GPU declines bids for Australian assets

GPU Inc., a Morristown, NJ-based public utility holding company, on Wednesday said it has declined all bids to buy its Australian subsidiaries, GPU PowerNet and GPU GasNet. Submitted bids fell below GPU's expectations 'and would not have produced sufficient value for our shareholders,' says Bruce Levy, senior vice-president and chief financial officer of GPU.


GPU Inc., a Morristown, NJ-based public utility holding company, on Wednesday said it has declined all bids to buy its Australian subsidiaries, GPU PowerNet and GPU GasNet. Submitted bids fell below GPU's expectations "and would not have produced sufficient value for our shareholders," says Bruce Levy, senior vice-president and chief financial officer of GPU.

The lower valuations were largely a result of recent developments in the Australian market, including uncertainty of the outcome of future regulatory actions and rising interest rates, Levy says. Judging from these regulatory developments, the Australian market appears to be headed in a direction that means slower growth in the operations' financial rate of return, making Australia a less attractive market for GPU, says Ned Raynolds, GPU spokesman.

He also noted that the current exchange rate between the Australian and US dollars is at an unusually low level. A sale at this time would have resulted in a pretax foreign exchange loss of about $132 million.

Its need for capital isn't as voracious since it exited the generation side of the business, but GPU's quest to sell its Australia assets reflects its strategy of reducing the company's debt ratio to 60%. First announced in October 1999, the plan includes selling off assets outside of its core US-based utility business, buying back up to $350 million of its stock to boost its share value, and seeking diverse investments in nonregulated areas, says Raynolds.

The lack of an immediate sale will delay that planned debt reduction and stock buyback program. So far, GPU has bought back $248 million worth of shares.

GPU isn't ruling out possibilities for future sales, however, and continues to discuss alternative ownership arrangements and financing structures with some entities, including financial investors. It also will look at selling some of its independent power plants in the US or assets in Latin America.

GPU serves 1.4 million customers indirectly through its electric and gas transmission subsidiaries, PowerNet and GasNet. It serves 4.6 million customers directly through its electric companies, including GPU Energy in the US, Midlands Electricity PLC in the UK, and Emdersa in Argentina.

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