Snowy Hydro chief executive Paul Broad.SNOWY Hydro chief executive Paul Broad says the pressure is on to prove the worth of the energy supplier’s $834 million acquisition spree and achieve the growth he predicted.
Nanjing Night Net

Last year’s $600 million purchase of Lumo Energy from Infratil, and the $234 million acquisition of the Colongra gas-fired power plant in NSW, have almost tripled government-owned Snowy’s debt to about $1.2 billion. Its BBB+ rating is unchanged.

Mr Broad said convincing his board of the merits of the Colongra purchase was “more complex” than for Lumo.

“The board has put really tough numbers around us to achieve the synergies that we can achieve, the targets we said we were going to achieve. We have to now go and do it,” he said.

“It’s a very exciting time to be part of Snowy. It’s stressful but it’s exciting. We’ve now got debt and we’ve got to prove by performance that was a successful strategy.”

But Snowy will not be chasing growth for the sake of it and will does not expect to challenge the dominance of the big three suppliers, AGL Energy, Origin Energy and EnergyAustralia, but focus on expansion in the retail market.

“We don’t want to get big and go broke. Our job is to really focus on how we grow our business, and we don’t want to just play numbers,” he said, pointing to failed telco One.Tel.

“We’d like to grow our business in a targeted way that is successful. We are not chasing market share at all.”

Snowy initially considered bidding for the Vales Point coal-fired power station, which the NSW government sought to sell at the same time as Colongra, but pulled out. An offer to contract base-load capacity on the Vales Point plant was also rejected, causing Snowy to back away from any ambitions to supply large commercial and industrial customers, and focus instead on “mum and dad” customers.

“C&I is a tough market. We love the big, ugly, peaky loads and we’re still very competitive in that space but in big base loads we’re not competitive. We’re very happy in our space, and very happy with Colongra.”

Colongra has only run for about 300 hours since it was built five years ago, and rising gas prices means it may run even less often in the future. But Mr Broad said it would prove its worth as “an insurance product” alongside Snowy’s hydro-electric system in the Snowy Mountains, primarily used to fill shortages elsewhere in the market due to high demand or plant outages.

Mr Broad, a former chief executive of Infrastructure NSW, said Snowy was not interested in further acquisitions as it has the assets it needs to fulfil its ambitions in retailing and generation. He ruled out any interest in Alinta Energy, which will be sold this year by private equity owner TPG Capital.

“Our job is to make what we’ve got work. And the early signs from Lumo are terrific. I’m very, very happy.”

With about 1 million customers between Lumo Energy and Snowy’s Red Energy brand, Mr Broad said he saw scope for growth mostly in the key markets of Victoria and NSW, but outside the tough, competitive market in and around Sydney, where the major three retailers battled for market share. Rather, the focus was “on the fringes” in rural markets where the Snowy brand was strong.

Snowy’s recent acquisitions triggered speculation its owners, the NSW, Victorian and federal governments, may be considering a fresh push to privatise the business, after abandoning the last attempt in 2007. But Mr Broad, whose support for privatisation is well known, said there was no talk of any such move.

This story Administrator ready to work first appeared on Nanjing Night Net.