Meridian Energy buys Southern Hydro

Media Release
Saturday 22 March 2003

Meridian Energy buys Southern Hydro

Meridian Energy announced today that it has been successful in its bid for Southern Hydro. Southern Hydro is a hydro electric business in Victoria with a collection of ten stations with a total generating capacity of 540 MW with approximately 940 GWh of output. Southern Hydro has been sold by Alliant Energy of the United States.

Dr Francis Small, Meridian Energy’s Chairman, said “We are very pleased to succeed in this very important step for Meridian Energy. This is an excellent business and sits 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.”

Dr Keith Turner, Meridian Energy’s Chief Executive, said that Southern Hydro is a well-developed and well-performing business in the Victorian electricity market. “We undertook extensive due diligence on the assets and the business and have great respect for the skills of the Southern Hydro team of about 80 staff. We think we can support and improve the business with our substantial experience in hydro generation. What’s more important, we think the Southern Hydro team will also 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.”

Meridian Energy is strongly focussed on the renewables sector of the energy market which is growing in value and has premium attraction. Australia has a relatively small level of renewable electricity and Southern Hydro is one of the prime assets in this sector. It also performs a very valuable role in providing peaking power when demand spikes and prices are high.

Meridian Energy already owns and operates five small hydro stations in New South Wales and Victoria. It is also investigating wind farm development opportunities on both sides of the Tasman, with the opportunity to significantly reduce unit costs through economies of scale.

“The combination of our existing hydro assets with Southern Hydro and the potential wind developments provides Meridian Energy with a strong premium value renewables energy business in the Australian electricity market,” said Dr Turner. “It also provides extra capabilities that will further strengthen our New Zealand business.”

Meridian Energy will fund the acquisition entirely from internal resources and borrowings without impacting its ability to fund its New Zealand development programme. The company expects that Standard & Poor's will affirm its BBB+ long term credit rating.

Dr Turner said “We are very excited about the potential to grow significant value for Meridian Energy, for our shareholder and for New Zealand from this initiative. We have been operating in Australia for two years and have added substantial value to our existing asset base already. This initiative offers an opportunity to make a significant leap forward, and in doing so significantly help our development plans in New Zealand.”

Meridian Energy’s advisers for the transaction were Deutsche Bank and Allens Arthur Robinson.

ENDS

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ABOUT: Meridian Energy

Meridian Energy is the largest of the three state-owned enterprises formed from the split of ECNZ on March 31 1999.
With a total New Zealand capacity of 2438 MW, it has some 30 percent of the country’s total electricity generation.
In addition to the eight hydro power stations based on the Waitaki River system, Meridian Energy owns and operates New Zealand’s largest hydro station at Manapouri, and the Wellington wind turbine. It also owns five small hydro stations in Australia.
The company supplies energy to the country’s single biggest electricity customer, the Comalco aluminium smelter at Bluff, while at the other end of the customer scale it serves householders and businesses nationwide from a purpose-built retail operations centre in downtown Christchurch.
Meridian Energy has interests in South Island hydro development opportunities, research and development investments in superconductor and fuel cell technologies and wind generation opportunities.
It employs about 200 people at offices in Christchurch, Wellington, Twizel and Sydney.

Generating Assets
Waitaki River system
The Upper Waitaki system begins at Lake Tekapo, a storage lake with about 800 GWh of storage capacity, which represents about 22 percent of the country’s hydro storage.
Water passes through the Tekapo A power station and is diverted by a purpose-built hydro canal to Tekapo B station on the shores of Lake Pukaki.
Lake Pukaki has some 1600 GWh of storage capacity – about 44 percent of New Zealand’s total. Water is drawn by canal from both Lakes Pukaki and Ohau to supply Ohau A , B and C power stations, before being discharged into Lake Benmore.
After passing through the Benmore power station, the water flows down the Waitaki River through the Aviemore and Waitaki stations.

Manapouri/Te Anau system
The combined storage of Lakes Te Anau and Manapouri is 380 GWh. The Manapouri power station lies 178m underground on the western shore of Lake Manapouri, and is accessed via a 2km road tunnel. After passing through the station the water flows into Doubtful Sound via two 10km-long tailrace tunnels.
All of the stations are designed to be remote controlled from a control centre at Twizel.

Australia
Meridian Energy Australia Ltd owns hydro generation facilities at five small dams in New South Wales and Victoria, generating a total of 62 MW.

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ABOUT: Southern Hydro

Southern Hydro, headquartered in Melbourne, Victoria, is an Australian hydropower company that offers renewable peaking power and ancillary services to energy traders, retailers and generators.
It was formed in 1995 from the disaggregation of Victoria's electricity industry. Today, Southern Hydro is the largest privately owned hydroelectric company in Australia and accounts for 6% of Victoria's total electric generating capacity.
The company employs 80 people. It has three main hydroelectric operations; the Kiewa and Dartmouth plants located in the Victoria's northeast and the Eildon Power Station in the Goulburn Valley. It also has two smaller plants at Rubicon near Eildon and Cairn Curran in central Victoria.

Generating Assets
Kiewa Hydro Electric Scheme
The Kiewa hydro-electric scheme is the largest in Victoria. It was built over more than 20 years from the late 1930s until 1961. The scheme is located in the Australian Alps in north-eastern Victoria, about 350km from Melbourne. It has three power stations with a total capacity of 211MW and an average annual electricity output of 340 million kWh.
The three power stations in the scheme are McKay Creek Power Station (120MW) , Clover Power Station (29MW) , West Kiewa Power Station (62MW) .
Eildon Hydro Electric Scheme
The station comprises two 60MW generators, one installed in 1956 and the other in 1957, together with the two machines from the old Sugarloaf Power Station up-rated to 8MW each. These 8MW generators were retired in 1971 and have been successfully re-commissioned in 2001.
Eildon Power Station operates mainly during the summer when irrigation water is released, but there is provision for limited output in winter. Southern Hydro can draw an agreed amount of water from the reservoir each year to generate electricity at any time of the year.
Dartmouth Hydro Electric Scheme
The Dartmouth Hydro-electric Power Station came into operation in January 1981 and is the largest single hydro plant in Victoria with a nameplate capacity of 180MW provided by a single generator.
The station was built in conjunction with the Dartmouth Dam on the Mitta Mitta River in north-eastern Victoria. It is located at the foot of the dam wall and operates on irrigation water released from the reservoir.
Rubicon Scheme
The Rubicon Scheme has significant heritage value as its construction commenced in the mid 1920s and it remains essentially in its original condition. Because of their low operating costs and environmental friendly operation they continue to play an important role, not only with respect to the generation of electricity, but also with respect to the protection of the environment.

Cairn Curran Station
Cairn Surran Station is an irrigation-type power station built in 1960 at the Cairn Curran Reservoir on the Lodden River, near Castlemaine. This is a small installation of 2MW capacity operating solely on irrigation outflows.

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