KEY POINTS:
Vector is optimistic it will get approval for a $785 million deal to sell its Wellington electricity network to Hong Kong-based Cheung Kong Infrastructure Holdings (CKI).
The sale is subject to conditions including the approval of the power network's shareholders and the Overseas Investment Office (OIO).
Announcing the
deal today, Vector said it would initially use the money to retire debt, strengthening its balance sheet and positioning it to consider any potential infrastructure opportunities should they arise.
Chief executive Simon Mackenzie said the Wellington assets did not sit on sensitive land, and the network had already been held twice by foreign owners.
Also, as international infrastructure owners and managers, CKI had expertise in the industry, he said.
"We can never say how the process will run, but I think on that basis, the way in which we look at it, we think it meets a number of the criteria as we understand it."
Within hours of the deal being announced, both the Green Party and New Zealand First had come out in opposition to it.
Green Party MP Sue Kedgley said Wellingtonians could only lose out, predicting more expensive power bills as the new owners sought to make a profit.
"I expect the new Hong Kong-based owners will run down Wellington's electricity network, suck out profits for their offshore shareholders with minimum maintenance for the end users - Wellington residents, and use the network as a cash cow," she said.
"I also predict they will sell it off again in a few years time for a hefty profit."
New Zealand First economic development spokesman Doug Woolerton said New Zealanders should own their own energy networks, which were too important to be "flogged off" overseas.
Vector expects to make a profit of about $195m from the sale, though that is still to be finalised. The proposed settlement date is July 1.
Mr Mackenzie said Vector was not looking at any specific opportunities to buy other assets now.
But as a multi-utility company with investments in electricity, gas, telecommunications and renewable energy, it would probably consider a range of infrastructure assets as opportunities arose.
The Wellington electricity network was pretty much a stand alone network, with Vector not having any other of its infrastructure assets overlapping it, Mr Mackenzie said.
Vector was looking for assets with strong growth potential that overlapped with its other network areas, and could provide corridors for expansion into other types of infrastructure.
Earlier this month government ministers vetoed a bid by the Canada Pension Plan Investment Board (CPP) to buy a stake in Auckland International Airport, citing a lack of benefit to New Zealand as the key reason for declining the bid.
That was despite the OIO recommending the ministers allow the Canadian bid.
Last month the Government tightened overseas investment regulations regarding foreign companies buying large New Zealand assets, in the face of concerns about foreign ownership of key assets.
Standard & Poor's Ratings Services said it was reviewing Vector's future risk appetite and strategic growth following the sale announcement.
The divestment of the Wellington network reduced the business diversity of Vector and marginally weakened the company's business profile, S&P said.
But those factors should be offset by the company's decision to apply the sale proceeds to reduce debt.
CKI is a global infrastructure owner and operator with assets and operations in Australia, including interests in Melbourne's CBD electricity network, as well as operations in Britain, Canada, mainland China and Hong Kong. CKI is indirectly controlled by tycoon Li Ka-shing.
Vector is 75.1 per cent owned by the Auckland Energy Consumers Trust. The balance of shares are held by institutional and retail investors.
Vector's biggest assets are its power and gas networks in Auckland, and pipelines delivering natural gas around the North Island.
Vector shares were up 1c around mid-afternoon today to $2.12.
- NZPA
