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Commission receives applications from Vector

13 October 2004-05

Commission receives applications from Vector to acquire NGC

Vector Limited has applied to the Commerce Commission for clearance under the Commerce Act to acquire up to 100 percent of the shares in NGC Holdings Limited (NGC Holdings), which is 66.05 percent owned by the Australian Gas Light Company Limited (AGL). In addition, Vector has applied for an exemption under the Electricity Industry Reform Act for the potential cross-involvement of the merged group in both an electricity supply business and an electricity lines business.

Vector is 100 percent owned by the Auckland Energy Consumer Trust, which is managed by five trustees, who are publicly elected every three years in local body elections. The core business activities of the Vector Group include an electricity distribution business (in Auckland and Wellington), a natural gas distribution business (in Auckland), and a telecommunications network business (in Auckland and Wellington CBD and in other parts of Vector’s electricity network area).

NGC Holdings is a New Zealand listed company, majority owned by AGL. The core business activities of the NGC Group include the purchase and sale of natural gas, a natural gas transmission business in the North Island and various natural gas distribution businesses in towns and cities throughout the North Island.

Any acquisition by Vector would involve the acquisition of AGL’s interest and a full takeover offer for the balance of the shares in NGC Holdings.

In considering this application, the Commission’s role is to determine whether the proposed acquisition has the effect of substantially lessening competition in a market.

Under the EIR Act, the Commission will grant exemptions if it is satisfied that the cross-ownership or involvement proposed would not inhibit competition in the industry or would not permit cross-subsidisation of generation assets or electricity retailing with electricity lines businesses. The Commission will also grant exemptions if it finds that the involvement would result in relationships between lines and supply businesses that are at arms length.

Public versions of both applications are available on the Commission’s website www.comcom.govt.nz

Background

The purpose of the EIR Act is to reform the electricity industry to better ensure that costs and prices in the electricity industry are subject to sustained downward pressure and the benefits of efficient electricity pricing flow through to all classes of consumers, by effectively separating electricity distribution from generation and retail and promoting effective competition in electricity generation and retail markets.

The Commission may grant an exemption in respect of a business or involvement or interest, only where doing so: would not result in certain involvements in electricity lines businesses and electricity supply businesses which may create incentives or opportunities: to inhibit competition in the electricity industry; or to cross-subsidise generation activities from electricity lines businesses; and b) would not result in relationships between electricity lines businesses and electricity supply businesses which are not at arms length.

ENDS

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