Bid for green energy outfit

Australian
Tuesday 9/6/2009 Page: 17

A PRIVATE-equity consortium headed by Sydney firm Archer Capital has launched a takeover bid for clean energy company Energy Developments. The Energy Developments board is still trying to decide on the bid's value, but it is thought to be more than the market value of $240 million. Energy Developments' biggest shareholder New Zealand's Infratil announced yesterday that it had granted Archer a call option over 19.99% of Energy Developments' shares at an unspecified price.

The private equity bid is described by Energy Developments as being highly conditional and incomplete. One partner in the Archer-led consortium is understood to have run the ruler over Energy Developments when it put itself on the auction block last July. But that plan fell apart when global markets went into meltdown shortly after.

Since then, shares in Energy Developments, which has James Packer's Consolidated Press Holdings, BT Financial and Macquarie on its register, have lost more than half their value. Shares have slumped partly because of concerns the federal government's proposed emissions trading scheme will scrap a NSW gas abatement scheme, meaning a big loss of income for Energy Developments.

The company is lobbying for compensation and wants the coal methane it collects from east coast coal mines included in the ETS. Archer may be speculating that any amended scheme put in place by the federal government will not penalise a company dedicated to low greenhouse gas emission power. The call option granted to Archer becomes effective only if a strike price is agreed and a takeover bid from Archer becomes unconditional.

Infratil claimed this would allow it to sell the rest of its 32.1% stake in Energy Developments into the bid. According to Energy Developments, the option agreement contained complex provisions, but appeared to expire in about 10 weeks if an agreement had not been reached on an acceptable price for a takeover bid or scheme proposal.

It provides also that Infratil will pay a cost reimbursement to Archer of twice Archer's bid costs, up to $5m, in certain circumstances. Energy Developments' independent directors are considering the proposal. If the bid goes through, it is said to be the biggest private-to-public deal in Australia in the past 18 months. Energy Developments gets three-quarters of its earnings through Australian landfill, coal mine gas, LNG and compressed gas operations, but has businesses in Europe and the US.

Energy Developments announced in March that it had been unsuccessful in selling its European landfill business. The company has total power-station capacity of about 600 MWs from 74 power stations. As well as landfill and coalmine gas, Energy Developments owns the West Kimberley Power project in Western Australia's north, which includes a 200 tonnes-a-day LNG plant. And it runs a compressed natural gas power station that powers the Uluru-Kata Tjuta National Park in the Northern Territory.

Energy Developments shares closed at $1.56 on Friday, down from a high of $3.03 last August.