AGL poised to take full control of Natural Gas

By Mark Reynolds

Australian Gas Light Company's move to buy Fletcher Challenge's one-third stake in Natural Gas Corporation has strengthened the Sydney-based energy company's platform to launch a full takeover bid for NGC.

The transaction also allows Fletcher Challenge to tidy up its balance sheet, ready for a spend-up on further oil and gas exploration and production assets.

If AGL secures full control of NGC, it will be able to take the company's assets to the negotiating table when it seeks to secure a more significant slice of Tauranga-based electricity company TrustPower.

AGL already owns one-third of NGC and after securing a hold on Fletcher's one-third stake yesterday, it is widely tipped to mount a takeover offer for the remainder of NGC held by 8000 minority owners. Such a takeover would allow AGL to carve-up NGC's assets, perhaps refloating NGC's national gas transmission grid assets and keeping the company's energy marketing and distribution assets to pursue its own downstream energy ambitions in New Zealand.

AGL already has an 11 per cent stake in electricity retailing and generating company TrustPower, while the NGC business includes the 68,000 power customers of Hamilton-based WEL Energy and 64,000 retail gas customers throughout the North Island.

AGL declined comment on its future plans for NGC yesterday. The company's group corporate affair manager, Bill McLaughlin, said from Sydney that it was too early to comment on other strategies. AGL's priority was to finalise the purchase of the Fletcher stake, he said.

AGL is exercising a pre-emptive right over the shares after Fletcher said it wanted to sell out of NGC rather than spend time working through a previously-announced plan to carve up the company.

Last November, NGC announced a proposal to split into three, with gas transmission assets to be shared by existing shareholders, processing and generation assets to be controlled by Fletcher, and energy retailing and distribution assets to be controlled by AGL.

Natural Gas said yesterday the plan had been abandoned in favour of an internal review of operations that would ensure separate business strands remained competitive.

Natural Gas shares rose 6 cents to $1.17 yesterday.

The exact price AGL will pay for Fletcher's shares has yet to be determined, but it will be close to the market price before the announcement.