Shares in AGL Energy (AGK) rose as much as 5.5% to $11.35 today after the electricity and gas supplier said it is selling its 100% owned Chilean gas distribution business GasValpo, ending its 12-year presence in the South American market.
The business and associated assets will be purchased for $US90 million by a consortium of Australian superannuation funds.
The deal is the first of a number of asset sales promised by AGK to reduce gearing. Investors widely believe it is also positioning itself for any sale of electricity assets by the NSW Government, should it overcome rising political opposition to the privatisation.
The Chilean sale will net AGL Energy $US64 million, with debt of $US26 million in the business being refinanced by the purchasers.
AGL will receive an additional US$10 million of cash from pre-completion dividends and payments of interest on intra-group loans, which will be applied to reduce AGL’s bank debt.
“This transaction clearly demonstrates our absolute focus on capital management. It is the first in what should be a series of non-core asset divestments that will return our current credit rating of BBB to stable outlook and ultimately provide balance sheet flexibility to participate in the significant new opportunities, both organic and greenfield, which are emerging in Australian energy markets,” managing director Michael Fraser said.
“GasValpo was always going to be the most challenging non-core asset for us to divest so it is particularly pleasing we have been able to start with the sale of this asset,” Mr Fraser said.
AGL said the sale will be EPS neutral and will not cause any change to AGL’s revised 2008 earnings guidance of $330 – $360 million. AGL expects the sale will result in a small post-tax profit.
Australia’s largest gas and electricity retailer reported a net profit after tax (NPAT) of $182.8 million for the six months to 31 December 2007, although NPAT was down 6.5% from $195.6 million reported in the previous corresponding period. AGL noted this was due to increased interest expenses.
GasValpo provides natural gas to the residential and industrial sector in Chile’s region V? and is one of the beneficiaries of the GasAndes pipeline from Argentina.
AGL bought a 30% stake in GasValpo in 1997 for an undisclosed amount, and increased that to 50% the following year.
In 2000, AGL acquired a further 50% stake for $36.6 million from Lipigas, the previous sole owner of the business, hoping to take advantage of the company’s expanding client base.
AGL said completion is scheduled to occur on 30 April 2008.
Shares in AGL Energy closed 4% higher at $10.97, in line with the broader market.
