Cash-rich Cheung Kong Infrastructure Holdings (CKI) is diversifying into the regulated power market in New Zealand after beating other bidders with its NZ$785 million (HK$4.78 billion) offer for an electricity distribution network in Wellington.
CKI, the utilities and toll roads flagship of Li Ka-shing, agreed yesterday to buy from energy infrastructure group Vector the electricity grid serving Lower Hutt, Upper Hutt, Porirua and Wellington City.
The deal will add fuel to CKI's overseas growth and pave the way for a possible sale of half of its stake in the project to its growth-challenged associate, Hongkong Electric Holdings.
Vector, which will use the proceeds to trim debt, said the sale was pending approval by its shareholders and New Zealand's Overseas Investment Office.
An analyst at a European brokerage said the deal would open a stable income source for CKI, which had an HK$8.2 billion war chest as of the end of last year.
'It is good news that the cash pile is invested rather than resting in this low-interest regime,' he said. 'The acquisition in a regulated market will bring to the company a stable return and steady cash inflow.'
He said tariffs of the Wellington power grid were linked to the city's consumer price index at a rate that was reset every five years. The existing tariff regime will mature in 2010.
