KEY POINTS:
An overseas interest is the likeliest buyer for the 50 per cent stake in electricity and gas company Powerco.
Listed Australian fund Babcock & Brown Infrastructure yesterday announced that it was looking to sell up to 50 per cent of New Zealand's second largest lines company as part of a capital management review.
It had announced the review on June 19 following a massive plunge in the share price of investment bank Babcock & Brown, which set up and manages the fund. The share price decline had prompted Babcock & Brown's lenders to review its three-year A$2.8 billion ($3.6 billion) debt facility negotiated in April.
Babcock & Brown Infrastructure said yesterday that following a number of unsolicited approaches, it had started formal price discovery processes for co-investment in up to 50 per cent of two of its core assets: Powerco and Australian rail network operator WestNet Rail.
Grant Williamson, director of sharebroking firm Hamilton Hindin Greene, said the move had been on the cards as Babcock & Brown looks to change its debt structure.
"I suppose the surprise is that they're only looking to sell down a portion of it, rather than the whole lot.
"Powerco is a very good quality asset and therefore would be one of their easier ones to realise."
Williamson said the unsolicited interest in those assets indicated that it would be a reasonably quick selldown, most likely to an overseas buyer.
The unimpeded June sale of Vector's Wellington lines business to Hong Kong-based Cheung Kong Infrastructure Holdings and Hong Kong Electric Holdings, and Babcock & Brown Infrastructure's 100 per cent holding of Powerco, meant there was likely to be little in the way of regulatory hurdles, he said.
Should a sale proceed, Babcock & Brown Infrastructure intends to apply the proceeds to reducing its gearing.
POWERCO
* New Zealand's second largest electricity and gas distribution company.
* Has around 400,000 consumers connected to its networks.
* Electricity networks in Tauranga, Thames, Coromandel, eastern and southern Waikato, Taranaki, Wanganui, Rangitikei, Manawatu and Wairarapa.
* Gas pipeline networks in Taranaki, Hutt Valley, Porirua, Wellington, Horowhenua, Manawatu, Hawke's Bay and Tasmania.
