Snowy Hydro Needs to Raise Funds to Stay Competitive, CEO Says

April 16 (Bloomberg) -- Snowy Hydro Ltd., which is planning an initial share sale this half, needs to raise funds to invest in its power supply infrastructure and remain competitive, Chief Executive Officer Terry Charlton said.

Snowy Hydro's share sale may raise A$3 billion ($2.2 billion), EL & C Baillieu Stockbroking Ltd. estimates. UBS AG, Macquarie Bank Ltd. and Goldman Sachs JBWere Pty were hired last month by the company's owners, the federal, Victorian and New South Wales governments, to sell the stock.

``What we're seeing now is an evolution of the electricity industry and we have to be a continuing player,'' Charlton told Nine Network's Business Sunday program today. ``That is going to require further investment that is beyond our borrowing capability or our cash flow.''

Snowy, which owns a 3,756-megawatt hydropower system in Australia's Southern Alps, supplies about 74 percent of the renewable energy in eastern mainland Australia. It can start generating power within 90 seconds, allowing it to benefit from surges in wholesale prices at peak-demand periods. Peak power demand in eastern Australia, the nation's most populous area, is forecast to rise 35 percent by 2015.

Charlton declined to say how much Snowy Hydro plans to raise in the IPO after funds have been paid to its owners.

``What we're looking for is access to future capital and that's achieved by being listed,'' he said. ``If we don't continue to grow with the market, then the Snowy scheme runs the risk of becoming less important.''

The system, which took more than 25 years to build, includes seven power stations, 145 kilometers (90 miles) of tunnels and pipelines and 16 dams with a total storage capacity about 13 times the volume of Sydney Harbor.

The company has been expanding its business to include gas- fired generation and energy retailing.

Last year it paid A$243 million for the Valley Power gas- fired generator. It is building a A$150 million gas-fired plant near Melbourne to further add to its capacity to meet peak- period electricity demand. The company also owns the Red Energy power retailing business in Victoria state.



To contact the reporter on this story:
Vesna Poljak in Sydney at vpoljak@bloomberg.net.
Last Updated: April 16, 2006 01:38 EDT