July 18 2002 – American Electric Power (AEP) signed an agreement today to sell CitiPower, AEP’s retail electricity and gas supply and electricity distribution subsidiary in Australia, to Cheung Kong Infrastructure Holdings Ltd (CKI) and Hong Kong Electric.
Concurrent with the sale, Origin Energy Ltd will purchase the electricity retail business of CitiPower from CKI and HKE.
“The divestiture of CitiPower, a retail energy supply and regulated distribution business, strengthens our balance sheet as we continue to advance our strategy,” said E. Linn Draper Jr., AEP’s chairman, president and chief executive officer. “The core of that strategy is a balanced portfolio that includes wholesale energy businesses and assets both in the US and select international markets and our strong utility business in the US.”
The CitiPower transaction is valued at approximately A$1.555 billion ($855 million). Under terms of the agreement, AEP will receive net cash of A$330 million. AEP will use the proceeds from the CitiPower sale to reduce debt.
AEP will recognize an after-tax loss on the sale of approximately $125 million in the second quarter, a portion of which may be recognized as an impairment of goodwill under a recent change in accounting rules. Included is a foreign exchange loss of approximately $14 million previously reflected in AEP shareholders’ equity.
The transaction does not require regulatory approval and is expected to be completed by Aug. 30. CitiPower, headquartered in Melbourne, owns and manages the electricity distribution network that serves approximately 264 000 customers in the Melbourne central business district and inner suburbs, an area that accounts for 25 per cent of the employment for the state of Victoria. CitiPower also is a national energy company in Australia, offering electricity, gas and related services through its offices in Melbourne, Sydney, Brisbane and Adelaide. AEP acquired CitiPower from Entergy in December 1998 for A$1.7 billion ($1.1 billion at the exchange rate on the December 1998 closing date).
CKI, headquartered in Hong Kong, is a diversified infrastructure company with a focus in the development, investment and operation of infrastructure businesses in Hong Kong, Mainland China, Australia, Canada, the Philippines and other countries. Hong Kong Electric Holdings Limited (HEH) was established in 1976 to serve as the holding company of The Hong Kong Electric Company, Limited (HEC), the main operating company of the HEH Group. HEC is responsible for the generation, transmission and distribution of power to Hong Kong Island, Ap Lei Chau and Lamma Islands. Origin Energy is a leading Australian energy company that supplies natural gas, electricity and LP Gas to more than 1.8 million business and residential customers in Australia and New Zealand. ABN AMRO Australia advised AEP on the sale of CitiPower.
American Electric Power is a multinational energy company with a balanced portfolio of energy assets. AEP, the US’ largest electricity generator, owns and operates more than 42 000 MW of generating capacity in the US and select international markets. AEP is a leading wholesale energy marketer, ranking among North America’s top providers of wholesale power and natural gas with a growing wholesale presence in European markets. In addition to electricity generation, AEP owns and operates natural gas pipeline systems, natural gas storage, coal mines, and the fourth-largest inland barge company in the US AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s wires. The company is based in Columbus, Ohio.