Energy hydro-Quebec to sell Chile stake

Hydro-Quebec will unload its biggest international asset to a consortium of investors led by Brookfield Asset Management Inc. for $1.7-billion as the utility prepares to execute an ambitious plan to step up power generation at home.
Hydro confirmed yesterday it will sell its 92% stake in Transelec Chile SA, Chile's main electricity transmission company, in a transaction expected to close July 6.
The utility, Canada's biggest, has been selling off its international assets for the past year. It's turning its attention instead on investing nearly $20-billion to build new power dams in Quebec by 2010 -- part of a plan by Premier Jean Charest to boost the utility's money-making power through exports.
The Quebec government is Hydro's sole shareholder.
Brookfield, which owns 137 power plants in Canada, the United States and Brazil, said it is buying Transelec together with Canada Pension Plan Investment Board and British Columbia Investment Management Corp.
CPPIB said it would invest up to $350-million in the project. Brookfield said it would buy the remaining 8% in a separate deal.
The consortium's offer was selected over five other binding bids in an international auction.
It's Brookfield's first power asset purchase in Chile and the biggest deal it has struck in power transmission specifically. Transelec owns over 8,000 kilometres of transmission lines and 51 power substations, delivering electricity to an estimated 99% of Chileans.
Brookfield said it will fund 30% of the purchase while Scotia Capital and HSBC Bank will provide $600-million in debt financing.
Transelec represented 80% of Hydro's international investments by value, meaning this transaction is by far the biggest monetization of its holdings outside the province, said Daniel Garant, the utility's chief financial officer. Hydro expects to bank a profit of at least $750-million from the sale.
"We really wanted to redeploy our capital," Mr. Garant said in an interview. "The market timing was right."
Hydro-Quebec has sold assets in Peru, Austria, China, Costa Rica and the United States. in recent months.
It still has two international assets to unload: minority stakes in DirectLink in Australia and a power station in Panama worth up to $200-million.
The utility began investing heavily in overseas power projects in the late 1990s as way to add revenue growth.
Mr. Charest's Liberal government has mandated Hydro to focus on developing 4,500 megawatts worth of new electricity by 2015. Roughly a quarter of that is to be dedicated to export sales, the Premier said. Last year, the utility pocketed $830-million, or 30% of its total profits, by selling 4% of its output on spot electricity markets.
For Canada Pension Plan Investment Board, the Transelec investment marks another push into non-equity assets like infrastructure. In 2004, it joined a group led by the Macquarie European Infrastructure Fund to buy the Wales & the West DN, a regulated gas distribution business.
"These are assets that we plan to own for a long time," said Mark Wiseman, vice-president of private investments for the CPPIB. "They're not sexy. They're not going to generate wild returns. What they are going to generate is long-term stable cash flow."
nvanpraet@nationalpost.com