Government-owned Meridian announced its purchase of the collection of stations, which have a total generating capacity of 540 MW and approximately 940 GWh of output, on Saturday. New Zealand's largest hydro station, the South Island's Clyde dam has capacity of 432MW.
Meridian, New Zealand's hydro king, paid United States' Alliant Energy about $A585 million for the scheme, with Meridian chairman Francis Small saying Southern Hydro was an excellent business and sat right in the core competencies of Meridian Energy.
"While our primary focus is on expanding our renewable generation capacity in New Zealand through Project Aqua and wind developments, Southern Hydro offers an important strategic opportunity to grow in Australia."
Company chief executive Keith Turner said Meridian believed it could support and improve the Southern Hydro business and that the 80-strong Victorian team would be able to contribute to Meridian Energy's New Zealand business as well.
"The complementary nature of the businesses will offer valuable opportunities to learn from each others' asset management and electricity trading experience."
Southern Hydro performed a valuable role in providing peaking power when demand spikes and prices were high, Turner added. Meridian takes over the Melbourne-based company on April 30.
Meridian Energy already owns and operates five small hydro stations in New South Wales and Victoria. The deal does not include the dams or lakes, which were built mainly for irrigation, only the small turbines attached to them.
Turner also said the Southern Hydro purchase would help Meridian build a big wind-hydro energy development across the Tasman. This in turn would help it build big wind farms in New Zealand, with the opportunity to significantly reduce unit costs through economies of scale.
If equipment for New Zealand and Australia could be procured at the same time, instead of only buying 20-30MW of plant, up to 200MW might be possible, which would be an important step in bringing big wind power projects to New Zealand.
With the growth in power usage outstripping supply, New Zealand is facing some serious power shortages, perhaps out to 2008.
Turner said wind power was not only renewable, but once the necessary resource consents were obtained wind farms could be built very quickly. Meridian believed it could install several hundred megawatts of wind farms between now and 2007.
He added that Meridian was close to announcing wind developments on both sides of the Tasman. Meridian Energy was strongly focused on renewable energy, the market for which was growing in value and had premium attraction.
Meridian Energy will fund the acquisition entirely from internal resources and borrowings without impacting its ability to fund its New Zealand development program. The company expects that Standard & Poor's will affirm its BBB+ long- term credit rating.
