AGL sells Chile gas outlet

Australian
Wednesday 26/3/2008 Page: 18

AGL Energy has sold its Chilean gas distribution business, GasValpo, for $US90 million ($98.4 million), which represents a small book loss. This is the third announcement as part of a plan by new chief executive Michael Fraser to restructure the company to concentrate on Australian assets. Mr Fraser has been keen to demonstrate that AGL Energy is pursuing a stable and coherent growth path following the removal of his predecessor, Paul Anthony, by the AGL Energy board last October.

GasValpo was always outside AGL Energy's core business, once AGL Energy decided to concentrate on its Australian retail energy operations. Since February, AGL Energy has announced it has acquired the rights for a third wind farm for its Hallet development in South Australia and confirmed it is considering options for disposing its PNG oil and gas assets once the front-end engineering and design decision for the ExxonMobil-led PNG LNG project is confirmed.

AGL Energy yesterday said it had sold GasValpo and associated assets and entities to a consortium of Australian superannuation funds. Under the sale terms, the buyers will refinance GasValpo's net bank debt of $US26 million. The remaining sale proceeds of $US64 million, together with about $US10 million in cash, will be applied to reduce AGL Energy's bank debt. Mr Fraser said the sale clearly demonstrated the company's "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," he said. AGL Energy is reportedly interested in acquiring NSW government-owned electricity assets, if they become available later this year.

Mr Fraser said yesterday Gas- Valpo was always going to be "the most challenging non-core asset to divest", so it was pleasing the divestment process had begun with its sale. GasValpo was in AGL Energy's books at $108 million, but the company expects that on a pre-tax basis it will record a loss of about $10 million on the deal, although the benefit of a "tax capital loss will result in a small post-tax gain." The transaction is not expected to affect AGL Energy's revised 2008 earnings guidance of $330-$360 million.