UnitedNetworks waiting for final bids on sale or split

By CHRIS DANIELS energy writer

The sale of New Zealand's largest power lines company, UnitedNetworks, is nearly complete, with bidders due to put in their final offers on Monday.

UnitedNetworks directors will then decide later that week which of the bidders will become the new owner of the North Shore-based company, which supplies electricity to about 30 per cent of New Zealand consumers, and gas to more than 50 per cent.

Missouri-based Aquila, which owns 70 per cent of UnitedNetworks, is willing either to sell its shares to another party as part of a full takeover offer, or to split the company up and sell it in parts, or as a whole, to the highest bidder.

Moody's this week cut Aquila's credit rating to junk status - a below investment grade Ba2. Standard & Poor's cut the company's rating only one point to BBB minus, its lowest investment grade rating.

The moves will raise fears among minority shareholders that Aquila will be even more interested in a rapid, rather than thorough, sales process.

UnitedNetworks chief executive Dan Warnock said he was happy with the way the sales process was going.

"At this point in time we have a very robust and competitive process with continuing international and domestic players looking at both assets and the whole business.

"We feel real good about where it's at and look forward to a good result on the ninth."

New Zealand's second largest power lines company, Vector, has received the blessing of the Commerce Commission to take over all of its neighbouring network.

Buying UnitedNetworks would make Vector by far the largest lines company and would increase its electricity lines assets from more than $854 million to just under $1.9 billion.

It would take on an extra 506,000 customers, up from its existing base of 275,000 connections to its network.

If Vector or any other bidder launched a takeover offer, it would run the risk of not attaining the 90 per cent of all shares needed to compulsorily acquire the remaining 10 per cent.

Should the UnitedNetworks board decide to accept a takeover bid, it would have to meet with the approval of Aquila. Once the Aquila shares are accounted for, the potential new owner would have to convince owners of a remaining 20 per cent of UnitedNetwork shares to accept its takeover offer.

Vector has more than 270,000 customers in Auckland City, Manukau City and Papakura. It is fully owned by the Auckland Energy Consumer Trust, an elected body, which distributes dividends from Vector to every customer connected to its network.

If it bought UnitedNetworks, profits earned from the newly acquired customers would be paid out in the form of dividends only to existing Vector customers.

The value of UnitedNetworks shares has increased by $1.10c each, to $9.30c, since Aquila announced the sale of the company on June 12.

The three councils now have the option of selling their 16.2 million shares in UnitedNetworks.

North Shore City, Waitakere City and Rodney District councilS share a combined 10.7 per cent stake in the company, worth more than $150 million at current market prices.

These shares are held through the Waitemata Electricity Trust which is run on behalf of the community by the UnitedNetworks Shareholders' Society as trustee.

Dividends paid out by UnitedNetworks are used by the trust to put powerlines underground and build community facilities such as playgrounds.

The councils, the trust and UnitedNetworks announced yesterday they had signed a "deed of variation" which amends the trust deed, meaning they now "have the flexibility to consider all options regarding their ratepayers' investment in the company".

North Shore City Mayor George Wood, speaking on behalf of the other councils, said the change meant they could avoid the threat of their shares being devalued if they were left as a minority shareholder after any takeover or sale of all its assets.