Aquila retreat offers prize to eager market

By CHRIS DANIELS energy writer

New Zealand's biggest power lines company UnitedNetworks is up for grabs, either whole or in pieces.

Ailing US energy giant Aquila has prompted the sale, because it needs to raise cash from its 70 per cent stake in the company, worth $824 million on market, held by its subsidiary Utilicorp NZ.

UnitedNetworks, the country's 11th-largest listed company by market capitalisation with assets worth $2.3 billion, will be sold in full to a new owner, or divided into pieces and sold in parts to the highest bidders.

UnitedNetworks chief executive Dan Warnock, announcing the sale yesterday, said substantial interest, both foreign and domestic, was already being reported by its investment bankers.

He said the assets, including one or more of its three regional electricity distribution networks, its gas distribution network, its broadband telecommunications network could be sold separately.

Both processes would run concurrently and would take around three months.

"The ultimate decision of whether to divest, and on what basis, will be made based on what UnitedNetworks considers to be the best value outcome for all UnitedNetworks shareholders," Warnock said.

"We want to maximise the value to shareholders - that's to all shareholders.

"We are saying the only way to ensure we're maximising value for shareholders is to say - you can buy it all, or a number of parties can buy a piece."

If a new buyer wanted the 70 per cent Aquila stake, an offer to take over the whole company would have to be made to all shareholders.

If the board agreed that splitting up and selling off the assets separately would provide better value for all shareholders, then the company would be wound up and the cash dispersed.

One sharemarket analyst said the assets of UnitedNetworks, particularly its Auckland-based electricity lines network, would be highly sought after.

Vector, Powerco and any of the other lines companies would be interested in buying those parts of the UnitedNetworks system that lay next to their own networks.

Natural Gas Corporation would be a likely bidder for the company's gas network.

Big infrastructure funds based in Australia and Asia would also be in the market for all of UnitedNetworks.

A big fund could spin off some parts of the network, but "the jewel" was the Auckland electricity lines business, covering the North Shore and Waitakere City.

There was no reason why Vector could not launch a full takeover for the company, but political considerations centred on Vector's owner, the publicly elected Auckland Energy Consumer Trust, could become important.

The trust went to the High Court at Auckland this week, seeking to clarify whether customers of any lines company that Vector took over would become new beneficiaries of the trust.

Justice Rhys Harrison, while yet to deliver his reserved decision, told the trust that its existing beneficiaries - who live in Auckland City, Manukau City and parts of Papakura - would remain the only people entitled to share in Vector's dividend payouts.

Vector may have already been talking to other interested parties, such as NGC or Taranaki based lines company Powerco, with the aim of eventually selling them the parts of UnitedNetworks it may no longer want.

One analyst said the effect on the stock exchange would not be good.

The sale would mean the departure of a good, although thinly traded, blue chip company.

Key dates in the impending sale:

Parties will be asked to notify expressions of interest by June 28.

A comprehensive information memorandum will be provided to selected parties in early July with non-binding indicative bids required by mid-July.

Short-listed parties will get an opportunity to conduct due diligence with final, binding bids, submitted in late August.

Decisions on the bids will be made in late August.