AGL bail-out sets up $1b sale

By PAUL PANCKHURST and AGENCIES

Another $1 billion of New Zealand energy assets is up for sale after gas company NGC's majority owner, Australian Gas Light, decided to bail out.

AGL put its 66 per cent stake on the block after the failure of merger talks between NGC and the publicly-owned Auckland power giant Vector.

The Business Herald was told Vector valued AGC's shares at closer to $2.70 than the market price, which yesterday closed up 3c at $2.98.

It seems the pair also struck problems in structuring a deal for Vector to secure 100 per cent of NGC and simultaneously list on the stock exchange.

NGC pipes gas in the North Island, processes and trades gas and LPG and owns energy meters.

It is New Zealand's biggest gas distributor with a market capitalisation - the value of all shares on issue - of $1.3 billion and assets of $1 billion.

AGL's decision follows changes of ownership at Powerco and Contact Energy - power companies with a reported $5.7 billion of assets.

AGL missed out in its bid for a majority stake in Contact.

Roly Michelmore, of AGL shareholder Argo Investments, said the recent deals had left AGL with little scope for expansion in New Zealand, "so it makes sense for them to withdraw".

"I think there's plenty of opportunities for them in Australia, and that's what they're focused on."

AGL said the sale would pay for acquisitions and return cash to shareholders.

The sale of the 66 per cent stake will trigger a full takeover offer.

AGL would not name its financial adviser for the sales process yesterday, but the Business Herald understands it is investment bank UBS.

The sharemarket yesterday valued AGL's stake in NGC at $877 million.

Names featuring in speculation on likely bidders include Prime Infrastructure, an infrastructure fund that is an offshoot of Australian investment bank Babcock & Brown.

Prime did a deal this month to buy a 53.6 per cent stake in New Plymouth lines company Powerco, triggering a full takeover offer.

Also named have been Australia's listed Diversified Utility and Energy Trusts and Singapore Power.

Australian Pipeline Trust - 30 per cent owned by AGL - said it might consider bidding.

"If AGL wants to sell it and they offer it to us at a price that suits us, we'll probably think about it," said managing director Jim McDonald.

"We're not averse to being in New Zealand but we want assets at the right price and one of the issues with NGC is it's pretty well-priced.

NGC has been in talks with Powerco and Vector, New Zealand's two biggest power distributors, about possible business opportunities.

Both companies also operate residential gas pipelines.

The Powerco talks ended with that company's change of ownership.

"In view of AGL's announcement, NGC will conclude its discussions with other companies on potential growth opportunities," NGC said.

AGL managing director Greg Martin said the company wanted to use money from the sale of the NGC stake to buy or build power plants in Australia, expand in electricity retailing in New South Wales and invest in renewable energy generation.

'There are a range of areas where we see we can re-apply those proceeds for greater returns to AGL shareholders."

Bloomberg figures show Australia and New Zealand have had $12.3 billion of utility transactions in the past year as companies such as Singapore Power buy assets to tap rising energy demand.