Half of Powerco goes on sale

By CHRIS DANIELS energy writer

Half of Powerco, New Zealand's second biggest power lines company and largest gas distributor, is being put up for sale by two Taranaki local bodies.

New Plymouth District Council, owner of 38.12 per cent of Powerco, and Taranaki Electricity Trust, owner of 11.79 per cent, made the shock announcement late yesterday.

At current prices the stake is worth $326.5 million and would give any new owner effective control of the company.

Only another few shares would be needed to take them over the 50 per cent ownership level.

But any potential bidder will have to make an offer to all shareholders, unless given a dispensation at a special shareholders meeting.

The sale has been prompted by Powerco's merger talks with NGC.

NGC has also been talking to Auckland power lines company Vector, which has refused to comment on the discussions.

Vector, the largest lines company in New Zealand, is a potential buyer for the Powerco stake.

The sale decision comes as a surprise, as the NGC-Powerco merger talks were at an early stage, with no guarantee of success or sense of what any merged entity would look like.

The sale announcement could be an attempt by the councils to flush out potential buyers for their stake.

They would be hoping for a top price, yet politically comfortable with retaining the shares should no such offer arrive.

Powerco chairman Barry Upson, who last night had not read the council's sale decision, said the company would probably be talking to NGC in the next couple of days.

NGC refused to comment.

New Plymouth Mayor Peter Tennent, who on Tuesday was singing the praises of the Powerco investment, said a "window of opportunity" had now opened for the council to get a premium price for its shareholding.

PricewaterhouseCoopers has been given the job of selling the shares. It is asking for indicative bids by early June.

"The very clear advice we have is that there is a window now, in similar cases a premium of about 25 per cent has been paid," said Tennent.

If the council waited too long and tried to sell after a merger, it would have to accept a discount of up to 10 per cent, he said.

The council had decided unanimously that it would not borrow millions of dollars to retain its influence in any new entity, said Tennent.

It would invest sales proceeds in other investments.

Tennent said the proposed NGC-Powerco merger was "likely to be a success based on Powerco's active history of growth through such deals".

But to gain a position of influence in the new entity, the council would have to borrow heavily to buy extra shares.

This was not regarded as a "financially prudent option".

If the council kept its existing Powerco shareholding, its 38 per cent would be heavily diluted, limiting its influence over the lucrative dividend it provides.

Yesterday's announcement was made after the NZX closed.

Powerco shares finished the day up 4c, at $2.07.