Auckland kept out of Vector, NGC deal

By PAUL PANCKHURST

One of the merger proposals for publicly owned power giant Vector would ring-fence the company's Auckland assets and combine the rest with listed company NGC.

The Business Herald was told merger discussions were live, detailed and promising.

Finance industry sources say the advisers are ABN Amro (Vector) and Goldman Sachs JBWere (NGC).

Vector and NGC managers are expected to decide soon - possibly within two to three weeks - on whether a deal is warranted.

They would then take a proposal to their owners.

The Business Herald was told a full merger of the two companies - with the resulting shareholdings "falling wherever they fall" - had been investigated, as well as the "ring-fencing" plan.

With assets of $3 billion, Vector is the power lines company sometimes called "a public pot of gold". It is owned by the Auckland Energy Consumer Trust.

NGC is the owner and operator of gas transmission and distribution networks and is 66 per cent owned by Australian energy company AGL.

A merger would need to be palatable to the five-person Auckland Energy Consumer Trust.

One member of the trust, Shale Chambers, has opposed less than 100 per cent ownership by the trust of any Vector company.

Other members have talked of floating off up to 24.9 per cent of Vector on NZX.

The Business Herald was told those involved in the merger discussions "understand the trust's objectives and its go and no-go areas".

The trust is divided politically.

In June, one of the trustees, John Collinge, was rolled from Vector's board because of the conflict of his dual roles.

He draped himself in the cloak of anti-privatisation martyr.

Vector owned and operated only the Auckland electricity network until the December 2002 purchase of UnitedNetworks. It describes itself as "the largest owner and manager of network infrastructures in New Zealand", delivering electricity, gas, and broadband communications in the Auckland and Wellington regions.

NGC's transmission and distribution pipelines and electricity meters look a good fit with Vector's businesses.

The trust receives an annual dividend from Vector which it passes on to 285,000 customers in Auckland City, Manukau and part of Papakura, through a credit on power bills.

Last year's credit was $155.

One view is that, should the managers of the two companies want to press on, the trust can expect to see a proposal in the next four to six weeks.

Ownership of the power sector is in flux.

Australia's Origin Energy just bought into Contact Energy.

NGC's majority owner, AGL, was another bidder for the 51 per cent stake secured by Origin.

Final bids for a controlling stake in New Plymouth lines company Powerco are due tomorrow.

The New Plymouth District Council, Taranaki Electricity Trust and Powerco Wanganui Trust decided to sell their stakes - a joint 53.6 per cent - after the Business Herald reported in April that Powerco was in merger talks with NGC.

That story prompted NGC to disclose it was in talks with both Powerco and Vector on "potential opportunities".

New Plymouth mayor Peter Tennent said yesterday that the council hoped to confirm the outcome of the Powerco sales process within a few days of bids closing.

"We hope to make an announcement soon and we remain confident of a good premium on our shareholding."

International ratings agency Standard & Poor's has given cautious approval to the council's sale of its shares.

The council retained its AA+ long-term rating - the highest of any council in the country - after S&P's latest investigation.