Aussies grab more NZ energy

By CHRIS DANIELS

Australian investors swooped on New Zealand's energy industry for the second time in a month yesterday, grabbing 53.6 per cent of the listed Powerco in a $680 million takeover bid.

Powerco is New Zealand's second biggest power lines company.

The buyer is an Australian infrastructure investment fund, Prime Infrastructure.

A big shake-up of ownership in New Zealand energy now seems less likely, as Prime's buy will probably not trigger any other deals in an industry in flux.

The company says it is a long-term investor and will be leaving the Taranaki company to pretty much run itself.

A full takeover would remove Powerco from the stock exchange, but Prime says it wants to list on the NZSX, allowing locals to again invest in the company.

Prime is paying $2.15 a share - or $360 million - for the 53.6 per cent stake in Powerco owned by the New Plymouth District Council, the Taranaki Energy Trust and the Powerco Wanganui Trust.

The council's stake was put on the block in April after the Business Herald revealed that fellow gas pipelines company NGC was in merger talks with Powerco.

It later emerged that NGC was also talking mergers with Auckland lines company Vector.

Two weeks ago, Origin Energy - another Australian company - bought 51 per cent of Contact Energy from the American energy giant Edison Mission for $1.68 billion.

It is about to make a takeover offer for the rest of Contact, at the below market price of $5.67 a share.

Powerco shareholders are being offered a novel payment from Prime Infrastructure for their shares of cash and high-yielding debt securities.

The New Plymouth City Council wanted to diversify its investments, and so wanted a new investment such as the Prime bonds, which will pay 8.5 per cent interest.

Mayor Peter Tennent said the council had got a premium of more than 21.5 per cent for its holding, based on pre-announcement prices.

Powerco shareholders and bondholders will get offer documents within the next six weeks, describing the cash and securities offer.

"We believe that it is an offer that will be very attractive to all Powerco shareholders, as evidenced by the acceptance of the majority shareholders for their controlling stake," said Prime chief executive Chris Chapman.

"Consequently, we are expecting a strong take-up of the offer." .

Prime would not be increasing its $2.15 a share offer for at least the next 12 months, he said.

Craig Rice, who headed the sales process for PricewaterhouseCoopers, said it was a good result for the council and the two community trusts.

"There was a market view that we'd have difficulty getting above $2, and there was certainly more than one final bid received that was more than $2, so that was pleasing," he said.

The offer of debt securities, with cash, was the idea of the council and trusts, said Rice.

At a $2 share price, the dividend yield for Powerco was 8 per cent, so the Prime securities offering 8.5 per cent were very attractive.

Prime is offering the council and trusts 62.5 per cent of the price in cash and 37.5 per cent in the new securities, which can be traded on the stock exchange's debt market.

All other shareholders will now be offered the same deal, although some can elect to sell all their shares to Prime for cash, or take all the money in the new debt securities.

But there might be some scaling back, because the total amount of securities offered cannot exceed 37.5 per cent of the overall mix.

Who they are


Prime Infrastructure was listed on the Australian Stock Exchange (ASX) in June 2002. Its initial asset was ownership of the 99-year lease of one of the largest coal export terminals in the world, at Dalrymple Bay, Queensland.

This was bought by Babcock & Brown in 2001 for $A830 million ($911 million).

The Brisbane-based fund, part-owned by Babcock & Brown, says it is interested in buying "large, existing strategic infrastructure assets, with a recurrent and growing income stream from creditworthy customers".

Prime is particularly interested in infrastructure classes such as "bulk terminals, transport infrastructure, thermal and renewable power generation assets and transmission and pipeline assets".

Prime says it has out-performed the market by 30 per cent since listing. It has an enterprise value of about A$1.33 billion ($1.46 billion) and a market capitalisation of about A$55 million ($60 million).

It says it will soon list on the New Zealand Stock Exchange.


What they're offering


Prime Infrastructure is offering the New Plymouth District Council, the New Plymouth District Council, Taranaki Electricity Trust and Powerco Wanganui Trust $2.15 per share for their 53.6 per cent stake in Powerco.

It is paying them in cash and capital bonds, which pay interest of 8.5 per cent (62.5 per cent cash, 37.5 per cent bonds).

All Powerco shareholders will be offered a similar deal, but can select to be paid all in cash, all in the bonds, or a mixture of the two. If everyone asks for bonds, there will be some scaling, as only 37.5 per cent of Prime's total payout can be in bonds.

Prime says it will not be offering a higher price during the next 12 months.