Chow Tai Fook Enterprise, a Hong Kong family-owned company better known for its jewellery and property businesses, is paying multi-billions of dollars for Western Australia’s largest gas retailer, Alinta.
Financial details haven’t been disclosed but Alinta had been planning an ASX listing, valuing the company at $4 billion.
More than 70% of Alinta is owned by private equity investors and hedge funds, with the investment managed by TPG Capital, Oaktree Capital and Anchorage Capital. The remaining equity is held by other financial institutions and management.
Chow Tai Fook Enterprise, owned and operated by the family of Dr Cheng Yu Tung, has an agreement to acquire 100% of Alinta, subject to approval by the Foreign Investment Review Board.
The Hong Kong group has limited existing exposure to the utilities sector and this is its first acquisition in the Australian energy market. It has significant investments in Australia in real estate and integrated resorts.
At the end of June last, Chow Tai Fook’s major undertaking, New World Development, one of Hong Kong’s largest property developers, reported total assets of around $67 billion, according to ratings agency Moody’s.
Chow Tai Fook Jewellery Group, a chain of luxury stores, is said to have more revenue than American luxury jeweller Tiffany & Co.
This new interest in Australia’s energy sector, and the cash flow it generates, isn’t a one off. Chow Tai Fook Enterprise says it intends to grow the business by pursuing investment opportunities in the Australian energy market.
And Chow Tai Fook isn’t alone in its interest in Australian energy assets, despite recent troubles with domestic gas supplies putting electricity generation in doubt during peak demand and sending prices for industry higher.
Energy utility group Duet in January accepted a $7.37 billion offer from a consortium led by Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings.
Cheung Kong Infrastructure Holdings, which also owns power grids in South Australia and Victoria, is the same group which tried to buy NSW energy infrastructure body Ausgrid, but was rejected by treasurer Scott Morrison on national security grounds.
Alinta says its takeover highlights the attractiveness of the Australian energy markets.
CEO Jeff Dimery, will continue in the role under the new owners.
“CTFE (Chow Tai Fook Enterprise) has indicated the acquisition is highly strategic,” Alinta said in a statement.
“They are committed to ensuring the energy needs of Alinta’s customers continue to be met and intend to grow the business by pursuing value accretive investment opportunities in the Australian energy markets as they arise.”
The Sydney-based Alinta has a gas and electricity retail presence in Western Australia and to a lesser extent in the east coast national electricity market, serving around 800,000 customers. Alinta has 410 employees.
It is also owns and operates six power stations across the country and a single power station in New Zealand.
The company’s generation fleet has a combined capacity of around 2,000 MW.