Equity-raising Powerco talks of $53m profit

By CHRIS DANIELS

Energy lines company Powerco released details yesterday of the year's largest equity raising, including ambitious plans for big profits and good yields.

Trading in Powerco shares will be stopped for the next two days, while a "book is built" - bids for shares at certain prices accepted from brokers and institutional investors.

The New Plymouth-based lines company is trying to raise $150 million - 40 per cent of its current market capitalisation - to help pay for its purchase of the North Island gas and electricity assets of UnitedNetworks.

The price of the new Powerco shares, likely to be in a range of $1.50 to $1.80, will be known by Friday.

Known as "jumbo placement", existing shareholders are offered the right to buy new shares, similar to a standard rights issue. The shares that are not taken up by them will then be placed with new investors.

Powerco shares are tightly held. The New Plymouth District Council owns 47.6 per cent, the Taranaki Electricity Trust 16.8 per cent and the Powerco Community Trust has a little under 4 per cent. These big shareholders are not expected to take up anywhere near their full entitlements.

In Auckland yesterday Powerco chairman Barry Upson forecast after-tax profits of $53.6 million in the 2004 financial year - with a 16c a share dividend, meaning a yield of between 8.9 per cent and 10.7 per cent, depending on the final share price for the new equity.

The deal will nearly double Powerco's size, giving it an 89 per cent increase in the number of customers connected to either its electricity or gas network.

It is paying $810 million for its new assets and will pay at least another $20 million in costs.

* The North Shore City Council is the only one of three local councils yet to decide whether it will sell a combined stake of 10.7 per cent of UnitedNetworks.

The shares are owned by the councils of North Shore City, Waitakere and Rodney District and are wanted by neighbouring lines company Vector, which has launched a full takeover offer for UnitedNetworks. It already has 80.9 per cent of the company.

Spokesman Paul Thompson yesterday refused to say whether a meeting to discuss the issue had been arranged ahead of the October 23 expiry of the Vector offer.

It is understood that the North Shore City Council is holding any decision up, possibly thinking that the strategic value of a 10.7 per cent shareholding could earn them more money.

The three councils have agreed to make any decision to sell a unanimous one, with the potential $160 million sale proceeds being split according to population.

If the North Shore City Council scuppers the sale of the shares, then it will have to hope that Vector launches a new takeover offer, one that offers more than the present $9.90 a share.

It runs the risk of Vector choosing to sit tight and wait until 12 months has elapsed, when it can then buy up to 5 per cent of the remaining shares on the open market.

The price for both the council shares and the remaining 10 per cent owned by other investors would be determined by market forces.