Powerco trumpets a $150m 'jumbo'

By CHRIS DANIELS energy writer

A new equity raising method known as a "jumbo placement" will be unveiled today by energy network company Powerco as it seeks to raise $150 million for new acquisitions.

Macquarie Bank is organising New Zealand's first "jumbo placement" - a combination of a rights issue and a share placement.

Properly described as a priority entitlement offer, the method gained the "jumbo" nickname in Australia because it allows listed companies to make very large placements of shares to institutional investors.

New Plymouth-based Powerco is raising the $150 million in new equity to help pay for its purchase of UnitedNetworks' gas and electricity networks businesses, which are being sold just before it is taken over by its neighbouring lines company Vector.

A jumbo placement means that all existing shareholders are offered, on a pro rata basis, the right to buy new shares. If all take up the offer, then there is no need for new investors.

If, however, some decide not to take up their right, then those shares are put into a pool and placed with newcomers.

The method is regarded as better for those companies with significant shareholders who may not want to take part in any rights issue.

To the retail investor the Powerco jumbo will look the same as a rights issue, with the issue of a prospectus and application forms.

The rights are non-renounceable, meaning if a shareholder decides not to take up their rights, they cannot be onsold to anyone else.

The takeover of UnitedNetworks by the trust-owned Vector means opportunities for private investors to put money into this monopoly-run segment of the energy networks business have been limited.

Powerco shares are tightly held, with the New Plymouth District Council owning 47.6 per cent, the Taranaki Electricity Trust owning 16.8 per cent and a little under 4 per cent owned by the Powerco Community Trust.

Along with Hawkes Bay Networks, Powerco is buying the electricity networks in Tauranga, the eastern and southern Waikato, Thames and Coromandel for $785 million, of which Powerco is contributing $590 million.

Powerco is also paying $220 million for the gas networks business in Wellington, Horowhenua, Manawatu and Hawkes Bay.

Once it has bought these assets, Powerco will have effectively doubled its asset base to $1.7 billion.

Its 282,0000 connections will make it the country's second largest electricity lines company, after Vector, and the largest gas distributor, with 107,000 connections.

On Friday the company announced a 6.5 per cent rise in half-year profit, after tax, to $18.75 million. Revenue rose from $77.8 million to $93.98 million.

Powerco chairman Barry Upson said yesterday that dividends were forecast to increase from the 13.1c a share declared for the 2002 financial year to 14c a share for the 2003 year and 16c a share in 2004.

* The three local councils that collectively own 10.7 per cent of UnitedNetworks are still to say whether they will accept Vector's $9.90 a share takeover offer.

Between them, the North Shore City Council, Waitakere City Council and Rodney District Council stand to get $160 million for their shares.

A stake of 10.7 per cent means the councils can block Vector reaching the 90 per cent ownership threshold necessary to compulsorily acquire all remaining shares.

The councils have until October 23 to take up the offer.