New Zealand:

Partnering up to exploit heat beneath Bay of Plenty feet - Editorial

Geothermal power is a growing part of New Zealand’s renewable energy portfolio, with world-leading technology being used to exploit the immense heat under the central North Island.

Gisborne-based Eastland Group has become a niche player in recent years, buying a geothermal plant in Kawerau then an undeveloped field nearby.

Initial plans to tap this field, named Te Ahi o Maui, might cost around $60 million. On top of at least $100m of other capital requirements over the next decade, as well as plans for small hydro developments, the group and its 100-percent shareholder the Eastland Community Trust (ECT) have decided to explore options for new equity.

One possibility is finding a partner for its geothermal business, or just the Te Ahi o Maui project. This would reduce risk for Eastland Group, especially if the investor had geothermal experience. It would limit upside potential, though, and it is this that has drawn the group to geothermal generation.

More likely, the group and ECT will seek a major new shareholder or several significant investors (a wider offering would add expense and complexity) in the entire Eastland Group; or its energy and highly attractive port and electricity network businesses.

Investors with long time horizons are very keen on reliable infrastructure assets that will consistently achieve returns above inflation. Pension funds are the classic example. The Super Fund, ACC and major KiwiSaver funds would like to run their eyes over an Eastland Group prospectus.

Iwi with major Treaty settlement payouts on the way, and even longer-term views, would also be natural fits — especially Ngati Porou, who will receive $120m this year and aspire to a future of renewable, clean energy to boost their wealth.

A Chinese investor could also be a savvy (if controversial) move, especially one involved in, say, the timber or solar power industries.

But why should the ECT share ownership of its Golden Goose?