Edison Mission says differing valuations killed Contact offer

12.00 pm

Edison Mission said today differing opinions on valuation were responsible for the failure of its bid for control of power company Contact Energy.

"A number of shareholders, particularly institutional shareholders, had a different view of the value of the company than we did," Edison vice-president Bob Driscoll told reporters at a news conference.

While final numbers were still to be tallied, Mr Driscoll confirmed the company fell well short of its 90 per cent target in the $4.14 per share offer, which expired at midnight on Sunday.

Contact shares fell 5 cents to $3.73 by mid morning as stock offered to Edison was released back into the market.

Mr Driscoll said investors appeared to have taken a robust view of Contact based on last year's electricity crisis, where the company benefited from its dependence on thermal, rather than hydro generation facilities.

Contact posted a bumper $131 million net profit for the September 2001 year, as hydro lakes plunged to their lowest levels in 70 years, causing spot electricity prices to soar.

That event was viewed by Edison as a one-off, Mr Driscoll said.

"Short term phenomena or infrequent phenomena, while part of our valuation, do not form the basis of our valuation," he said.

Edison's offer took into account the volatility of the industry.

"If you look at what has happened in the US power industry, particularly in the last four or five months and after the Enron collapse, you are seeing a lot more volatility and a lot of the independent power producers that are traded on the New York Stock Exchange have seen their prices drop to all time lows.

"We took all that into account as we looked at the long term value of Contact Energy."

Contact last month said it was tracking slightly below a $102 million profit forecast after its first three months of the 2002 financial year, due largely to softer electricity spot prices and lower volumes of thermal generation.

Despite failing to take control of the company, Edison remained committed to its 51 per cent holding, Mr Driscoll said.

"We like New Zealand, we like Contact Energy. We intend to remain its long-term major shareholder."

No plans were afoot to launch a fresh bid in the near future, he added.

"We have no plan to make a second bid in the near term for Contact Energy.

"Beyond that statement... we have a policy of not speculating on our investment criteria or potential future investments."

One deterrent to any future bid was the Government's new Takeovers Code which made launching a takeover bid more difficult, he said.

"Complying with the Takeovers Code and the behind the scenes effort that it has taken to put this bid together has been a complex process and is not something we would do again lightly.

" The deadlines, the logistics of the Takeovers Code... with 125,000 shareholders scattered all over New Zealand plus shareholders in Australia and around the world, make it a difficult task.

"The code itself has a number of very important attributes, including that an offer has to be open and eligible for all -- you can't differentiate... but logistically there are some issues with the size and diversity of the shareholder base for Contact Energy that made it difficult."

- NZPA