22 August 2002 – New Zealand’s Natural Gas Corporation (NGC) surprised the energy industry by announcing plans to sell its power stations and quit the gas retailing business.
Chief executive Phil James revealed the changes while releasing the company’s annual results, which showed a healthy recovery from its recent disastrous foray into electricity retailing. He outlined a major change of direction for NGC, shifting away from retailing energy and into gas market infrastructure.
It wants to sell its two main power stations – a modern gas-fired station in Taranaki and its Cobb hydro station near Nelson.
NGC generates around 12 per cent of New Zealand’s electricity and values its generation assets at $547.8m ($254.7m).
It made an after-tax profit of $34.5m for the year to June 30, a marked improvement from the year before, when it lost more than $300m and was forced to go to its 66 per cent owner, Australian Gas Light, for a bail-out.
Revenue was $709m, reduced from the previous year’s $1.24bn by the withdrawal from electricity retailing.
NGC, which has dropped the Natural Gas Corporation title, hopes to sell its power stations within the next six months. It currently sells gas through Genesis Power, which bills and services the customers.
A new look NGC would also mean a new capital structure, said Phil James, and it was possible that capital would be returned to shareholders. He said the company would focus on supplying energy to businesses, not the mass market.
And he hinted at the possibility of NGC buying into the electricity lines business, when asked about the sale of UnitedNetworks. “Today we are becoming an infrastructure-focused energy services company, largely centred around gas assets and gas capability and the gas market,” he said. “It’s quite reasonable to predict that at some time we will contemplate other classes of assets but they’ll need to meet our investment criteria.”
James said NGC’s assets would be attractive to potential buyers. He thought they would be broken up for sale, not sold in one block. The company would accept nothing less than book value for its power stations and James said he felt confident that “we’re at or approaching the top of the cycle for those assets”.
The Taranaki station is the only power station to have gas supplies guaranteed beyond the expected 2007 depletion of the Maui gas field.
A new, much smaller field known as Pohokura, owned by Shell, Todd Energy and German energy giant Preussag Energie, is expected to be the next field to supply power stations such as NGC’s Taranaki plant and Contact Energy’s Otahuhu B station.
Genesis Energy, a likely bidder for the NGC assets, owns 70 per cent of the undeveloped Kupe oil and gas field.
Genesis chief executive Murray Jackson confirmed that the company, one of the three big state-owned power companies, was looking at the NGC stations.
Jackson said as well as needing the knowledge of how to run a station such as that in Taranaki, any new owner would probably also want customers nearby.
“It’s not much good to you if all your customers are in Auckland and you’ve got a gas turbine in Stratford. Differential pricing and transmission is quite high.”
Genesis is the electricity retailer in Taranaki, Wanganui, Manawatu and Wairarapa.
The Commerce Commission will announce on Friday if it will let NGC buy the gas pipes owned by UnitedNetworks, which are for sale with the rest of the North Shore company.
The commission will also give its decision on whether electricity lines company Vector can buy all of UnitedNetworks.