Power giant share price jumps after sale news

By NZPA

Thursday 13th June 2002

Shares in New Zealand's biggest electricity and gas company UnitedNetworks jumped 42c, or 5.3 percent, this morning as speculation grew over who might snap up the company or its assets.

UnitedNetworks announced yesterday that it was thinking of selling, after its American parent Aquila indicated it wanted to cash up its stake.

Aquila, a 70 percent stakeholder, is under pressure to reduce its debt. Its stake would be worth $824 million on market, and is held by its subsidiary Utilicorp NZ.

UnitedNetworks, the country's 11th-largest listed company by market capitalisation with assets worth $2.3 billion, will be sold in full to a new owner, or divided into pieces and sold in parts to the highest bidders.

Auckland power company Vector was quickly tipped as a potential buyer, at least of some of United's key Auckland lines networks. But Vector chief executive Patrick Strange said it was not company policy to respond to speculation.

Powerco and Natural Gas Corporation both said they would consider any assets that were for sale.

One analyst said any of the lines companies would be interested in buying those parts of the UnitedNetworks system that lay next to their own networks.

Natural Gas Corporation would be a likely bidder for the company's gas network, and big infrastructure funds based in Australia and Asia would also be in the market for the entire company, he said.

Another analyst said the sale would have a negative impact on the Stock Exchange. It would mean the departure of a good, although thinly traded, blue chip company.

Macquarie Equities analyst Arthur Lim said the New Zealand market would be "hungry" for shares in a big utility company with stable dividends. Brierley Investments, now called BIL International, had sold out of Sky City this way, as had Waste Management's US parent.

Vector could afford to buy the whole business, he said. At $8 a share the market capitalisation of UnitedNetworks was $1.22 billion and servicing the debt on that would cost about $100 million a year.

Powerco chief executive Steve Boulton said Powerco would be interested in some of the assets, probably the electricity and gas assets in the southern part of the North Island, including the Wellington electricity lines assets.

"We will be having a good close look at the information memorandum coming out soon," Mr Boulton said.

Powerco did not have the capability to take over UnitedNetworks, he said.

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