Powerco Announces Special Meeting of Shareholders
Powerco Announces Special Meeting of Shareholders on UnitedNetworks Acquisitions and Debt Funding Arrangements
Dynamic electricity and gas distribution company, Powerco, has called a special meeting in which its shareholders will be asked to vote on the purchase of assets from UnitedNetworks Limited and the debt funding arrangements required for the $810 million purchase.
Powerco Chairman Barry Upson said an information pack comprising the Notice of Special Meeting of Shareholders, the Chairman’s letter, an information brochure and an admission card and proxy/voting form were posted to Powerco’s shareholders on 11 October 2002.
The resolutions shareholders will be asked to consider are based on:
The acquisition of UnitedNetworks “Eastern Electricity Business” jointly with Hawkes Bay Networks Limited. The electricity network assets to be acquired by Powerco in this transaction are located in the Tauranga, eEastern and southern Waikato, Thames and Coromandel regions and the purchase price payable by Powerco is $590 million, whilst Hawkes Bay Network Limited will acquire the network assets in the Rotorua and Taupo regions, and
The acquisition of UnitedNetworks “Central Gas Business” with gas network assets located in the Wellington, Horowhenua, Manawatu and Hawke’s Bay regions for $220 million, and
The debt funding arrangements required to support the acquisition of these assets.
Powerco has a sound history of successfully achieving and integrating asset acquisitions into its business Mr. Upson said. “We have achieved ten mergers or acquisitions over the past decade. These asset acquisitions are an extension of our core business in both electricity and gas distribution adding additional size and scale, and improved geographic and demographic diversification to our business”.
Powerco’s three largest shareholders (the New Plymouth District Council, the Taranaki Electricity Trust and the Powerco Community Trust) who together hold approximately 68% of Powerco’s shares, have indicated their support for the proposed transactions.
“Following the acquisitions, Powerco’s total asset base is expected to increase to $1.7 billion, an effective doubling of the company’s size.
“This will result in Powerco becoming the largest energy distribution company in New Zealand in terms of network length and the second largest in terms of consumer connections with around 390,000 total connections. Electricity connections will expand to 282,000 from 157,000. Gas connections will double to more than 107,000 also creating Powerco as New Zealand’s largest gas distribution utility”, Powerco Chief Executive Steven Boulton said.
Mr. Boulton added that Powerco continues to take a strong stakeholder approach to business operations, with consumers and shareholders benefiting from Powerco’s strategic approach to business.
Benefits of the purchase to shareholders will include an increase in operating scale leading to greater economic efficiency resulting in improved forecast dividends. Powerco’s residential consumers have benefited for the past five years from no increases in line charges realising an approximate 10% reduction in line charges in real terms. The company anticipates that this transaction should enable it to extend this price freeze further. The reliability of the network has also improved during this recent period.
Barry Upson said that as a result of the transaction, dividends per share were forecast to increase from the 13.1 cents per share declared in respect of the 2002 financial year to 14 cents per share for the 2003 financial year and 16 cents per share for the 2004 financial year.
Powerco is expected to enter the NZSE40 index following the finalisation of funding arrangements said Mr. Upson. The Company has targeted to have a Standard & Poor's long-term rating of BBB+ following the acquisitions.
The Special Meeting of Shareholders will be held on 29 October 2002 in New Plymouth.