Page 10 - Sphere No.30 (Dec 2011)

8 Sphere 30
The company acquires a 50 per cent stake
in both ETSA Utilities and Powercor
of Australia, followed by the
acquisition of a 50 per cent
interest in Citipower, Australia
in July 2002.
2000
1990
2000
With maximum demand topping
1,000 MW every month of the year for
the first time, the company moves all
operations to Lamma and decommissions
its oilpowered plant at Ap Lei Chau.
1989
A new 350 MW coal-fired unit is commissioned at
Lamma Island, capable of generating 3,500 times
more power than the company’s first facility at
Wan Chai.
1986
“Financially, having the backing of Power Assets underpins
the stability of our business, and that helps enormously
whenever we need to access capital from the marketplace,” said
Robert Stobbe, CEO of ETSA Utilities in South Australia, in
which Power Assets has a 27.93 per cent share. “As a capital-
intensive business, having that sort of ownership strength is a
major benefit.”
In addition to meeting the high cost of entry, Power Assets
has had to navigate the complex world of terms and conditions
set by government regulators in each market. “Besides money
and technical know-how, market entry can only occur when the
entrant fully understands and effectively manages regulatory
and legal challenges,” said
C K Woo, senior partner of US-
based consultancy Energy and
Environmental Economics, Inc
(E3). “Moreover, obtaining permits
and transmission access is another
major barrier that one cannot
overlook.” Mr Woo estimates that, as a
result, the number of qualified players
active in that market worldwide is
small: “probably fewer than 50”.
Power Assets has been able to leverage its business reputation
and experience as an exemplary energy provider – with a supply
reliability rating in Hong Kong of over 99.999 per cent since
1997 – to good effect at a time when the openness of overseas
energy markets has coincided with a rise in the number of
investment opportunities.
As the global economy weakens, more holders of utilities
are looking to raise cash for other obligations. “With Europe’s
current financial challenges, European assets may be put up
for sale. Power Assets is particularly qualified to invest in these
opportunities as they arise,” Mr Tso noted.
Power Assets’ approach to any prospective investment target
draws on the company’s decades of technical expertise. “After
buying a company, Power Assets has never discovered
any skeletons in the closet,” said Mr Tso, attributing
this to the quality of due diligence conducted by
Power Assets’ world-class engineers.
What is more, the company’s hands-on approach
does not simply end once the investment has been
made. Power Assets’ commitment to international
best practice, especially in the areas of safety and
environment, involves the provision of technical support
to each new asset after purchase, and the application
of considerable technical expertise to ensure long-term
safety and profitability.
“In many technical areas,
Power Assets’ expertise has been
extremely useful,” said Mr Stobbe.
“Various technical studies have
been greatly facilitated by having
access to Power Assets’ staff and
experience, and, over the years, many
of our own staff have been lucky
enough to visit their installations
and learn from their employees.”
In terms of geographical spread and types of assets
considered, Power Assets priorities are high-quality, long-term
plays, with returns over 20 to 30 years or more. “More important
than where we buy, is what we buy,” said Mr Tso. “We look at the
quality of assets before we consider where they are located.”
Investments are currently spread evenly across six countries
on four continents, with a particularly strong recent focus on
utilities in the UK. In June last year, Power Assets acquired a
25 per cent interest in Seabank Power Limited, an electricity-
generating company. Four months later, it acquired what is now
called UK Power Networks Holdings Limited, an electricity
distributor whose networks serve around 7.8 million customers
– more than 13 times the number of Power Assets’ customers in
Hong Kong.
“Having the backing
of Power Assets
underpins the stability
of our business.”