Infratil's $10m award rubs salt in NGC wounds

By RICHARD BRADDELL utilities writer

Infratil has added insult to Natural Gas Corporation's already large injuries, winning a $10.1 million award in a landmark arbitration in the first-time use of Companies Act minority buyback provisions.

NGC is already reeling from losses of around $300 million from last year's disastrous $830 million purchase of the 75.8 per cent controlling interest in TransAlta NZ - which now trades as On Energy.

And in a ruling presented to the parties on Friday night, arbitrator David Williams QC, further vindicated Infratil's fierce opposition to the takeover.

Having voted against the takeover, Infratil was entitled under the Companies Act minority buyback provisions to force NGC to buy back its shareholding which then stood at 6.7 per cent.

NGC assessed fair value at $1.30 a share and paid Infratil a a total of $34.6 million for 26.6 million shares.

But, in assessing the value at $1.68 per share, Mr Williams supported Infratil's argument that NGC should have paid closer to the $1.81 a share it was trading at before the announcement that it would buy control of TransAlta.

The ruling is not expected to open the floodgates for shareholders to get bought out if transactions they don't like turn sour.

First, decisions like the one to buy TransAlta require a 75 per cent majority vote at an extraordinary general meeting and complaining shareholders must first have voted against the transaction.

In most cases, a 75 per cent vote in favour should be a strong indication that the deal is reasonable. But in the NGC/TransAlta deal, the transaction was a foregone conclusion as it was supported by NGC's 72 per cent shareholder Australian Gas Light when put to the vote last year.

Instead, the sheer difficulty of establishing a reasonable price under the Companies Act provisions has resulted in calls by Infratil and others for the public release of Mr Williams' 260-page report.

"We now have an award that contains a wealth of material that might be useful to any shareholder who is considering enforcing the regime or to any listed company that must respond," Infratil said yesterday.

Infratil executive Paul Ridley-Smith said that few ordinary shareholders could afford the huge legal expenses and massive amounts of executive time incurred in proceeding with arbitration.

Another source said that arbitration took place towards the end of February and start of March, about the time that NGC was making disastrous decisions to go into the winter with little or no hedging for its retail customer base.

NGC still has rights of appeal, but said yesterday that it was reviewing the decision and had yet to decide if it would do so.