Power utility CLP Holdings, through its Australia-based flagship TRUenergy, has raised its interest in coal seam gas reserves in the Gunnedah Basin of New South Wales in a A$284 million (HK$2.35 billion) deal.
TRUenergy, which at present holds a 3.8 per cent stake in Eastern Star Gas - that in turn holds the largest natural gas reserve in New South Wales - will end up with 20 per cent ownership of the gas firm's permits and assets in the Gunnedah Basin after Eastern Star Gas changes hands.
TRUenergy, which supplies gas and electricity to 2.7 million customers in Australia, said the deal would feed its future need as the nation switches to a low-carbon regime.
'This acquisition provides TRUenergy with upstream gas reserves to support its generation and gas retail operations into the future,' CLP chief Andrew Brandler said yesterday.
Eastern Star Gas has a proved and probable, or the so-called 2P, coal seam gas reserve of 988 petajoules, equivalent to a heat energy content of 42.48 million tonnes of black coal. Coal seam gas is a major source of gas for Australia and will play a key role in the country's carbon reduction plan.
The TRUenergy acquisition is part of a deal which will see Australian gas producer Santos offer to take over Eastern Star Gas. The takeover involves Santos and Eastern Star Gas swapping shares, valuing Eastern Star Gas at A$924 million.
TRUenergy will sell its 3.8 per cent stake in Eastern Star Gas to Santos for A$35 million, then buy a 20 per cent interest in Eastern Star Gas' coal seam gas permits and a pro rata share of other assets previously owned by Eastern Star Gas for A$284 million.
Some analysts said the move would expand TRUenergy's portfolio, which comprised gas and coal-fired power plants in Victoria, New South Wales and South Australia with a combined 5,613-megawatt capacity. They said a larger portfolio and a higher level of gas supply security would help TRUenergy's potential listing in Sydney next year.
They said the purchase was 'a strategic move' for TRUenergy, which along with other coal-fired electricity producers would have to cut its greenhouse gas emissions as the Australian government presses ahead with a carbon cuts regime.
TRUenergy stands to benefit from the government's subsidy plan, which will see the utility reimbursed with US$250 million in cash in 2011-12, or the first year of the five-year transition period. The utility will also be eligible for 10.42 million carbon trading permits annually for four years from 2013-14. In addition, it will negotiate with the government about the fate of the Yallourn coal-fired power station in Victoria. TRUenergy may receive government compensation if the power station is closed.
CLP shares fell 35 HK cents, or 0.5 per cent, to HK$68.30 yesterday.