Vector set to unveil $200m note issue

By CHRIS DANIELS

A chance for the public to invest in Auckland powerlines company Vector is expected to be unveiled this week.

Vector has so far been unwilling to say how it proposes to pay for its takeover of neighbouring power lines and gas network company UnitedNetworks.

But it is expected to announce this week a capital notes issue of more than $200 million.

This will help pay for its $1.5 billion takeover bid for its much larger rival, which will largely be financed by a consortium of banks.

While Vector is a highly rated company, with low debt levels, it is thought that banks will be unwilling to lend it the entire purchase price.

This may be in part because of a desire to limit exposure to one company, and also to the energy sector as a whole, which has been in trouble worldwide.

UnitedNetworks was put up for sale after its 70 per cent owner, US-based Aquila, ran into financial difficulties and had to sell assets.

Aquila accepted Vector's offer of $9.90 a share for UnitedNetworks last week.

One industry watcher said Vector's lending banks were likely to view the money raised by a capital notes issue as similar to equity, placing less pressure on Vector's balance sheet.

As a trust-owned company, Vector cannot readily raise equity finance.

A capital notes issue would be popular with members of the investing public, allowing them to invest directly in a company.

The assets of Vector are managed by the Auckland Energy Consumer Trust on behalf of the beneficiaries - every electricity consumer in Auckland City, Manukau City and most of Papakura.

It pays out dividends in the form of credits on power bills.

This year's dividend of $145 is being paid to beneficiaries this month.