Richard Inder: Key absentees point to disunity

The absence of three men at the ceremony to float Vector amply illustrated the risk the energy supply company faces over and above many of its rivals - an unpredictable majority owner.

The absentees were John Collinge, Mike Buczkowski and Shale Chambers, trustees of the Auckland Energy Consumer Trust, until yesterday 100 per cent owner of Vector. They were also staunch opponents of the float.

It seems more than a coincidence that only trust chairman Warren Kyd and trustee Karen Sherry came to take part in the spectacle - television cameras, champagne and a strong debut for the shares they fought hard to see listed.

Remember, Sherry and Kyd only held sway because a court excluded Collinge from voting on the motion to float. The court ruled he may have stood to gain from the move, splitting the trust in two and allowing Kyd to use his casting vote in favour of a listing.

Yesterday's ceremony was in many ways a trivial event. After the trust decided, the path towards flotation was just process.

Still, it marked the end of a long and often bitter march towards privatisation. It also gave a sense of occasion to the moment when the governance of one of New Zealand's largest companies changed dramatically. For these reasons, it would have been form for Collinge, Buczkowski and Chambers to attend.

A show of unity would have been good for Vector. Any business that does not have the confidence of its owners will suffer on the markets.

The trio's absence will only reinforce suspicions that the trust, now Vector's 75 per cent owner, still does not speak with one voice.

One can argue that dissent on the trust does not matter so much since the listing results in a transfer of power to the board.

But trustees' power to appoint directors means it could still hold sway on major questions of Vector's strategy.

Two questions loom large.

The most important is that of future capital raising. Its preferred balance sheet ratios give it under $500 million to invest in new initiatives. This sounds like a large sum of money, but it is not.

Vector, for instance, is in the final stages of buying gas pipelines group NGC for $1.36 billion. If it were to make a similar move say in Australia, it would have to issue more shares.

It is by no means clear that the trust, as it is constituted, would agree to further dilution of its powers. (It is highly unlikely the trust would raise debt to avoid dilution.)

The dividend could, in the long term, also cause friction. Vector has forecast payouts for next year of $114 million, representing 84 per cent of cashflow. But the Vector board, in need of cash, could decide to revert to the policy set out in the prospectus of paying at least 60 per cent.

The trust may find it hard to argue against such a reduction, but the ensuing fight could prove a distraction.

Despite these concerns, the Vector float is to be welcomed. It is a high-quality company led by a high-quality board.

Many of the company's new 49,000 minority shareholders are first-time equity owners. Their decision to buy into the float can only help engender the equity ownership culture, which boosts capital markets in the US.

Vector's arrival is also a substantial bulwark in the disturbing trend for major companies to leave the New Zealand market .

NZX boss Mark Weldon can only hope that more such listings are in the wind.

* For the record, Chambers was at board meeting for another company in Wellington, Buczkowski was just "too busy" and Collinge did not respond to the Herald's call.