Monday 9th November 2015 |
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Vector, the Auckland based electricity and gas network operator, is to quit its gas transmission and distribution assets outside Auckland in a $952.2 million sale to Australian investor First State Funds, an infrastructure investor with $7 billion of assets across Australia, New Zealand, and Europe.
The sale will result in a gain for Vector of about $167 million and follows a strategic review of the company, which is increasingly focusing on growing its interests in areas that are not subject to price regulation, such as telecommunications infrastructure.
The sale of Vector Gas, the holding company for regional gas distribution assets and transmission assets, will also see the company quit its contract to operate and maintain the Maui gas pipeline, which failed in October 2011 and took almost six days to repair, with subsequent government ordered inquiries identifying increasing risks of failure and heightened repair requirements as the ageing pipeline, already 31 years old, prepares for another 30 years of operation.
"Vector believes this is a great outcome, further strengthening our balance sheet to fund organic growth in Auckland and pursue attractive unregulated growth," chief executive Simon Mackenzie said in a statement. "The proceeds will initially be used to repay debt."
Vector was also signing 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 cooperate 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.
The sale is conditional on approvals from the Overseas Investment Office and ministers, and from Vector shareholders, with a special meeting expected to be held next month and settlement anticipated by March 31 next year.
Vector's regional gas transmission business covers more than 2,200 kilometres of high pressure gas transmission pipelines, 233 stations and associated non-network assets that supply natural gas to industrial consumers, and distribution networks in most cities and large towns across the North Island of New Zealand.
The non-Auckland gas distribution business comprises networks in six regions in the North Island, consisting of more than 3,400 kilometres of main pipes and an additional 1,400 kilometres of service pipes. It provides gas distribution services to gas retailers who sell gas to more than 60,000 customers.
First State Investments' other New Zealand assets include bulk liquid storage facilities.
BusinessDesk.co.nz
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