Investors still in the dark

By Mark Reynolds

Small shareholders in North Island electricity network owners PowerCo and CentralPower are still being kept in the dark about merger plans for their companies, even though major shareholders have a detailed report on the proposal.

The New Plymouth District Council has received a report from accounting firm PricewaterhouseCoopers on the value of the merger, council management support executive Steven Taylor confirmed yesterday.

But details of that report would not be released publicly because it contained commercially sensitive information, Mr Taylor said.

The district council took the merger report into account when it decided to reject a full takeover offer for PowerCo from GPU of the United States last week, Mr Taylor said. The council has a 50.4 per cent share of PowerCo through a holding company, Pukeariki Holdings.

The rejection of the GPU offer by the council effectively scuttled the takeover bid for small shareholders, because for the bid to be successful it would require the approval of 75 per cent of PowerCo's shareholders.

The two companies have a book value of about $420 million but GPU had offered to buy both of the companies for about 50 per cent more than that.

The council said it had rejected the bid for PowerCo because it "supports PowerCo's endeavours to amalgamate with Palmerston North-based Central Power, to create a major lines network business that will effectively extend from Mount Messenger to Cape Palliser."

"By growing the business we'll achieve economies of scale which will continue to benefit New Plymouth District residents," New Plymouth mayor Claire Stewart said in a statement last week.

"For these reasons, the council has no desire whatsoever to consider the unsolicited GPU bid."

The mayor and New Plymouth District Council general manager Kinsley Sampson are on a sister-city visit to Japan and were unavailable to comment further on the planned merger yesterday.

But Mr Taylor said the council had put "significant effort" into creating the alliance.

"There are certainly benefits to be had by continuing to have a stake in the energy market," he said, but he would not elaborate on the benefits of the merger for smaller shareholders of CentralPower and PowerCo.

Some sharebrokers have suggested the GPU offer valued the two companies at more than 1.5 times their current book values, and creating that sort of extra value from a merger would be difficult. Mr Taylor said there was an issue as to whether a merger would bring benefits comparable to accepting the GPU bid, but the council believed it would.

"I can't quote any figures to you .. that is commercially sensitive.

"What I can say is that the council reviewed its position based on independent advice."

Mr Taylor said even if the merger went ahead, GPU might make an offer for the combined organisation.

"What we are saying is that now is not the time to be considering this specific offer," he said.

"It's not as if we are saying we will never, ever sell."

Both PowerCo and CentralPower shares are traded on an unofficial trading system operated by sharebrokers. The GPU offer valued the companies at more than 30 per cent above their traded values.