Vector owner seeks bid ruling, UnitedNetworks on the block

By CHRIS DANIELS and TONY STICKLEY

As the lion's share of UnitedNetworks goes on the block, owners of its nearest rival have gone to court seeking clarification of what would happen if it bought such a company.

The publicly elected owner of Vector, the Auckland Energy Consumer Trust, went to the High Court this week wanting part of its trust deed interpreted.

Specifically, it wanted to know who would share in the spoils if it took over another lines company.

The owner of 70 per cent of UnitedNetworks, the United States energy giant Aquila, last month announced a 40 per cent fall in first-quarter earnings and said it was considering selling assets worth US$500 million ($1 billion).

Based on current market capitalisation, its 70 per cent stake in UnitedNetworks, based next door to Vector on the North Shore, is worth $812 million.

Australian financial media have reported that investment banker Salomon Smith Barney was appointed by Aquila to advise on the sale of its New Zealand and Australian assets.

At issue in the High Court was whether electricity consumers living in a new takeover area could become trust beneficiaries.

At present all power consumers in the Vector area - Auckland City, Manukau City and parts of Papakura - are paid an annual dividend.

The trust argued that the new customers were not entitled to become beneficiaries if their lines company was taken over.

Justice Rhys Harrison, while reserving his decision, told the trust that he agreed with this interpretation.

If Vector took over UnitedNetworks, it would mean the merging of the two biggest lines company in the country - with assets worth $1.89 billion and 750,000 connections.

UnitedNetworks customers would get no dividend payout, this money going only to Vector customers.

If Vector bought the company, it could keep the lines business on the North Shore and in the Waitakere region, while selling those parts that were not connected with its core Auckland network.

This would include the lines networks in the Coromandel/Thames area, and in Wellington and the Hutt Valley.

Selling these parts of the business would also enable Vector to keep its business fairly well concentrated in urban areas, which have many more connections per kilometre of line.

Trust chairwoman Karen Sherry played down the court action, saying it was merely "housekeeping", as Vector had been asking it since 1999 to "tidy up certain aspects" of the trust deed.

"It's just the next issue on our list of things to do", she said.

Sherry laughed when asked if it was merely a coincidence that this issue was being dealt with while 70 per cent of UnitedNetworks was being touted for sale.

"Obviously that's a company matter and you know that the company has a policy not to respond to media speculation and so does the trust," she said.

"The reason why we've done this clarification is because it was on our list of things to do since 1999."