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Genesis snaps up Nova Energy gas business

NZ Newswire logoNZ Newswire 30/04/2017 Jonathan Underhill

Genesis Energy has agreed to acquire the retail LPG business of Todd Corp's Nova Energy unit for $192 million, a move that will give New Zealand's biggest electricity retailer almost a fifth of that market.

The deal, which is subject to some limited due diligence, will increase Genesis's share of retail LPG in New Zealand to 19 per cent from 3 per cent, making it the second-largest player in that market by customers behind Contact Energy.

The deal would deliver about $17m of earnings before interest, tax, depreciation, amortisation and movements in the value of financial instruments in 2018 before integration costs.

It would also generate "synergies of $4-6m per annum from FY19 onwards mainly from vertical integration benefits", the company said in a statement.

Nova's network includes a nationwide retail and bulk distribution system with 35,000 bottled gas customers across residential, commercial and industrial segments.

The acquisition also includes about 6400 dual fuel electricity and LPG customers and an option to acquire Nova's 12.5 per cent interest in Liquigas for additional consideration.

The Nova purchase is the second large acquisition for Genesis Energy in the past six months after it agreed to buy NZ Oil & Gas's 15 per cent share of the Kupe oil and gas field for $168m last November, giving it close to half Kupe's annual production of some 90,000 tonnes of LPG.

"It's completely unsurprising. It was always just a matter of which business Genesis would pick up," said John Kidd, energy equities analyst at Woodward Partners.

"For them to plug the hole between upstream and downstream does makes absolute sense."

Settlement is expected on May 31, subject to due diligence, with rebranding expected to be complete by the end of July.

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