Investors recruit friends and family to secure Vector stake

A share float in Auckland's electricity network is attracting so much interest that some investors are using their friends and family to get a bigger stake.

Shares in the power lines company Vector are expected to rise in value when the partial privatisation begins later this year.

But only Vector's paying Auckland customers are entitled to the shares - prompting some investors to discuss ways of persuading their relatives to sign up on their behalf.

All 286,000 Vector customers in Auckland City, Manukau City and Papakura were this week sent letters asking for pre-registrations of interest in the upcoming partial float, which is expected to raise between $600 million and $1 billion from mostly small investors.

Market analysts say the market is pointing towards the new shares trading at a 12 per cent premium.

Money raised in the float will be used to pay off debt raised when Vector bought 67 per cent of gas transmission and trading company NGC last year.

NGC shareholders have been promised some kind of special preference in the Vector float, but details have yet to be revealed.

This week's request for pre-registration is Vector's way of gauging the level of interest in the float.

Beneficiaries can ask for a minimum of $500 in shares or more, but fears are rising that its popularity will mean anyone wanting extra will have requests scaled back.

Once the Vector shares are issued, shareholders can do what they like with them, on-selling or transferring ownership. To be accepted into the beneficiary priority pool, the buyer must have an "ICP" number - which identifies every power meter. This means shares will be issued only to names listed on power accounts. People with more than one property can apply for each power account.

Discussion on the ShareTrader website - a chat room for share traders - has this week included methods of getting more shares allocated, by asking friends and family to buy them on behalf of others.

"I'll be asking a few people [family, friends, etc] if I can buy through them," said one trader.

Dividends now paid out annually to all beneficiaries in the Vector home area will continue.

Last year, company chairman Michael Stiassny predicted that the NGC merger would mean a doubling of beneficiary payouts.

The 24.9 per cent privatisation will, however, widen the pool of those getting dividends from what is now the country's biggest energy network company.

Macquarie Equities investment director Arthur Lim said the float had attracted a lot of interest.

There had been a lot of activity recently around Vector's corporate bonds, ownership of which carries preferential rights in the initial public offering and a discounted price. The pricing of these bonds points to a 12 per cent premium for the shares.

Institutional shareholders building a good position in Vector bought up the bonds as a way of getting a decent allocation of shares in the float.

"I think it is going to be a good stock," he said. "A bit like Contact [Energy], to hold for the long haul."

Vector shares

* Vector beneficiaries are being asked to pre-register their interest in Vector shares.

* The company is raising between $600 million and $1 billion in an initial public offering, privatising 24.9 per cent.

* Potential shareholders will then be sent a prospectus late next month and will be able to finalise how many shares they want before sending off a cheque.

* The pre-registration, which carries no obligation to buy the shares, closes on Friday, June 10.

* Beneficiaries are all those with power accounts in the Vector home area: Auckland City, Manukau City and much of Papakura.