Powerco set to double its size
POWERCO SET TO DOUBLE SIZE
Powerco Chairman Barry Upson was pleased to announce today that Powerco Limited has signed an agreement to acquire certain Thames Valley and Bay of Plenty electricity assets and lower North Island gas assets of United Networks Limited (UNL). This agreement is part of the successful consortium bid by Vector Limited, which includes Powerco and Hawkes Bay Network Limited. The agreement is subject to both UnitedNetworks and Powerco shareholder approval. Powerco’s three largest shareholders have indicated their support for the transaction. Vector’s successful bid for Aquila’s 70 per cent shareholding in UNL is subject to approval by Aquila’s bankers.
“The acquisition will cost Powerco $810m, plus transaction and integration costs, to be funded by a combination of debt and equity said Mr Upson. “The amount of equity to be raised will be no more than $150m with Macquarie, the transaction advisor to Powerco, providing the equity underwrite. Westpac, ANZ and BNZ banks have underwritten the debt requirement.
“With this acquisition, Powerco has reviewed its capital management strategy, and in doing so, has elected to target a strong BBB+ credit rating in the short to medium term. The Directors believe that this provides an appropriate balance between minimising the cost of capital, whilst exposing our shareholders to a prudent risk adjusted return. This philosophy also positions the company favourably for further growth.
Mr Upson said that this move is another major expansion milestone for Powerco providing long-term benefits to both shareholders and consumers.
Under the consortium arrangements Powerco will purchase the UNL electricity distribution networks spread throughout the Coromandel, Thames, Eastern Waikato and Tauranga regions, and gas networks in Hawkes Bay, Manawatu and Wellington. This acquisition will double the size of the Powerco network resulting in Powerco becoming New Zealand’s largest gas distribution company and second largest electricity distribution company in terms of consumers connections with 391,000 connection. Powerco will also become New Zealand’s longest electricity and gas networks owner.
“This acquisition will expand Powerco’s core business in both electricity and gas distribution. Powerco has many years of proven expertise and success in these core business activities Powerco Chief Executive, Steven Boulton said. “This acquisition increases scale, geographic diversification and provides an improved mix of provincial and urban networks to our business”
Mr Boulton said Powerco also had substantial experience in quickly integrating and improving performance in network investments in this sector having managed a number of recent mergers and acquisitions. Powerco has been accountable for achieving ten mergers or asset acquisitions in the energy industry in the past ten years.
Powerco is one of New Zealand’s largest electricity and gas distribution companies, currently with around 205,000 consumers connected to networks in Taranaki, Wanganui, Rangitikei, Manawatu, Wairarapa and Wellington, and has around 17,000 shareholders. Powerco’s current asset base is around $867 million.