NEW ZEALAND

New Plymouth council boosted by Powerco sale

International ratings agency Standard & Poor’s believes the credit quality of New Plymouth District Council will be increased even further by the sale of its major shareholding in energy network company Powerco.

New Plymouth council boosted by Powerco sale

The council today quoted S & P rating specialist Rick Impala as saying: “Standard & Poor’s expects New Plymouth District Council’s very strong credit quality to strengthen further as the risk from generating large additional non-core revenue (interest income and dividends) is reduced because the council is intending to diversify its investment portfolio through new investments, while maintaining their current level of income.”

In the July S & P “industry report card” on New Zealand public sector entities, Impala notes the council’s desire to “diversify its investment base while crystallising the value of its investment (in Powerco) as part of a takeover process”.

Mayor Peter Tennent says this shows the independent credit ratings agency’s faith in the structures set up to professionally manage the council’s investments, “in particular our unanimous decision to consider selling our shares in Powerco.

“We firmly believe that diversifying our investments is the right way forward, if we can sell at the right price, and Standard and Poor’s is clearly of the same view.”

Standard and Poor’s currently rates NPDC at ‘AA+’ long-term - the highest of any kiwi council - and ‘A-1+’ short-term.

The council - and to a lesser degree the Taranaki Electricity Trust and Wanganui’s Powerco Community Trust - have come under fire recently for their planned sale of their majority shareholding in Powerco, probably to Aussie or Asian interests.

Tennent said his council hoped to confirm the outcome of the sale process within a few days of closure of final bidding this Friday. “‘We hope to make an announcement soon and we remain confident of a good premium on our shareholding.”

As well as Australia Gas Light, Australian Pipeline Trust and Singapore Power, global finance and banking company Babcock and Brown, plus ANZ Infrastructure Services, are tipped to be among the shortlisted bidders for the controlling interest in Powerco being sold by NPDC, TET and PCT.

Commentators say the sale of that 53.65% stake might not mean a full takeover of all minority shareholders and point to last month’s purchase by Origin Energy of 51.2% of Contact Energy.

Origin pitched its offer to Edison Mission Energy high enough to get that sale but not to necessarily succeed with other shareholders. Origin paid the US energy giant NZ$1.675 billion which equated to NZ$5.67 a share, well below market prices of over NZ$6 each.

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