Vector Completes Purchase
of United Networks
Readers will be aware that the Auckland energy lines company, Vector, has purchased
a majority interest in United Networks, with an aggregate purchase price over
NZ$2 billion.
Brookfields acted for Auckland Energy Consumer Trust (AECT), as 100% shareholder
of Vector, in relation to this transaction.
The principal legal issue concerning AECT and the transaction was whether
it was appropriate for the trustees to approve the transaction in terms of
the trust deed governing AECT. This required analysis of the position for income
beneficiaries of AECT (ie the present Auckland electricity consumers) on the
one hand and the capital beneficiaries (the Auckland, Manukau and Papakura
councils) on the other. In order to be satisfied that the interests of these
two classes of beneficiaries would be served by the transaction, the trustees
needed to be satisfied that the method of funding the purchase price would
not inhibit AECT's ability to pay dividends to its consumers and that the transaction
would add value.
To this end a large part of our assistance to AECT was in relation to how
the transaction was to be funded. The level of funding required was such that
AECT was forced to consider a partial equity offer to the public. Equity participation
on the part of the public was only feasible if the shares on offer were shares
in a company that was listed on the New Zealand Stock Exchange. For that reason
it was necessary to advise AECT on the process, and consequences of listing
Vector on the NZSE.
Primary amongst the consequences of a listing on the NZSE was AECT's continued
ability to control Vector, including ensuring ongoing dividend entitlements.
This control issue dictated that AECT's shareholding in Vector at all times
remain above 75%. The NZSE Listing Rules do not permit a single shareholder
to hold in excess of 75% in a listed company. It was acknowledged that this
presented a tension that might only be overcome either by way of a dispensation
from the NZSE (by way of a non-standard designation as exists with Ports of
Auckland for example) or by an alternative to an equity offer. Our advice to
AECT included advice in these respects.
We also advised AECT in relation to the Energy Companies Act 1992, particularly
control aspects through the Statement of Corporate Intent and the requirement
under that Act for energy companies to operate as a successful business.
There are over 20 electricity lines businesses presently operating in New
Zealand. Economies of scale and potential reform of asset valuation methodologies
for these companies is likely to see this number reduce, perhaps by half. If
that proves to be the case then there will be a great degree of activity in
this area.
As a result of our experience with AECT we are well placed to assist any party
seeking to either purchase or sell its energy assets.
For more information, please contact:
Brendan Meech
Partner
t: +64 9 979 2209
e: Brendan Meech
Last updated:
This article is intended to be brief in nature and should be used for information only. It should not be relied on as legal advice. |
