Power giant rejigs loan for Orion buy

By FIONA ROTHERHAM

New Zealand's largest electricity distributor, UnitedNetworks, is to finance its $550 million purchase of Orion's North Island gas network through a $1.46 billion refinancing package.

Shareholder approval was given easily on Thursday for both the Orion deal and for refinancing an existing syndicated loan and working capital facility on better terms. Shareholder consent was the final hurdle to settling the deal yesterday. Transaction costs are $6 million.

UnitedNetworks, 79 per cent owned by Missouri-based Utilicorp, has nearly 500,000 customers and will gain 117,000 Orion customer connections.

Chairman Bob Green said the acquisition provided the most significant growth opportunity since the company bought the TransAlta and TrustPower lines business.

It will boost forecast earnings before interest and tax by $36.9 million this year. The company said it was on track to meet this year's forecast of close to $100 million profit after tax.

Orion's gas business is New Zealand's largest low-pressure gas distributor, with relatively new networks in Auckland, Wellington, Hawkes Bay, Manawatu and Horowhenua.

Chief executive Dan Warnock said opportunities for improving gas penetration were considerable, particularly in Auckland, which had only 25 per cent penetration.

''At its peak Orion [formerly Enerco] was connecting 10,000 customers a year. The business is now connecting around 3500 and we intend to quickly increase that number substantially.''

The company is already talking to power retailer Contact about expanding the business.

Contact takes control next month of Orion's gas-trading business. It paid $10.2 million and gains 40 big industrial gas customers.

Mr Green said UnitedNetworks' debt gearing would increase with the Orion deal from 51 per cent to 63 per cent, still comfortably within the recommended range for a utility business.

Utilicorp had delayed cutting its stake to around 50 per cent through a sale to a private investor. ``It's not imminent [but] will happen this year,' said Mr Green.''

The company's worth was undervalued at $5.75 a share, he said, but Utilicorp was confident of fetching a true value upwards of $7.