'Gold-plated family silver', says mayor

North Shore City mayor George Wood says Vector paid a "gold-plated price for the family silver", the 16.2 million UnitedNetworks shares which will reap North Shore City, Waitakere City and Rodney District Councils more than $160 million.

Last week, the councils announced they would sell their combined 10.7 per cent stake in UnitedNetworks to neighbouring utility company Vector for $9.90 a share.

Mr Wood says the decision to accept Vector's takeover offer was strongly supported by independent financial and legal advice.

"By selling the shares now we have attracted a premium return on investment. We are not left as a minority shareholder and we've avoided the threat of our shares being devalued following the takeover."

UnitedNetworks' share price was $7.66 on June 11 when majority shareholder UtiliCorp NZ (owned by Aquila Inc of America) indicated it was going to sell its 70.2 per cent stake in the company. In less than four months, the three councils' investment had increased by 29 per cent or $36.3 million.

Of the $160.4 million, $8.9 million will fund the ongoing 'undergrounding' programmes that involve removing power poles and burying electricity cables.

The balance will be distributed among the councils based on the number of electors living in each city in October 2001, the date of the last local body elections. This would entitle North Shore City to $67.7 million (based on 130,701 people), Waitakere City $56.4 million and Rodney District $27.4 million.

North Shore City Council has yet to discuss what to do with its share of the proceeds. Its own Treasury Management Policy currently specifies that the proceeds of the sale of assets such as shares should go to repay debt.

Should councillors keep to that policy, its $67.7 million would almost clear the city's current debt of $71 million. It would also save itself around $4.5 million a year in interest costs - achieving an immediate saving of $2.3 million during the current (2002/03) financial year alone.

The dividends from the three councils' shareholding have funded the undergrounding programme, with more than $36 million reinvested in a total of 124 projects over the past eight years. (It was in 1994 that the Trust was established following the privatisation of the Waitemata Electric Power Board.)

>From October 1994, exactly half (62) of those projects were undertaken in North Shore City. They were worth $17.87 million, an average of $2.2 million a year.

Vector has confirmed to the councils its current policies relating to the undergrounding of the power lines where it will work with other utility companies and councils to pool resources.

North Shore City has also to consider its approach to funding its undergrounding programme from July 2004. Traditionally, it has staged those projects to complement roadworks, beautification and other upgrading work undertaken around the city.

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