Users' priority treatment could raise Vector price

By CHRIS DANIELS

A high price for Vector's sharemarket float could result from plans to give special treatment to most of Auckland power users.

Vector, which is floating 24.9 per cent in an initial public offering (IPO), is studying ways to give priority treatment to income beneficiaries, who are paid yearly dividends.

The powerlines company is floating next year to raise money for its $1.3 billion takeover bid for gas transmission company NGC.

It is now 100 per cent owned by the publicly elected Auckland Energy Consumer Trust, which pays out dividends to every power user in Auckland City, Manukau City and most of Papakura.


Decisions have yet to be made on what sort of special treatment Vector's income beneficiaries will get when the float happens.

Bond holders, whose money helped pay for Vector's purchase of UnitedNetworks two years ago, have the right to subscribe for 50 cents worth of new Vector shares at a 2.5 per cent discount to the offer price for every dollar of bonds.

Those living in the Vector home area were given priority rights to buy the bonds when they were issued in 2002. This group now numbers at least 286,000 people.

Goldman Sachs JBWere analyst Peter Sigley said the large number of buyers with priority rights in the IPO - trust income beneficiaries, Vector bond holders and possibly NGC minority shareholders - could force up the share price in any IPO.

This would be because the number of shares available to the big institutional investors would be small, with the competitive tension pushing the price high.

With such mass participation, any Vector float could be akin to the floats of Contact Energy or Auckland International Airport.