EDL COULD PUT ITSELF UP FOR SALE
12 August 2008
Tony Grant-Taylor
BRISBANE-based Energy Developments might have been living the good life at present -- with its green energy and carbon abatement credentials making it a market darling even in volatile times.
But although greenhouse gas abatement and emissions trading are on so many lips, EDL is instead examining ``all its options'' in a strategic review that could well see it broken up or disappear completely as an independent company.
Over 20 years, EDL has established itself as a world leader in generating electricity from municipal waste.
It has branched out into electricity from coalmine methane drainage.
And it has devised an innovative system that replaces high-priced diesel-generated power with liquefied natural gas generated electricity in remote locations.
But though oil and other energy prices have soared to a point where the group's cheaper alternatives might have seen it cashing in, EDL's major shareholders, including New Zealand infrastructure group Infratil with 30 per cent, have convinced the group to in effect put itself up for sale.
EDL's shares, after hitting a high around $5.20 in March 2007, slumped to less than $2 earlier this year and yesterday were trading around $2.87.
The major problem was a cost blow-out at the group's West Kimberley power project, a series of five LNG-fired generators built to provide electricity to the area's remote towns.
Managing director Greg Pritchard, who took over the job in December after being CFO, inherited the WKPP problems --and concedes EDL bit off a bit more than it could easily chew in the Kimberleys.
A project that was initially estimated to cost $180 million began construction just as costs across the boom region blew sky high and, by completion, it had cost some $320 million.
Mr Pritchard says, however, the project, which is financed separately from the rest of EDL's assets, still has good long-term gas contracts.
Indeed, one of EDL's overall attractions is that it has significant gas contracts across most of its projects -- including its landfill gas projects -- that have years to run and were signed when prices were significantly below today's levels.
Mr Pritchard declines to speculate on what the current strategic review will come up with but like EDL's major shareholders, hopes the process will produce significant extra value for shareholders that is not currently reflected in EDL's share price.
One area where that may well happen is in Europe, where EDL has 60 megawatts of landfill gas generating capacity in the UK and another 60MW in France and Greece.
EDL currently is valued by the sharemarket at just over $400 million.
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