Local Govt | National News Video | Parliament Headlines | Politics Headlines | Search


Window of opportunity opens on Powerco shares

Window of opportunity opens on Powerco shares

The New Plymouth District Council is seeking indicative bids on its shareholding in energy distribution company Powerco, following news of merger discussions between Powerco and NGC.

The merger talks have created a window of opportunity for the council to maximise its Powerco investment by selling its shares now. The council would then re-invest the proceeds in a number of alternative investments, spreading risk while at least maintaining current income levels.

The council’s 38.12% Powerco shareholding, alongside the 11.79% holding of Taranaki Electricity Trust, which is also inviting bids, will put potential buyers in a position to control Powerco. In recent examples of such takeover positions, buyers have paid an average premium of around 25% on the market share price prior to the takeover announcement. The council’s expectation is greater than this due to the size and strategic nature of the Powerco business.

Recent examples suggest that if the council sold its shares after a merger took place, it could have to accept a discount of around 10% on market value.

Mayor Peter Tennent says the proposed merger is likely to be a success based on Powerco’s active history of growth through such deals. However, in order to achieve a position of influence in the new entity, the council would need to borrow heavily to purchase the additional shares necessary – and this is not regarded as a financially prudent option.

Mayor Tennent says: “Our investment in Powerco has been an unmitigated success and I have no doubt the company will continue to go from strength to strength. It is a fantastic company and if we lived in an ideal world we would stick with them and borrow to achieve a position of influence in the new entity.

“But borrowing that amount of money is just not an option. The landscape is changing and things are getting a bit too hot for us.

“So it’s time to move on, and the window of opportunity is open now. If we sell before the merger we stand to gain a good premium on top of the value of our holding. Selling after a merger could greatly reduce the chances of securing such a premium. In fact, we could well have to sell at a discount.

“If we simply retained our existing shareholding in the new entity, our current 38% would be drastically reduced, significantly limiting our influence over the dividend income that is so important to us in keeping a lid on rates.

“We have taken a great deal of expert advice on this subject and we believe our best option is to sell at a premium before the merger and re-invest in a range of investments.

“This will allow us to diversify our investments, taking our eggs out of a single basket and spreading them around. The net result is that we’ll have a larger, more diverse and less risky investment that yields at least the same income as at present.

“Rest assured that we wouldn’t contemplate going down this road if we envisaged it leading to an increase in rates due to a lower level of investment income.”

The council has instructed Pricewaterhouse Coopers to manage the sale process on its behalf and expects to consider indicative bids in early June. More information is available on the NPDC website at www.newplymouthnz.com.

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines


Also, Loan Interest: Productivity Commission On Tertiary Education

Key recommendations include better quality control; making it easier for students to transfer between courses; abolishing University Entrance; enabling tertiary institutions to own and control their assets; making it easier for new providers to enter the system; and facilitating more and faster innovation by tertiary education providers... More>>


Higher Payments: Wellington Regional Council Becomes A Living Wage Employer

Councillor Sue Kedgley said she was delighted that the Wellington Regional Council unanimously adopted her motion to become a Living Wage employer, making it the first regional council in New Zealand to do so. More>>


Scoop Images:
Dame Patsy Reddy Sworn In As Governor-General

This morning Dame Patsy Reddy was sworn in as the New Zealand Realm’s 21st Governor-General. The ceremony began with a pōwhiri to welcome Dame Patsy and her husband Sir David Gascoigne to Parliament. More>>


Ruataniwha: DOC, Hawke's Bay Council Developer Take Supreme Court Appeal

The Department of Conservation and Hawke's Bay Regional Investment Company (HBRIC) are appealing to the Supreme Court over a conservation land swap which the Court of Appeal halted. More>>


With NZ's Marama Davidson: Women’s Flotilla Leaves Sicily – Heading For Gaza

Women representing 13 countries spanning five continents began their journey yesterday on Zaytouna-Oliva to the shores of Gaza, which has been under blockade since 2007. On board are a Nobel Peace Laureate, three parliamentarians, a decorated US diplomat, journalists, an Olympic athlete, and a physician. A list of the women with their background can be found here. More>>

Gordon Campbell: On The Key Style Of Crisis Management

At Monday’s post Cabinet press conference Key was in his finest wide- eyed “Problem? What problem?” mode. No, there wasn’t really a problem that top MPI officials had been at odds with each other over the meaning of the fisheries policy and how that policy should be pursued... More>>


Mt Roskill: Greens Will Not Stand In Likely Post-Goff By-Election

“The Green Party’s priority is changing the Government in 2017, and as part of that we’ve decided that we won’t stand a candidate in the probable Mt Roskill by-election... This decision shows the Memorandum of Understanding between Labour and the Green Party is working." More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news