Credential: Powerlink divests its 41% interests in ElectraNet
The divestment of ElectraNet was part of responding to electricity consumers increased demand for a lower cost service with greater efficient transmission services that take account of the value to those customers. As it was a divestment of a 41% interest (rather than a 100% stake) providing bidders with as much relevant information as possible was a significant challenge.
- Our Client
- What was our client’s capital agenda?
- The divestment process
- Driving Exceptional Client Service
- The Outcome
Powerlink owns and operates the electricity transmission network in one of Australia’s fastest growing markets. Formed in 1995, Powerlink is the government-owned, primary electricity transmission network owner and operator for the state of Queensland, with a $6 billion high voltage network comprising 126 substations and 14,700 circuit kilometres of transmission lines.
In almost two decades of operation, Powerlink has successfully adapted its business model to cater for the rapid evolution of Australia’s electricity industry including rising population, increasing regulatory pressures and changing consumer behaviour.
“Powerlink’s greatest challenge – and perhaps the secret to its success – is its ability to ‘focus on the right things’. It has been a real journey for us – first to adopt a commercial focus and, most importantly, to understand what our role is.
We are getting very clear signals from our stakeholders that they want us to be an efficient business that delivers efficient services. It is not about whether the process within the business is efficient – it’s about whether the transmission service has actually delivered an efficient service to the people who want to get that service.
With this in mind, Powerlink re-examined its business strategy to respond to an external environment that is perhaps not as predictable as it was.”
Merryn York, Chief Executive (CE), Powerlink
What was our client’s capital agenda?
Having considered their future business requirements and recognising the shareholder objectives, our client decided it was an appropriate time to divest non-core assets. Powerlink’s 41% interest in South Australia’s transmission business, ElectraNet, met the criteria.
While it has been a very successful investment for Powerlink, the divestment will allow Powerlink to fully focus its capital resources on its Queensland transmission business, both regulated and non-regulated transmission network augmentation requirements.
Going forward, one of Powerlink’s priorities will be responding to coal seam gas (CSG) mining in Queensland’s Surat and Bowen basins.
“Because we have a fixed asset base, the extra demand from CSG projects will lower the transmission cost on a per megawatt hour basis for everyone else. The divestment of ElectraNet was part of responding to our customer’s and electricity consumers increased demand for efficient transmission services that take account of the value to those customers.”
Merryn York, Chief Executive (CE), Powerlink
The divestment process
Powerlink engaged our Transaction professionals once they had made the decision to consider a divestment. The engagement was won on our extensive experience transacting in the power and utilities sector and our ability to demonstrate our deep understanding of sector market trends and issues.
Timing of the transaction was critical. As it was a divestment of a 41% interest (rather than a 100% stake) providing bidders with as much relevant information as possible was a significant challenge.
To overcome this challenge, the divestment process drew on information available as part of ElectraNet’s regulatory reset submissions to the Australian Energy Regulator - all of which could be made available in a timely manner to bidders.
“The nature of this divestment proved particularly difficult to provide the ‘picture’ to potential buyers. EY delivered a team of industry specialists across a number of different services to help tell the story of the asset relevant from a purchaser’s perspective.”
Maurie Brennan, Chief Financial Officer, Powerlink
Our Transaction Advisory services on this divestment included:
- Vendor Due Diligence
- Transaction Tax including structuring the divestment in an optimal way
- Regulatory input
Driving Exceptional Client Service
EY’s Transaction Advisory Services team's continued commitment to provide excellent client service provided Powerlink with confidence in our team.
In addition to providing the necessary services to fulfil the divestment, EY helped Powerlink evaluate the field of potential bidders including the successful bidder - State Grid Corp of China - the world’s largest utility by revenue1.
The divestment of Powerlink’s share interest in ElectraNet is in line with Powerlink’s business strategy, and is consistent with the Queensland Commission of Audit Report recommendations.
1‘Hastings Funds Management looks to offload ElectraNet stake’, The Australian Financial Review - Friday June 7 2013