Adelaide-based natural gas transmission and distribution company Envestra is closer to inking a deal that will complete 20 years of national consolidation in the sector.
Envestra’s directors yesterday agreed to put to its shareholders a $2 billion takeover offer from gas pipeline giant APA Group.
Envestra has resisted APA Groups offers in previous months, forcing the corporate suitor to increase its offer several times.
Envestra is the old South Australian Gas Company (SAGASCO), a state-owned utility that dates backs to the 1860s.
Its original business was the manufacture of gas from coal; that changed when it signed the first natural gas contract in 1966 after the massive Cooper Basin discoveries by SANTOS.
SAGASCO ran distribution, retail and almost every possible aspect of the sector.
In the aftermath of the 1991 State Bank collapse the cash-strapped Bannon Government of 1992 offered its 52 per cent stake in SAGASCO to private investors; that offer was taken up by Boral.
Five years later, in August 1997, the natural gas distribution networks of SAGASCO, Gas Corporation of Queensland (GCQ) and Centre Gas Pty Ltd (in the Northern Territory) were combined into one organisation, named Envestra, and floated on the Australian Securities Exchange (ASX).
Envestra drew its name from the words energy, investment, infrastructure and Australia.
The new company immediately began to gather up other players in the sector.
At the time of listing on the ASX in 1997, Envestra’s distribution networks were valued at $900 million.
In 1999 Envestra acquired a distribution business in Victoria for approximately $1.2 billion.
The purchase increased the Company’s assets to $2.1 billion, increased the distribution networks to about 17,000 kilometres and increased the number of consumers supplied with natural gas to 835,000.
Today the company owns about 23,000km of networks, 1,100km of transmission pipelines and delivers gas to more than 1.14 million consumers.
In 2007, the contract to operate, maintain and expand Envestra’s distribution networks was transferred to APA Asset Management (for further information refer to Operating and Maintenance Agreements).
APA is the former Australian Pipeline Trust which listed on the stock exchange in 2000.
It owns or has an interest in 14,000 km of pipelines and 25,000 km of distribution networks, owns gas storage facilities and a wind farm and transports more than half of the natural gas used in Australia.
Yesterday’s move on to take up the assets and business of Envestra will see further consolidation in the distribution and transmission industry.
One hurdle remaining is the stake in Envestra held by Chinese company Cheung Kong Infrastructure (CKI).
CKI holds a 17.6 per cent stake in Envestra and is the second-largest shareholder after APA, which holds 33 per cent.
To date, CKI has been silent on the deal.
APA shares closed 23c lower yesterday at $6.13, while Envestra shares rose 5c to $1.12.
The revised offer to Envestra shareholders is equal to $1.17 a share, up from the initial offer of $1.10 a share.
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