Interview: Energy
>> australia’s pacific hydro says potential bids from the company may come from electricity utilities in japan. australia’s biggest listed renewable energy company adds the interest of japanese companies are seeking to gain carbon credits. the company has renewable energy projects in the philippines, p.g. and chile. the managing director joins us. you’ve made initial approaches to potential bidders on the company throughout asia, north america and europe. how much interest has there been and from where?
>> is interest is wide, there has been interest from japan, interest from trading companies and utilities in japan. also, utilities in southeast asia. there have been a number of institutional investors, as well. some merchant banking groups and out of europe there’s a large number of renewable energy funds established as we speak because renewable energy is seen as a major new potential market in the fight against global warming internationally.
>> and what feedback have you been getting from existing shareholder american electric power? are they a likely seller of their 16% stake in pacific hydro?
>> i think it’s fair to say that the major shareholders are not sellers at current market prices. i’m not sure what their exact position will be in the long term. you’d have to really talk to them about that. american electric power has been a strong long-term shareholder as have the other major shareholder developers in australia.
>> have they given any indication at what price they might consider selling shares?
>> no. they have indicated they’re happy to remain as a shareholder at the current time and they have been a shareholder since 1996 and have seen the company grow from being capitalide from $5 million australian in 1996 to close to $600 million today.
>> given the level of interest in the company, do you think the likely outcome of the review will be a sale?
>> it’s quite possible, cathy. it really depends upon what position international businesses take with regard to the future value of carbon credits. now that kyoto has been signed by the russians and will come into force, the market for carbon credit starts in europe and initial trading has been at around 11 euro per ton with projections it could go above 40 euros per ton, clearly the carbon market in the future will be enormous and i think a lot of international businesses have started to focus in on companies that can secure for them a long-term reliable flow of carbon credits which will be of very high value which today have zero value on the balance sheets of companies with that asset.
>> what is the timing for completing a strategic review for a potential bid?
>> discussions have commenced with some parties. i understand confidentiality agreements are being exchanged. there will be a process of looking at indicative bids and proposals and in a short list there will be detailed discussions with the short-listed companies. it’s expected it will be wrapped up by the end of the first quarter next calendar year.
>> you said last month the government’s position last june would result in the company shifting more of its overseas investments in other markets . what sort of overseas investments are planning and in which markets ?
>> pacific hydro has a major position in the chilean electrical market . chile is a wonderful market for investment, rated a by moody’s, currently higher than new zealand and japan. it has a very strong economy. electricity demand has been growing through the 1990’s and throughout the current decade at 8% to 9% pernum so it’s a professional market for hydro electricity. we’ve secured the rights of two rivers adjacent to santiago. we’ve estimated that from chile alone we’ll be able to generate not far from three million tons of carbon credits per anum once the hydros under development at the moment are in operation. beyond chile, we have initial discussions in canada. canada is a strong market for renewable energy and europe is terribly strong for renewable energy and we’ve started to take our first steps with regard to investing in europe.
>> good to speak with you, thank you, jeff, jeff harding of pacific hydro in sydney. coming up, south korea’s biggest steelmaker, posco, says it may require only half of the steel requested by nissan motor after the automaker cut output plans because of the lack of metal.
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Listen Interview: The dollar's slide
from china, japan and korea at a two-day summit in laos. learn if the asean nations can compete with china in the race to attract foreign investment. learn if australia’s market can make it five for five. the australian stock exchange opens in 30 minutes, running a string of four straight record highs. our reporter stands by in sydney. spider-man drops in on the new york stock exchange. u.s. stocks drop, as well. disappointing holiday sales from wal-mart sent the dow and s&p 500 lower. the nasdaq finished higher. the dollar halts its slide against the euro and yen in new york. traders say the u.s. currency has fallen too far, too fast, after setting eight record lows this month. asian leaders took on the subject of the dollar’s decline at this week’s asean summit in laos. the head of the u.s.-asean council says the dollar’s slide won’t hurt trade with asia. he says he doesn’t think the u.s. is pursuing a weak dollar policy but officials are not doing enough to stop the slide.
>> in terms of exporters, i think it’s a good thing. i don’t sense a lot of concern in the united states for that policy. i think that the u.s.g. is probably allowing the dollar to sink in order to support exports.
>> having said that, do you expect the dollar to continue to decline? >> it’s hard to say. but i think that it’s good for our companies if they can export more to china% -and good for them if china can export more here as we have a large investment in china. >> are there concerns?
>> the only concerns are that we keep pace. so far, i think we are. but we have to keep pace with the chinese and about what they’re doing so as not to lose the advantage we already have.
>> when you say keep pace, what needs to be done?
>> we need to stay involved in the markets , stay involved in dialogue with the governments. we need to move forward on our own f.t.a. strategy. we have a strategy of engaging asean on a one-to-one basis with a.f.a―f.t.a.’s. we’ve done one with singapore and have one with thailand under way so we have to stay engaged with the economic ministers in the region and show commitment to the market .
>> what are some of the challenges the companies you represent are facing at this point in time?
>> i think there’s a number of issues, challenges we face. corruption is always an issue for american companies working in the region. slverl of the countries in the region rank the lowest in terms of attractiveness due to the problem with corruption. attractive markets otherwise but they rank low in terms of transparency. that’s a problem, consistent tax structure is another issue we watch carefully.
>> how serious is the threat of china replacing the u.s. as the top destination for asian exports?
>> i don’t think it’s―i don’t think it’s that big of a concern right now. they are growing at a very fast pace. china, asean trade has grown probably 30% a year but they’re starting from a low base. the u.s. trading position is much larger and so i don’t see any concern there at the outset. but as china increases its trade, that’s good. we’re glad for that. we just want to keep our companies involved, as well.
>> how about in terms of the yuan policy? to what extent or have your members, member companies, done anything to put pressure on china to reconsider the yuan policy?
>> u.s.-china, on that end of the equation, i think there has been discussion about that. back in the states, the u.s. chamber of commerce, for instance, has been very much involved in currency policy. they see as an export issue as we were talking about. our members, we deal primarily with asean and asean runs a trade surplus with china. i don’t see aseans and companies in their region for their regional interests, our companies, i don’t see them complaining about the value.
>> walter lohman of the u.s.-asean business council. there’s half an hour before the markets open. we’ll speak with david tweed in sydney.
>> retailers led the australian market to its fourth record consecutive high yesterday and retailers coles myer, woolworth, might do it again today. we also had the busiest ever month in terms of value yesterday so far and we have another day to go according to goldman sachs. 72.3 billion dollars worth of australian shares traded in november, that’s the record. national banks chairman graham cray is going to give a speech and they indicate how they’re going with the sale of the irish banks and southpaw will brief analysts, number two winemaker in australia.
>> what are investors looking for in the rest of asia?
>> one is the reaction to the halt in the slide of the dollar. the second thing to watch for is the reaction to the drop in u.s. retail stocks so there could be quite a mixed picture there for asia’s exporters. look out for the reaction to companies like toyota, nissan and in south korea, samsung electronics. back to you, cathy.
>> you got that right, thanks for that, david. after the break, australia’s biggest listed renewable energy company says it’s receiving approaches from companies that may lead to a takeover bid. the managing director of pacific hydro will join us. .
