Vector set to sell non-core assets

By Mark Reynolds

Auckland electricity lines company Vector expects to sell its remaining non-transmission assets this financial year.

The sales will allow the company to repay its remaining debt and begin to focus on refinancing its balance sheet, chief executive Patrick Strange said yesterday. The assets to be sold include the company's holding in the Southdown Cogeneration plant in South Auckland, he said.

Vector's March financial year accounts, revealed to the Business Herald yesterday, show it reduced debt to $228.5 million at the end of March, from $454.4 million a year earlier. At the same time, a series of complex transactions meant that the group's shareholder equity actually increased 132 per cent to $822.8 million.

Dr Strange said he expected the remaining debt to be repaid this year, after which Vector would look to regear its balance sheet. He said a network company like Vector would usually have a debt-to-capital ratio of about 50 per cent, meaning there was scope for the company to raise about $500 million on capital markets.

Exactly what the company would do with such funds had not been determined. But the options included an expansion of its business or a capital repayment to shareholders.

Dr Strange said changes to electricity laws made it difficult for the company to consider expanding in the electricity networks sector, although it would ideally like to in order to bring some economies of scale to its business. "We believe there are too many network companies operating for the size of the country and we could play a part in rationalising the industry ... but it is difficult to value assets until the laws are settled," he said.

Vector - formerly called Mercury Energy - changed markedly during its March financial year, as did most electricity companies. The changes included a sale of its retailing operations and the sale of a large stake in rival Power New Zealand. Taken together, the numerous one-time impacts reduced Vector's overall net profit by about $13 million. Its after-tax result of $49.2 million was a turnaround from the previous year's loss of $25.3 million.