Power play goes public

By CHRIS DANIELS energy writer

A partial privatisation and Stock Exchange listing of monopoly lines company Vector will soon be announced by the publicly elected trust that controls it.

The Auckland Energy Consumer Trust, which manages Vector on behalf of local power users, plans an initial public offering of 25 per cent of the company once it completes its $1.5 billion takeover of UnitedNetworks.

It will also raise up to $350 million by way of a capital bonds issue and borrow money from a consortium of banks.

Vector is in the process of making a full takeover offer for neighbouring network company UnitedNetworks, for $9.90 a share.

While details of the new listed entity have yet to be finalised, it is understood that no more than 25 per cent would be available to the public. The new entity would be one of New Zealand's largest companies, but its tightly held shares would make it similar to UnitedNetworks, of which 70 per cent was owned by US company Aquila.

Three of the five-member consumer trust were elected in late 2000 on a strong anti-privatisation platform, saying 100 per cent of Vector would remain in public hands.

Trust members, including chairwoman Karen Sherry, who headed the "Powerlynk" ticket for the 2000 election, are expected to defend their latest decision by saying it is not selling shares in Vector, but in a new, much larger corporate entity, which includes UnitedNetworks' North Shore electricity and gas lines network.

They will also say that dividends from the new company will be much higher for beneficiaries, despite the introduction of private equity.

Vector chief executive Patrick Strange said last week that the company would be able to pay for its new assets entirely from bank debt.

A report from the Dow Jones news agency said the capital bonds issue would raise up to $350 million and carry an interest rate of 7.5-8 per cent, while also giving holders first rights at next year's share float.

When announcing the Vector deal to buy UnitedNetworks last week, Karen Sherry said the five trust members had no plans for a partial float of Vector. They planned to keep the company in public hands and allow Vector's strong financial position - the company is virtually debt-free - to fund the purchase of UnitedNetworks.

Sherry, Coralie van Camp and Pauline Winter were elected to the consumer trust on a strong anti-privatisation platform. Sherry was asked yesterday to comment on the report of the share float.

"I'm not going to speculate, but what I can say is that the transaction has been structured to prudently position Vector's balance sheet, basically to allow the company to grow in the future, and at all times the trust will remain in total control. The trust is not a seller of assets," she said.

In October 2000, while running for election to the trust, Sherry was asked if she favoured any change to Vector's ownership structure.

"No, we do not favour any change from 100 per cent community ownership," she said. "Privatisation will put profits above fairness and service."

Fellow trust member and Vector director John Collinge said yesterday that a float, so long as board control remained with the trust, was not a partial privatisation. Privatisation meant the passing of control from a public to a private body. This would not happen if, for instance, 24.9 per cent was floated.

A partial share float will mean that a quarter of Vector dividends will be paid to private investors, instead of the trust beneficiaries.

These beneficiaries are the power consumers of Auckland City, Manukau City and Papakura, who elect the trust every three years.