Powerco, NGC merger talks likely

Merger discussions between Powerco and NGC Holdings may soon be back on the table now the uncertainty regarding Powerco’s ownership is resolved.

Commentators say this week’s NZ$364 million conditional purchase by Brisbane-based Prime Infrastructure, of a 53.65% controlling interest in Powerco, signals the resumption of talks between the two energy infrastructure giants - New Plymouth-headquartered Powerco and Wellington-headquartered NGC.

“The only reason they (merger talks) stopped earlier this year was the uncertainty of ownership. Now that’s been removed it would be a natural assumption that talks will restart,” one commentator told EnergyReview.Net today.

Also, Powerco chairman Barry Upson yesterday said that as Prime already effectively held a majority shareholding in Powerco it could signal its intentions towards NGC now.

However, Prime chief executive Chris Chapman is reported as saying “it is far too early" to comment on the stalled discussions between Powerco and NGC.

Talks on “business opportunities”, including a possible merger between the two, were put on hold in May when Powerco's three big shareholders - the New Plymouth District Council, Taranaki Electricity Trust and Powerco Wanganui Trust - indicated they would consider selling their combined shareholding.

ERN yesterday reported that Prime’s acquisition of Powerco had silenced most critics of the sale of this country’s largest gas reticulator and second biggest electricity lines company.

New Plymouth Mayor Peter Tenennt was at pains to point out the predicament the council faced if it continued with its 38.16% shareholding in Powerco. He said that without the sale to Prime the latest council dividend, of NZ$19.3 million, could not have been sustained.

However, commentators say that is not necessarily so.

“To effectively cap that level of dividend payment and say Powerco is not going to grow further, and that dividend is not going to grow is unfair,” one commentator told ERN.

“Sure, further acquisitions or mergers would have required additional investment for the council to maintain its level of equity. But I believe Powerco, through its activities, could have grown that dividend to NZ$40 million or so in the next five years. That would be before Powerco incurred any tax liabilities.”

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