Singapore Power plans to raise A$1.6bn through an initial public offering of almost half its stake in SP AusNet, a move expected to give its Australian utility business the firepower to expand overseas.
Shares in SP AusNet will be priced at between A$1.29 and A$1.57, according to the prospectus released on Monday, potentially valuing the company at A$3.3bn. Singaporean investors will be able to buy shares at S$2.00 each.
SingPower plans to retain a 51 per cent stake in the company, which will be listed on the Sydney and Singapore exchanges with trading expected to begin on December 14. SP AusNet comprises an electricity transmission provider and a gas and electricity distribution network.
Ng Kee Choe, SP AusNet chairman, said the flotation would enable the group to seek further ?high-quality energy and utility assets?.
Yap Chee Keong, SingPower chief financial officer, said: ?Our investment horizons are not restricted to Australia. But any acquisitions must complement the existing expertise of SP AusNet.?
Like many utility companies in Australia, it is considered by investors to offer stable earnings and predictable yields.
SP AusNet is forecasting a yield of around 8.5 per cent until 2007, more than double that of the Australian stock exchange?s flagship index recent performance. In addition, nearly 90 per cent of SP AusNet?s annual A$900m earnings are regulated, with expenditure and revenue set every five years.
Demand for Australian energy shares is surging because of a forecast 35 per cent rise in eastern Australia?s peak power demand over the next decade. This is despite the country?s often cumbersome regulatory regime, where eight states or territories are each responsible for setting tariffs.
The Victorian energy regulator last month ruled that suppliers must cut average tariffs by around 8 per cent from January.
However, Nino Ficca, SP AusNet managing director, said: ?The impact of tariff reductions will be lessened as they are being spread over five years and we expect strong organic growth.?
The listing of SP AusNet is set to follow recent similar IPOs in Australia by Alinta, Hastings Diversified Utilities Fund and by Diversified Utility and Energy Trusts.
Cheung Kong Infrastructure Holdings, the Hong Kong-based utility, is also expected to publish a prospectus this week detailing the flotation of its Australian energy distribution business.
Singapore Power is owned by Temasek, the government investment agency which is known to be keen to raise funds for debt repayment. The SP AusNet share sale is being managed by DBS Group, Morgan Stanley and UBS.