Power Assets under pressure to dole out some of its HK$40bn cash hoard in special dividend

PUBLISHED : Monday, 16 January, 2017, 9:35pm
UPDATED : Monday, 16 January, 2017, 10:50pm

Power Assets may pay a special dividend on top of its final dividend after it announces its annual results, potentially answering calls by shareholders to distribute part of its huge cash pile after hopes for a special payout was dashed last May.

Power Assets said in a statement on Monday that its board will consider a motion to pay a HK$5 per share special interim dividend during a meeting scheduled for January 26

But Power Assets, which has energy projects in Hong Kong, mainland China, Europe, Canada, Australia, and New Zealand may still have more than HK$40 billion cash after distributing the HK$10.67 billion special dividend and completing a 20 per cent stake purchase in Australian energy distributor Duet Group for HK$8.6 billion.

Its cash and bank deposits totalled HK$66 billion at the end of June.

Asked whether the special payout is to help secure support for the Duet acquisition from Power Assets’ minority shareholders whose consent is needed to set up the bidding consortium, Kam Hing-lam, managing director of Cheung Kong Infrastructure (CKI), the largest shareholder of Power Assets, said: “We have long heard feedback from shareholders that they really want special dividends.”

Asked if Power Assets may consider paying more special dividends in the future given that it will still have a big cash pile, he told reporters on Monday via teleconference: “We will see.”

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Pierre Lau, Citi’s head of Asia utilities research Pierre Lau, said in a note on Monday that the HK$5 per share payout could help cut CKI’s debt or fund its share of the Duet acquisition, as he estimated the acquisition may raise CKI’s consolidated net debt-to-shareholders’ equity ratio by 11.7 percentage points to 14 per cent by the end of 2017.

Meanwhile, CKI deputy managing director Andrew Hunter told reporters the bidding consortium is confident of getting government approval in Australia since the nation’s competition commission has confirmed it has no objection to the bid.

“We are confident to be able to get approval from Australia’s Foreign Investment Review Board also,” he said.

After engaging with the review board for two months, Kam said it has not raised any concern considered by the consortium to be “insurmountable,” adding that senior Australian officials have said that the approval process under which CKI’s bid for Duet’s peer Ausgrid was rejected last year was “unique and didn’t set a precedence”.