UnitedNetworks buyers get sorted for big chance

By CHRIS DANIELS

Alliances are forming and possible buyers are preparing to kick the tyres of lines company UnitedNetworks.

The ailing United States energy giant Aquila, formerly Utilicorp, wants to sell its 70 per cent stake, worth a little under $870 million, in what is New Zealand's biggest lines company.

The stake will be sold as part of a full takeover for the company, or will be split up and sold in parts.

The obvious contender for the Auckland powerline assets of UnitedNetworks, fellow lines company Vector, yesterday refused to make any comment on a possible deal, but approaches were being made to the third largest lines company, Taranaki-based Powerco.

Chief executive Steven Boulton said other companies "in our line of business" had approached Powerco with a view to forming a consortium to consider buying UnitedNetworks.

Although UnitedNetworks was much bigger than Powerco, it would not be impossible to buy, he said.

"It would be a big thing to swallow, but it's not a pill that couldn't be swallowed," said Boulton. "We've not canvassed any other players, but we've had three or four other players canvas us to see whether we'd be interested in working with them."

Less than 32 per cent of Powerco shares are on the open market, and 47.6 per cent of the company is owned by the New Plymouth District Council.

It is the fourth largest network company by asset value, but has the second longest electricity system in New Zealand, covering Taranaki, much of the lower central North Island and the Wairarapa.

New Zealand lines companies are expected to be eager to pore over the books of UnitedNetworks, but they will be joined by some of the big power companies from the Asia Pacific region.

Big investment funds associated with companies such as AMP and Macquarie Bank have also been tipped to buy the remnants of Aquila's Australasian assets.

Financial analysts in New Zealand expect that they will also cast their eye over UnitedNetworks.

One potential problem for any buyer of UnitedNetworks is the presence of the Waitemata Electricity Trust, which was formed to look after the interests of smaller shareholders when shares were issued to 23,000 customers of Power New Zealand in 1994.

A bitter battle between Utilicorp and Mercury Energy broke out after the shares were issued, and the US company eventually won.

The fight took place before power companies were forced to split off their lines business from retail and generation.

The Mercury name was adopted by the state-owned enterprise Mighty River Power, and the lines business became Vector.

The Waitemata Electricity Trust holds 10.7 per cent of UnitedNetworks in trust for the Waitakere City Council, the North Shore City Council and the Rodney District Council.

Dividend payments to the trust are used to put power cables underground and to help low-income households with budgeting advice.

The trust has yet to meet to decide how it will respond to the UnitedNetworks sale.

But chairman Bob Stanic said he personally hoped that it would not be sold, but if it were accommodation must be made for the trust to continue. The trust had to legally continue until 2004, he said.

One possible solution was for a new owner of UnitedNetworks to pay the trust enough money - around $10 million, so it could continue its work for the next two years.