Announcing the intended Rockgas purchase this morning, Contact chief executive David Baldwin said the acquisition would give Contact a unique platform in New Zealand’s energy markets and provide strong growth opportunities for Rockgas through Contact’s large customer base.
Rockgas currently supplies bottled and reticulated LPG, and automotive product, to around 300 bulk industrial clients, 7000 commercial customers and over 17,000 domestic customers. Rockgas sells around 90,000 tonnes of LPG a year.
“We have been attracted to Rockgas for some time as a logical way through which to broaden our business and the offers that we can take to existing and new customers,” said Baldwin.
“There are synergies between Contact and Rockgas, which will provide strong growth opportunities for both companies.”
In addition to electricity and reticulated natural gas, Contact’s acquisition of Rockgas would enable the integrated energy player to supply LPG to homes and businesses not yet connected to gas networks, or to those that wished to use LPG to manage peak energy demands, Baldwin added.
He said the purchase of Rockgas was indicative of the direction Contact was pursuing regarding opportunities to grow the business and strengthen its position as a leading New Zealand energy company.
“Rockgas is a business which is performing well,” he said. “Contact will invest in Rockgas to ensure its continued growth and I am very confident this acquisition will deliver sustained value for Contact’s shareholders over coming years.”
Baldwin added in purchasing Rockgas from Contact’s majority shareholder – Origin owns 51.4% of Contact – it was important a fully independent sale process be conducted.
The process was led by Contact’s independent directors’ committee and an independent appraisal by PricewaterhouseCoopers concluded the acquisition price was fair, both having regard to the underlying value of the business and the value which could be added by Contact, and when compared with the trading multiples of similar comparable companies.
The Rockgas acquisition is conditional on approval under the New Zealand Overseas Investment Act, which is expected before the end of the financial year.
LPG production in New Zealand is expected to increase dramatically when Kupe, the $NZ980 million offshore Taranaki gas-condensate field, comes onstream in 2009, again opening up the possibility of exports to small South Pacific island nations such as Fiji, something that happened in the 1980s-1990s before production from the offshore Taranaki Maui field started to decline.
Origin, which operates Kupe with a 50% interest, had planned to market its half share of the 90,000t of Kupe LPG produced each year – about half New Zealand’s total annual LPG usage – through Rockgas. Contact will now take over that role.