Mercury to sell meter business for $270 mln

Monday 17th December 2018

Mercury NZ has agreed to sell its Metrix metering business to IntelliHUB Group to simplify its business and focus on faster-growing activities.

Metrix has about 90 staff and manages more than 460,000 electricity meters. Its sale – for $270 million – will reduce Mercury’s $500 million-plus full-year group operating earnings by about $28 million, the company said.

As part of the deal, Mercury and IntelliHUB will enter into a long-term meter services agreement. Sale proceeds will initially be used to pay down debt, Mercury said. Further application of the proceeds will be considered with the company’s full-year results.

More than 80 percent of New Zealand homes and business already have smart meters. TrustPower, the last retailer to complete their roll-out, is currently undertaking that with IntelliHub.

Metrix had looked to expand in Australia as Vector’s AMS metering business has but was unsuccessful in purchasing AGL Energy’s Active Stream business there in 2017. IntelliHUB acquired Origin Energy’s Acumen metering business there earlier this year.

“IntelliHUB is a natural owner for the business, given its experience and growth in Australia and its expansion into New Zealand,” Mercury chief executive Fraser Whineray said in a statement.

“While Mercury had its own strategy for Metrix, negotiations with IntelliHUB Group have presented an opportunity that is timely for both parties,” he said.

IntelliHub, originally formed by meter provider Landis and Gyr, is part-owned by Pacific Equity Partners. It agreed a three-year roll-out programme with Trustpower in August 2017. Metrix cancelled its meter roll-out contract with Trustpower in 2015; Trustpower said at the time that Metrix hadn’t been able to deliver what Trustpower wanted.

IntelliHUB chief executive Adrian Clark said Metrix’s large installed meter base, deep customer relationships and innovation platform made it a natural acquisition for the firm.

“It is also clearly aligned to our strategy of focusing on growth and innovation in smart metering services,” he said.

Metrix chief executive Matt Olde will remain with Mercury and will manage the transition. All other Metrix staff will join IntelliHUB.

Whineray noted that Mercury’s retail arm has metering agreements with all significant service providers. Under the sale agreement it will remain a partner with IntelliHUB under Metrix ownership.

Mercury indicated lower interest and depreciation costs will leave it with a $1 million annual net profit on the transaction, after allowing for the $28 million reduction in earnings before interest, tax, depreciation, amortisation and changes in financial instruments.

It will lose $25 million of third-party metering revenue and will also pay a similar amount through its new service agreement with Metrix. It will save about $22 million in Metrix-related costs.

Mercury is currently forecasting full-year ebitdaf of $515 million.

(BusinessDesk)

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