Edison wants all of NZ's Contact Energy


California-based Edison Mission Energy is bidding for all of New Zealand's Contact Energy. It now holds 51%.

WELLINGTON, New Zealand -- U.S. utility Edison Mission Energy is offering $450 million (NZ$1 billion) to move to full ownership of its New Zealand power and gas subsidiary Contact Energy.

Contact, now held 51 percent by Edison, produces a quarter of New Zealand's electricity. It is widely expected to report an improved profit in the year to September.

The cash offer, pitched at NZ$3.85 a share, values Contact at around $910 million (NZ$2.2 billion).

Contact shares closed Friday at NZ$3.91.

Edison's intentions towards the company have been the subject of speculation since Contact was privatised by the New Zealand government in 1999.

Moved to majority stake earlier in year

Edison bought an initial 40 percent of Contact at NZ$5.00 per share, while the rest was floated to the public at NZ$3.10.

Edison moved to a majority stake earlier this year. It called its offer of NZ$3.85 a share "full and fair" and a 36 percent gain on the float price after dividends.

Edison said it was not offering the NZ$5.00 per share it paid for the first tranche as it had already paid a control premium.

"In 1999 we acquired a cornerstone shareholding in an open competition. We were bidding, in effect, for a controlling interest in the company in 1999," Edison executive Robert Driscoll said in a statement.

"We really like Contact Energy. It has high-quality assets and its staff and management are very talented," Driscoll said.

Edison Mission Energy is a unit of California-based Edison.

An independent valuation of Contact is needed under New Zealand law before the offer closes at the end of November.

Dry winter sends prices higher

Contact has nine mainly thermal power stations with a capacity of 1,900 Megawatts -- more than it needs for its 375,000 power customers -- and has been a beneficiary of high wholesale power prices in a just completed dry New Zealand winter.

The drought left hydro lakes, which supply much of New Zealand electricity, unusually low and pushed weekly average spot power prices above NZ$200 MWh -- up to six times the normal price.

UBS Warburg, which is advising Edison Mission along with Macquarie Bank, forecast Contact Energy would have earnings before interest, tax, depreciation and amortization (EBITDA) of NZ$331 million for the year, up about 50 percent on the previous year.

Reuters contributed to this report.