Vector sells gas business for $952m

Ownership of a part stake in powerlines company Vector means a $345 dividend payout to many Auckland homes.

Vector, New Zealand's largest distributor of electricity and gas, said it had agreed to sell its gas business to utilities investor First State Funds for $952.5 million, resulting in a $167 million gain.

The sale was the result of its strategic review.

Vector's gas assets comprise gas transmission pipelines, and gas distribution networks outside of Auckland. Vector Gas is also a leading provider of unregulated pipeline management services and is the technical and system operator for the Maui Pipeline.

"Vector believes this is a great outcome, further strengthening our balance sheet to fund organic growth in Auckland and pursue attractive unregulated growth," it said in a statement.

The proceeds will initially be used to repay debt and would not be used to pay a special dividend, or for a share buyback, Vector said.

Vector said it had also entered a memorandum of understanding with First State Funds to consider opportunities to co-invest in regulated and unregulated energy infrastructure, both in New Zealand and offshore, and to co-operate operationally on gas distribution activities.

First State Funds comprises two infrastructure funds managed by First State Investments - known in Australia as Colonial First State Global Asset Management - a global infrastructure asset manager, with about $7 billion invested in infrastructure assets across Australia, New Zealand and Europe.
See a corporate profile of First State Funds here:

The sale is conditional only on approval under the Overseas Investment Act 2005, and by the shareholders of Vector, which will be sought at a special meeting expected to be held in December.

Goldman Sachs acted as the company's financial advisor throughout the strategic review process.

Vector's biggest shareholder is the Auckland Energy Consumer Trust, which has a 75.1 per cent stake. Its shares last traded on the NZX at $3.33.

See the latest Vector announcement here: