Shell’s sale of its New Zealand gas stations almost completed

Infratil’s Shell bid a done deal?

By ROELAND VAN DEN BERGH – The Dominion Post

Infratil’s bid to buy Shell New Zealand’s petrol stations looks like a done deal and could be finalised early next month after the utilities investor provided more details to investors.

Infratil announced two weeks ago that it and investment partner New Zealand Superannuation Fund were in exclusive talks with Shell over its petrol stations and other downstream assets.

But Infratil chief executive Marko Bogoievski said a lack of detail about the deal and how Infratil would add value had clearly impacted on investors’ sentiment.

The Shell New Zealand business includes a 17 per cent stake in New Zealand Refining Company, access to a key pipeline capacity and a quarter share in Loyalty New Zealand’s Fly Buys.

Mr Bogoievski moved to soothe investor jitters at the company’s half-year profit announcement yesterday by providing a surprising amount of detail about the transaction despite negotiations being at a delicate stage.

The Shell consortium would be a 50/50 joint venture between Infratil and the Superannuation Fund, and it would be “several weeks” before a deal was concluded, Mr Bogoievski said.

Infratil also had enough cash and flexibility in its credit lines to fund the its share of the purchase without needing to raise equity.

“There is no intention or indeed requirement raise equity to fund our capital contribution, and we can be quite clear about that,” Mr Bogoievski said.

There was also no requirement to sell assets to fund the purchase.

Infratil had substantial experience in services and retail markets including electricity retailing, airports and New Zealand Bus, he said.

AMP Capital Investors’ chief investment officer Guy Elliffe said the detail gave him a “high degree of confidence” that Infratil was serious about the acquisition.

Mr Bogoievski said Shell was an opportunity to optimise an integrated downstream New Zealand energy business by stripping away the costs and complexity associated with a multinational organisation and improving retail sales.

The service stations were in the right place and generating the highest throughput, but there was the potential to significantly improve the convenience retail side of the business, Mr Bogoievski said.

“We just think that for any meat pie fans we want you to buy your meat pies from Shell New Zealand in the future if this deal gets done.”

The Shell brand would continue to be used “for an appropriate period of time”.

Infratil also signalled it would focus on developing a trans-Tasman energy empire with further expansion in Australia.

“I’m talking literally in the next financial year I would expect some additional activity there,” Mr Bogoievski said.

Analysts said that was a clear signal that Infratil would focus on building energy assets in New Zealand and Australia and that non-energy assets, with the exception of Wellington Airport, could be sold.

Forsyth Barr head of research Rob Mercer said he expected Infratil’s two problematic British airports, Glasgow Prestwick and Kent, would be sold within 12 months.

Infratil sold its German airport back to the City of Lubeck this month at a near break-even price.

Infratil’s shares were trading at about a 30 per cent discount to net asset value of $2.25, indicating that the market had lost confidence in the company’s ability to grow net tangible assets over the next 12 months.

The shares closed yesterday at $1.51, down 3c.

The discount was equal to $480m, representing the combined value of the British airports, New Zealand Bus and 32 per cent owned Energy Development.

Infratil posted an operating profit after tax of $70.4m for the half year to September 30, up from $67m a year at the same time last year.

Non-cash charges of $80m for asset and financial instrument revaluation, partially offset by $26.2m of cash gains on sale of investments, led to a net loss of $31.4m, compared with a net profit of $7.3m.

Infratil forecast a full year profit before interest, tax, depreciation, amortisation and financial instruments of between $355m and $370m, compared with $356m a year earlier.

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