GREEN DEALS: TRU tap

An IPO for TRUenergy could be seen before the year is up, while Galaxy finds a lithium buy and the federal government tries to shield the winners of its coal compensation package.

Australian investors could soon be able to buy a piece of all of the ‘big three’ energy retailers, with the long-rumoured TRUenergy IPO slated for November, according to a report from The Australian Financial Review.

Murmurings about a float of TRUenergy have been around for some time, with the rumour gathering weight after CLP Group – the Hong Kong-listed owner of TRU – said last month that it had “engaged financial advisors… to review the prospects for a future possible listing.”

It appears that the ‘prospects’ are pretty good, with the joint lead managers expected to be released after the Easter long weekend.

TRU’s purchase of the Energy Australia retail business in New South Wales last year offered it the size and scope to consider a listing, with the company now valued at somewhere between $6 and $8 billion. According to the AFR, the float will be for 49 per cent of the company to raise $3-$4 billion, almost certainly making it the biggest IPO on the ASX for 2012.

It was reported in January that plans to float the company may have been put off until 2013 due to challenging market conditions and struggles with its new billing system (Project Odyssey), which reportedly have yet to be resolved.

Andrew Brandler, CEO of CLP, is tipped to be the company’s first chairman.

It will be interesting to see how the TRUenergy valuation stacks up compared to its peers, Origin Energy and AGL Energy, with some suggesting CLP's majority position may see it priced at a comparative discount.

Galaxy Resources

ASX-listed Galaxy Resources is set to be the world’s largest pure-play lithium company after agreeing to terms on a takeover of Canada’s Lithium One, pending shareholder approval. The Perth-based group has offered 1.8 shares for every Lithium One share, valuing the Canadian group at $110 million. The deal, to create a $490 million company, has the approval of both the boards of Galaxy and Lithium One and could be finalised as early as next month.

Galaxy has tacked on a $50 million capital raising to the merger news, a raising that will include a share purchase plan. It is likely be completed at around a 6 per cent discount to the company’s Friday close and will go ahead prior to a close of the merger.

Lithium is a metal in hot demand thanks to the growth of electric and hybrid vehicles, tablet computers, and smartphones, which use lithium-ion batteries. Given the interest in those products is unlikely to wane, demand will only rise. Producers of electric vehicles are hopeful of price falls in the key component however, with supply of lithium set to surge, possibly ahead of demand. A report last week from Pike Research said lithium-ion batteries could be 30 per cent cheaper by 2017.

Coal compensation

The Gillard Government has finally outlined the recipients of around $1 billion in compensation for coal-fired power generators in 2011/12 – the first year of the carbon price. The government was, of course, not particularly keen to make front page news out of it – hiding it away on the climate change department’s website and ensuring the link provided in the media release only went to the homepage and not the page where the real news was available. Its PR department is clearly well aware of how short on time most journalists are these days. It’s here in case you were wondering. Or here, if you were keen on the Climate Spectator version.

Journey to the data complete however, and the biggest financial beneficiaries will be International Power-GDF Suez, TRUenergy and AGL. International Power for the Hazelwood and Loy Yang B power stations, TRU for Yallourn W and AGL for the Loy Yang A station, a power station it acquired last month. Compensation for Hazelwood is set at $266 million, while Yallourn gets $257 million, Loy Yang A $240 million and Loy Yang B $117 million. The packages are part of the $5.5 billion Energy Security Fund, which is integrated into the Clean Energy Future legislation.

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