Invitations go out to Powerco buyers

By CHRIS DANIELS, energy writer

Failed buyers of UnitedNetworks are being tapped as potential new owners of lines company Powerco.

The New Plymouth District Council and the Taranaki Electricity Trust are hoping to earn a 25 per cent premium on the sale of their 49.96 per cent stake in Powerco.

Bidders for the assets of UnitedNetworks, formerly New Zealand's biggest lines company, sold by US energy giant Aquila in 2002, will be among the first to be approached by PricewaterhouseCoopers, which is leading the sales process.

New Zealand lines company Vector, Australian energy giant AGL and several Asian energy investors are likely to be asked to bid.

PricewaterhouseCoopers partner Craig Rice, who is leading the sales process, said indicative, non-binding bids for the Powerco shares were being asked for by June 11.

A flyer issued by the company lists "key investment highlights" of Powerco, including the recently announced merger discussions with gas company NGC, "significant additional merger and acquisition opportunities in the New Zealand market" and continued expansion in Australia.

Powerco said last month that it was in "informal discussions" with NGC which had "focused on a number of potential opportunities". The talks were "simply a part of Powerco looking at our strategic options".

NGC, which is also talking to Vector, the country's largest powerlines company and potential Powerco buyer, also said discussions were only "informal". A spokesman said yesterday that the talks were continuing and had not been put on hold by news of the council's share sale.

The Business Herald understands that merger talks between NGC and Powerco have been going on for at least the past 12 months.

Vector, which is owned by a publicly elected trust, has refused to confirm its negotiations with NGC nor outline the topics of its discussions.

A majority of members elected to the trust which owns Vector are in favour of a partial privatisation and sharemarket float of the company.

Such an opportunity could present itself by the need for money to pay for the purchase of Powerco.

The New Plymouth District Council and the Taranaki Electricity Trust have been talking up expectations of a 25 per cent premium on their shares, which has raised eyebrows among many who feel Powerco shares are already fully priced.

Any buyer must, however, find more money than just the premium the council and trust expect for their shares.

All shareholders must be treated the same under provisions of the Takeovers Code - meaning a buyer must also make an offer to the other 19,000 smaller shareholders.

If the desired 25 per cent premium is offered to the council and the trust, then it's likely many other shareholders would be keen to also cash in.

The 49.96 per cent stake is worth $338 million stake at current market value, meaning any 25 per cent premium would take the asking price to well over $420 million.

Should this price also be taken up by all other Powerco shareholders, the takeover may cost at least $845 million.