Editorial: Put Vector's trust out of its misery

COMMENT

The performance lately of the Auckland Energy Consumer Trust, the owner of Auckland power line company Vector, should be its own death warrant. Extraordinary legal manoeuvring by warring factions has destroyed the trust's credibility. Worse, it has jeopardised Vector's takeover of NGC, a gas transmission company that represents a potent avenue for growth. The deal has been mooted for some time, but last week Australian energy company AGL, which is selling its controlling stake in NGC, put the shareholding up for tender. If Vector was once in the box seat, it is now but one of several potential buyers.

All is not lost. The latest of a number of High Court verdicts has at least cleared the way for Vector to bid for NGC. Justice Helen Winkelmann ruled that a minimum of two of the five trustees would be sufficient to approve the bid, and the complementary move to finance this by floating 25 per cent of Vector. Thus has ended, for the time being, the fighting between the trustees who support a partial privatisation and those who have fought tooth and nail to prevent it.

The strife is sure to resurface, however. Should the bid for NGC fail, it will be reprised when another potential acquisition appears and capital needs to be raised. Potential sellers will look askance at the prospect of dealing with Vector. The only rational way out of this farce is partial privatisation. It should have happened already but the trust structure has, since its inception in 1993, proved an unsuitable vehicle for steering Vector along a logical growth path.

The latest legal wrangling has made this even more apparent. Trust chairman Warren Kyd got rather more than he expected when he applied to the High Court to bar John Collinge, one of the three trustees opposed to partial privatisation, from voting on the bid issue because Mr Collinge owned Vector bonds. Mr Kyd succeeded, but all the trustees were put on notice. Justice Barry Paterson said: "Political platforms do not allow [trustees] to breach duties imposed on them by law ... a trustee who fetters his or her discretion to act in the best interests of the trust and Vector, because of a particular policy on which he or she campaigned, may well be in breach of his or her duties as a trustee."

Justice Paterson seems to be saying that the platform of those who stand for election as trustees counts for nothing. Around the trust table, it must play second fiddle to the interests of Vector. This is hardly what voters in consumer trust elections want to hear. They vote on the basis that candidates will stay true to their platforms. Anything less is the harbinger of cynicism and shattered credibility. Inevitably, therefore, queries abound about Justice Paterson's reasoning. But not about the fact that the need for such a debate is a further indication of the folly of the trust structure.

Clearly, Parliament must put the trust out of its misery. Once an irritant, it has now become an irrationality. Lawyers have been the only winners in the latest bout of dysfunction. If the takeover bid for NGC fails, the major loser will have been Vector itself. Henceforth, the company should be allowed to operate as a commercial enterprise under the stewardship of the Vector board and with oversight provided by Auckland Regional Holdings, the successor to Infrastructure Auckland. That, and partial privatisation, would put Vector in the same ballpark as Ports of Auckland.

The ports company, unencumbered by the baggage that is part and parcel of elected bodies, is free to pursue expansion and bigger profits for the benefit of all its shareholders. This focus has served Aucklanders well. The same community has been appallingly served by the Auckland Energy Consumer Trust. It has made Vector, a company bearing many of the hallmarks of a highly efficient business, operate with one arm tied behind its back. Such an absurdity must be consigned to the dustbin of history.