Infratil decides against selling out to Powerco

By PAULA OLIVER

Powerco's steady entrance to the Stock Exchange's main board was clouded yesterday when key shareholder Infratil made a last-minute decision not to sell its stake.

It said the price on offer was too low.

The utilities investor had planned to sell its 4.9 per cent stake in the Taranaki lines company at the same time that power company Alliant International sold its 9 per cent holding, leading to the listing.

The two had indicated that they would accept between $1.30 and $1.50 for their holdings, but bids from institutional investors left the price languishing at $1.20 - 10c below what they had been hoping for.

Alliant, which also has a stake in Tauranga's Trustpower, elected to sell, but Infratil pulled out, saying it held a strong view that the shares were worth more than $1.20.

Shares traded at between $1.30 and $1.35 yesterday, which Paul Ridley-Smith, a spokesman for Infratil manager HRL Morrison and Co, said was closer to what he expected.

"I think our move [not to sell] should be seen as more positive by the market than negative, because what we are saying is we believe the shares are worth more," he said. "The people who bid expressed their views on the value, and we have a different view. Time will tell."

Mr Ridley-Smith said the decision had not affected the relationship with Alliant, which holds a 10 per cent stake in Infratil.

"We didn't pressure them to do anything, and vice versa," he said.

The $14 million that could have been raised from the sale would not adversely affect any investment plans Infratil had.

Analysts had mixed views on the effect of Infratil's decision.

One suggested that it could keep the future share price down because people would suspect Infratil might be keen to sell. Another said it had both a positive and a negative effect because it showed Infratil valued the shares highly but at the same time created uncertainty over the future.

Mr Ridley-Smith said it was not Infratil's style to bail out, but the option to go back to the market in the future did exist.



Infratil can hold on to the 5 per cent stake without breaking any rules covering generation, retail and lines company investment.

Forsyth Barr Frater Williams investment analyst Rowan Johnston said he expected Powerco's price to move up gradually when the company became part of the Top 40 index and consequently more visible to overseas investors.

An NZSE spokesman could not confirm whether Powerco would join the Top 40 index, saying that would be known in the coming two weeks.

Powerco closed at $1.31.