Commission blows cover on lines bid

By CHRIS DANIELS

New Zealand's second-largest power lines company, Vector, is launching a full takeover attempt on the biggest - its neighbour, UnitedNetworks.

Missouri company Aquila, which owns 70 per cent of UnitedNetworks, has decided to sell its Australasian investments.

Although many expected a Vector bid, it has until now refused all comment on the matter.

But its cover was blown by the need to apply for clearance from the Commerce Commission, which said yesterday that it had received such a request from Vector.

Should the publicly owned Vector be successful in its bid, it would become by far the largest lines company in New Zealand, increasing its electricity lines assets from more than $854 million to just under $1.9 billion.

It would take on an extra 506,000 customers, up from its existing base of 275,000 connections to its network.

However, Vector may not want to keep all those new customers.

Servicing rural areas is more expensive for a lines company, but UnitedNetworks runs both its country and urban networks from a central control room in Takapuna.

Vector could keep the lines business covering Auckland's North Shore, Waitakere, Rodney and Wellington, while selling the more rural-based parts, stretching from the top of the Coromandel, through the Hauraki Plains, South Waikato and Bay of Plenty.

It would also become the owner of gas networks in Auckland, Hawkes Bay, Wellington, Horowhenua and the Manawatu.

A fledgling telecommunications business, based around two fibre-optic loops in downtown Auckland and Wellington, is also for sale.

Responding to the commission's announcement, Vector yesterday played down the application for clearance, saying its actions were nothing more than "a precautionary move".

"If we decide we want to act, we need to ultimately have approval from the Commerce Commission," said a statement quoting chief executive Patrick Strange, who is overseas.

"So the application is a necessary preliminary step in the event that we may decide to make a bid for any of the UnitedNetworks assets."

This "preliminary step" comes despite the fact that the deadline for making indicative bids for UnitedNetworks was last Friday, and the company's board settled on a shortlist of bidders over the weekend.

It also appears the decision to act has already been made, despite Strange's press release.

In his application to the commission, he writes: "Vector is an interested party, and intends to enter into negotiations with UNL [United], with the view to acquiring 100 per cent of UNL, whether that be by way of a share or asset transaction."

UnitedNetworks has cited confidentiality agreements as the reason it cannot name any of the bidders. It said they comprised both local and international companies.

The potential buyers are about to start formal due diligence, before having to make final, binding bids late next month.

The sale is expected to be largely complete by the start of September.

Vector's designs on UnitedNetworks were made clear even before Aquila announced last month that it would leave New Zealand.

The Auckland Energy Consumer Trust, which owns Vector on behalf of power customers in Auckland City, Manukau City and most of Papakura, went to the High Court for a ruling on who would share in the spoils if it took over another lines company.

The court confirmed its interpretation that existing customers would remain the beneficiaries of profits.