Powerco sale the right move: Council

Prime Investments’ plum pick of Powerco has silenced most criticisms of the sale of this country’s largest gas reticulator and second biggest electricity lines company.

Powerco sale the right move: Council

New Plymouth Mayor Peter Tennent was yesterday at pains to point out the predicament the council faced if it continued with its 38.16% shareholding in Powerco.

“Powerco’s post-tax dividends to the council may well begin to tail off in the near future. We have clearly put ourselves and the community in a position of greater financial strength and reliability,” Tennent told EnergyReview.Net and other media when announcing that Brisbane-based Prime was paying NZ$2.15 per share to pick up a controlling stake in Powerco.

“We simply cannot rely long-term on receiving the same post-tax dividend levels from Powerco that we have enjoyed in the past.

“PricewaterhouseCoopers has also told us that Powerco’s current non-tax paying position is not sustainable. The result of this is that in future it may well pay its dividends two-thirds in cash and one-third in tax imputation credits.

“As the council is a non-tax paying organisation these imputation credits will be worthless to us. On current dividend levels this could mean us losing over six million dollars.

“Quite simply, before today, we had a $19.3 million dividend that was not sustainable, now we have $19.3 million plus that is almost guaranteed,” he told ERN.

Prime is to pay the council almost NZ$260 million, the Taranaki Electricity Trust NZ$80 million and Powerco Wanganui Trust NZ$25 million for their 53.65% stake in Powerco.

The way Prime has prepared the deal, the transaction will see 62.5% paid in cash and 37.5% paid in perpetual securities, presently yielding 8.5% per annum, to be reset every five years.

Tennent said that with the securities, the council would need less than a 7% from the cash element in order to achieve an annual return of NZ$19.3 million – the most recent Powerco dividend.

Yesterday Prime managing director Chris Chapman said Prime would now start a full takeover for all Powerco ordinary shares and unsecured subordinated capital bonds on issue, representing a total enterprise value (excluding transaction costs) of approximately NZ$1.815 billion, with the offer posted to Powerco shareholders and bondholders within the six weeks.

Critics - including Taranaki Chamber of Commerce chairman John Rae - had likened the deal to selling the British Crown Jewels.


A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.


ENB CCS Report 2024

ENB’s CCS Report 2024 finds that CCS could be the much-needed magic bullet for Australia’s decarbonisation drive


ENB Cost Report 2023

ENB’s latest Cost Report findings provide optimism as investments in oil and gas, as well as new energy rise.


ENB Future of Energy Report 2023

ENB’s inaugural Future of Energy Report details the industry outlook on the medium-to-long-term future for the sector in the Asia Pacific region.


ENB Cost Report 2021

This industry-wide report aims to understand current cost levels across the energy industry