By CHRIS DANIELS energy writer
NGC is giving back $475 million to its shareholders, with the cancellation of one in three shares.
The capital return, long anticipated by the market, comes from the proceeds earned by selling its TCC gas-fired power station to Contact Energy and the Cobb hydro station near Nelson
to Trustpower.
Shareholders will be paid $1.84 for each cancelled share, with the number of NGC shares on issue falling from 774.9 million to 516.6 million.
NGC shares closed yesterday at $1.68 each, up 7c, before the capital return announcement was made.
Chairman Greg Martin said two criteria were used when deciding on the share cancellation rather than other methods of returning capital to the shareholders, such as a buyback or special dividend.
These were the tax effectiveness of the deal and ensuring that it was fair to all shareholders. This pro-rata cancellation was the fairest method of returning capital, despite the length of time it was likely to take.
NGC was asking for a binding ruling from IRD on the tax status, and the deal did require High Court approval.
Of the 4000 shareholders, those with small holdings were likely to receive the money tax free, while the tax status of the institutional shareholders would vary.
Given the need for court and IRD approval, the payment was not likely until the end of the year.
NGC, which once had ambitions of becoming New Zealand's pre-eminent integrated energy company through its On Energy retail brand, is now concentrating on the less glamorous, but less risky, business of natural gas transmission and power metering.
NGC is 66 per cent owned by Australian energy company Australian Gas Light.
Martin said the NGC board was looking at several funding alternatives, including the issue of fixed-interest securities around the time of the proposed capital return.
Martin said the company was considering its medium to long-term programme and had identified opportunities for expansion, but no large investments were planned.
"At the moment we don't see anything of a sufficient size that will warrant us simply leaving those funds in the business," he said. "However, given the nature of ongoing evolution in the energy sector in this country, who knows when the next opportunity will arise?"
