Trust threatens to unplug Vector float

Energy giant Vector's share float - the biggest planned for New Zealand in 2005 - may be killed by the company's owner, the Auckland Energy Consumers Trust.

Vector's management and board are committed to a float of 24.9 per cent of the company after spending $880 million last year on a 66 per cent stake in gas transmission and distribution company NGC.

However, the trust is poised to appoint an investment bank to assess alternative fundraising deals, including a proposal from an Australian company that invests in energy assets, DUET (Diversified Utility and Energy Trusts).

Tensions are high between the trust and the growth-hungry company that it owns. The trust itself - famously dysfunctional - also appears to be split into two factions.

New Zealand's largest consumer trust represents the 290,000 consumers in Auckland City, Manukau City and parts of Papakura who share Vector's profits via credits on their power bills.

Vector is a big business. It delivers electricity and gas in the Auckland and Wellington regions and has assets of $4.76 billion and debt of $3.1 billion.

Vector's board includes chairman Michael Stiassny (Ferrier Hodgson), Tony Gibbs (Guinness Peat Group), Greg Muir (Pumpkin Patch) and John Goulter (former managing director of Auckland Airport).

A source said some trustees were "trying to backtrack" on an initial public offering of shares expected in the third quarter of this year.

"The trust are fighting among themselves about whether there should be an IPO or a private equity deal."

A financial markets source said a deal with DUET would involve a split of Vector assets - with the trust retaining the Auckland assets - and a joint management company. DUET is managed by Macquarie Bank and AMP Capital.

DUET is believed to have shown an interest last year in Australian Gas Light's 66 per cent stake in New Zealand gas company NGC - the stake later bought by Vector.

It is understood DUET is not the only party interested in a deal.

One of the trustees, John Collinge, said the trust was divided between trustees backing a float "at any cost" and those with open minds.

Sharemarket investors had thought the float a certainty.

The notion of alternatives contrasts with trust chairman Warren Kyd's statement on November 3, when he "confirmed the public offering will take place in the next 12 months".

But Kyd now says: "The original transaction" - he would not spell out what that meant - "did require us to look at alternatives."

Vector sold $354 million of PIPES - pre-IPO equity securities - and raised $526 million of senior debt to buy the stake in NGC.

Vector's financial adviser, investment bank ABN Amro, holds the PIPES, which convert into ordinary shares if the money is not repaid by December 13. That would mean ABN Amro would own a chunk of Vector.

Vector's six-month report said the money must be repaid "from the proceeds of an IPO".

The five people on the consumer trust are: Kyd, deputy chairman Shale Chambers, Michael Buczkowski, Collinge and Karen Sherry. Four of the five were elected on the Auckland Citizens & Ratepayers Now ticket, which supported partial privatisation under certain conditions.

However, the four fell out, with Collinge and Buczkowski opposing a float and Kyd and Sherry supporting one.

The fifth trustee, Chambers, was elected on a no-privatisation platform.

Last year, Kyd went to the High Court to have Collinge barred from a trust vote that could have blocked Vector's plans to buy the NGC stake and then float on the sharemarket.

A judge ruled Collinge had a conflict of interest because of his family's ownership of $200,000 of Vector bonds. (Collinge still has the interest in the bonds.)

Kyd used his casting vote to give the plans the green light.