Powerco restates annual profit down by half to $27.6m

Lines company Powerco said today it had had to restate its reported March year profit down from $55.1 million to $27.6 million.

The revision has been precipitated by likely changes of ownership and the resulting loss of accumulated tax losses.

"The potential change in shareholder continuity no longer makes the asset valuation of future income taxation benefits 'virtually certain' as required by accounting standards," the company told the stock exchange.

"The write-down of this asset by $27.6 million in the balance sheet impacts the reported profit of $55.1 million announced in April 2004, down to a revised profit of $27.6 million."

The company's three major shareholders, the New Plymouth District Council, the Taranaki Electricity Trust, and the Powerco Wanganui Trust, are considering selling their Powerco shares and this has triggered the revision.

Under tax law, a significant change in shareholder continuity can result in the company losing the benefit of its accumulated tax losses.

Powerco annual reports since 2000 have recorded the benefit of these available losses under generally accepted accounting standards.

Chairman Barry Upson said the potential sale meant the company was compelled to change the ownership continuity assumption, and this in turn had led to the restatement of the results.

He said the Powerco result announcement was made in April, before the major shareholders had informed the market of their intention to seek indicative bids for their shareholding.

"The result we announced in April complied with accounting standards at the time, but because shareholder continuity can no longer be assumed, we must now revise our financial statements since these are about to be released to all shareholders," Mr Upson said.

He said the restatement meant there would be no immediate impact on cashflow or operations.

Powerco had received an unqualified opinion from its auditor for the revision.

"If Powerco does lose the future income tax benefit asset, this will result in the company becoming a cash taxpayer earlier than expected," Mr Upson said.

"This will have no financial impact for taxpaying shareholders, as once Powerco eventually becomes tax-paying, they will receive imputation credits, which can be attached to dividends."

There would be no impact on the dividend paid to shareholders today, Mr Upson said.

Powerco shares fell 1 cent to $2.06 today.

Overseas companies are reported to dominate the list of more than 20 potential buyers for the stakes up for grabs -- 53.65 per cent of the company.

The deadline for indicative bids for the stake, valued at around $351 million at current market prices, was yesterday pushed out for the second time, to June 23 from June 18.

PricewaterhouseCoopers partner Craig Rice said there had been over 20 expressions of interest from New Zealand, Australia, Asia and North America,

"Most of the parties are offshore, not local," he told Reuters.

He declined to name any potential buyers.

Up to five parties will be shortlisted around 10 days after the indicative bids close, with final, binding bids due early-to-mid August, Mr Rice said.

The sale of the stake would trigger a takeover bid for Powerco, which has assets of $1.8 billion, as New Zealand takeover rules require the buyer of more than 20 per cent of a listed company to make an offer to all shareholders, he said.

Powerco has 295,000 electricity and 106,000 gas customer connections in the North Island, making it the country's second-largest networks company behind unlisted Vector.

Among the companies tipped as potential bidders are the Australian Gas Light Co, the Australian Pipeline Trust, and ANZ Infrastructure Services, the private equity arm of the Australia and New Zealand Banking Group.

Auckland lines company Vector has ruled itself out as a bidder.

Powerco expanded its business in November 2002 with the $804 million purchase of electricity and gas network assets from UnitedNetworks.

Excluding the three largest shareholders, the remaining 46.36 per cent of the New Plymouth-based firm is owned by around 19,000 shareholders.

- NZPA