEH. As the electricity retail unit represents only a small portion in Powercor, the groups' investment in Victoria is still substantial." commented Mr H L Kam, Group Managing Director of CKI.
"We consider Powercor's distribution business a valuable asset. We are happy with the performance so far. All results generated from Powercor are better than our original forecast, notwithstanding the tariff changes that we have already taken into consideration at the time of acquisition." stated Mr K S Tso, Group Managing Director of HEH.
"Both CKI and HEH are very satisfied with our investments in Australia - ETSA Utilities, Powercor, and in CKI's case, also Envestra Limited. We will continue to look for appropriate investment opportunities in the country," Mr Kam concluded.
CKI is a constituent stock of the Hang Seng Index. In terms of market capitalization, CKI is the largest publicly listed infrastructure company in Hong Kong. CKI's three core businesses are energy, transportation, and infrastructure materials and infrastructure-related businesses. The company has investments in Mainland China, Hong Kong, the Philippines, Australia and Canada.
HEH, another constituent stock of the Hang Seng Index, is the listed vehicle of the HEH Group of companies which includes The Hongkong Electric Company Limited (HEC). HEC is an electricity utility first established in 1889. The Company's principal activity is to generate and supply electricity in Hong Kong Island and Lamma Island.
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