KEY POINTS:
The Auckland City Council is mounting a fresh offensive to grab the shares of energy distribution company Vector after two previous attempts failed.
Documents released to the Business Herald under the Official Information Act show Auckland, Manukau and Papakura councils, led by Auckland, are set to lobby the Government for a law change to unwind the Auckland Energy Consumer Trust, which owns 75.1 per cent of Vector. They would divvy the booty among themselves and 290,000 power consumers in their area.
Consumers could each get shares or cash worth $3000-$4000 and the councils would receive the rest of the shareholding, worth between $450 million and $750 million, depending on the payout to consumers.
Each of the three councils would have the choice of keeping their shares or selling them to invest in other infrastructure.
The documents confirm the councils have been trying to wind up the "dysfunctional" trust and get their hands on its $1.6 billion of Vector assets.
The councils, as the capital beneficiaries of the trust, are not due to receive the assets until 2073. In the meantime, 290,000 consumers from the old Auckland Electric Power Board receive an annual dividend from the trust as the income beneficiaries.
The councils have previously played down trying to break up the publicly elected trust. Three months ago, Auckland City chief executive David Rankin told the Herald that "as far as I am aware there are no specific initiatives being pursued".
At the same time, City Vision councillor and finance chairman Vern Walsh said it "would be nice to get hold of the assets sooner rather than later" and he intended to look at the issue after October's trust elections.
A confidential paper to the council's finance committee a month earlier on September 14 outlined a new strategy to lobby the Government to wind up the trust once the trust elections were over in October.
Financial policy analyst Ross Tucker said "recent events may present an opportunity to make further progress on the issue". These included the power blackout on June 12, the appointment of two trust members to the Vector board (raising potential conflicts of interest) and a proposal by former board member Bryan Leyland, who stood for the trust on a policy of winding it up and distributing cash or Vector shares to consumers and councils. Leyland's bid flopped when he polled fourth to bottom of 20 candidates for the five-seat trust.
"Supporting the early wind-up of the AECT would be entirely consistent with Auckland City's previous lobbying efforts to have the trust unwound," Tucker said in the paper.
These efforts included a letter from the three councils' chief executives to Energy Minister Pete Hodgson in October 2004 asking to wind the trust up and hand the shares to the councils. The Government "did not see the issue as a priority at the time", Tucker said.
Last year, the Auckland City Council also received an unsolicited proposal from an unnamed New Zealand-based investment bank to help the council "extract value" from its capital beneficiary status. It involved paying consumers the equivalent of 18 years' of dividends (about $4000 each) in compensation for the loss of future dividends. This would realise $400 million for the councils.
Auckland City Council commissioned tax and legal advice on the proposal, which concluded there was "no legal mechanism for winding up the trust early" and the only way was through legislation.
In October, a spokesman for Finance Minister Michael Cullen poured cold water on the suggestion of winding up the trust early, saying it was an "issue for the shareholders of the region".
Since then, Vector independent directors Tony Gibbs, Greg Muir and John Goulter have quit the board, publicly declaring their lack of confidence in chairman Michael Stiassny. They complained the relationship between him and the trust was too close.
The confidential finance committee paper also revealed concerns by Auckland City that the Auckland Regional Council had been "aggressively" lobbying the Government to become the sole capital beneficiary of the trust, presumably to ensure majority ownership of the lines company ended up in one public body.
Tucker said that would lead to other regional ratepayers gaining benefits from Vector at the expense of the Auckland City, Manukau and Papakura income beneficiaries.
Vector shares closed down 2c at $2.55 yesterday.
