UnitedNetworks' rating on review, downgrade possible - Moody's

By NZPA

Wednesday 11th September 2002

International rating agency Moody's has affirmed UnitedNetworks' credit rating, following details of its sale announced yesterday, but the company's underlying rating is at risk of a downgrade.

Moody's corporate finance manager Brian Cahill said in a statement today that UnitedNetworks' (UNL) guaranteed debt remained at Aaa, but the company's underlying Baa1 rating was now under review.

Auckland's community-owned Vector, led a $1.5 billion carve up yesterday of UNL, the country's biggest energy distributor.

"The review for possible downgrade of the underlying Baa1 rating will focus on the ability of Vector to acquire all the shares of UNL, certainty of the proposed assets sales programme, integration risk, financial strategy and management quality of the combined company, and the quality of the existing Vector assets," Mr Cahill said.

The Baa1 rating would be confirmed once those issues were resolved, as long as UNL's combined businesses were better than its current stand-alone operation.

"However the success of the proposed acquisition and the risks of integration are considerable," he said.

The review affects $A464 million ($NZ547.7 million) in term notes and $NZ200 million in term notes.

New Plymouth-based Powerco and Hawke's Bay Networks will buy UNL's rural assets, the Eastern Region electricity network, for $785 million. Powerco will also buy UNL's gas networks in Hawke's Bay, Manawatu and Wellington for $220 million.

Vector, formerly Mercury Energy and now owned by the Auckland Energy Consumer Trust, will make a full takeover for UNL at $9.90 per share, valuing the company at $1.5 billion.

Vector's bid has the support of 70.2 percent shareholder, Aquila Inc.

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