Over 100 Powerco shareholders voted unanimously at today's special meeting in New Plymouth to approve the UnitedNetworks scheme, following a large positive proxy vote.
This approval means community-owned Auckland lines company Vector, and now Powerco, will have completed their acquisitions of UnitedNetworks and its assets by early 2003.
After the meeting, Powerco chief executive Steve Boulton said he was delighted with the very positive vote. "This purchase will be significant for Powerco and its shareholders; one that will bring far lower unit operating costs, improved liquidity and dividends.
"We will also march in to the stock exchange top 40," he said referring to the New Zealand Stock Exchange listing of the top 40 companies.
The $NZ810 million Powerco purchase of UnitedNetworks assets would mean Powerco becomes the largest gas distributor in the country and the second largest electricity reticulator.
Powerco chairman Barry Upson predicted improved earnings and increased dividend payments because of the purchase. Earnings were forecast to increase from $NZ33 million to $NZ36.3 million in the March, 2003 financial year, and $NZ53.6 million in 2004. Dividends were forecast to increase from the present 13.1 cents per share to 14 cents in 2003 and 16 cents in 2004.
International credit rating agency Standard & Poors had indicated a BBB+ rating after the UnitedNetworks had been completed, compared with Powerco's present A- rating.
Boulton said he saw great potential for growing the number of electricity connections in such newly-acquired areas as greater Tauranga, parts of eastern and southern Waikato; as well as increasing the penetration of gas in Hastings and westward to Palmerston North.
Acquiring pipelines in Wellington city, along with the existing Hutt Valley and Porirua gas network, would mean "far better assets to manage" than before.
Earlier this month Vector moved to compulsorily acquire all shares in UnitedNetworks, at $NZ9.90 per share, following the North Shore City, Waitakere City and Rodney District councils agreement to sell Vector their 10.8% UnitedNetworks stake for $160.38 million.
This, combined with the acceptance of UnitedNetworks' United States-based majority shareholder Aquila and minority shareholders, gave Vector a 93.8% stake and the right, under the Takeovers Code, to compulsorily acquire all outstanding shares. Vector is issuing up to $350 million in capital bonds to help fund the UnitedNetworks purchase, and is considering a sharemarket float of up to 25%.
Powerco last month said buying part of Auckland-headquartered UnitedNetworks would effectively double the size of its network and give it gross assets of about $NZ1.7 billion and approximately 391,000 consumer connections.
Earlier this month Powerco announced a new equity raising method, known as "jumbo" placement, to raise $NZ150 million for the $NZ810 million purchase of UnitedNetworks from Vector.
Today Upson said the jumbo placement, where shareholders have priority entitlement to one new share for every 2.37 existing shares, at $NZ1.60 per share, would open on November 5 and close 24 days later.
Institutional investors were entitled to about $NZ102 million of the $NZ150 million total. The method, properly described as a priority entitlement offer, gained the "jumbo" nickname in Australia because it allows listed companies to make very large placements of shares to institutional investors.
Boulton also took issue with recent New Zealand Herald coverage of the UnitedNetworks buyout, saying this country's largest daily had concentrated on a single strand of just one of the components of the Commerce Commission's pricing review of power companies.
"The Herald article mentioned nothing about commission concerns regarding reliability, quality, cost structure, or the rate of return on investment.
The NZH had said the UnitedNetworks acquisition represented a huge risk to Powerco as it (Powerco) was one of the highest-priced line companies in the country, which made it particularly vulnerable to the commission's pricing review.
The company would have approximately $NZ570 million of equity and $1.7 billion of assets after the deal, so, if the commission introduced tougher price controls, it would be Powerco shareholders and not the lenders who would bear the cost.
Boulton said Powerco's debt-to-equity ratio would increase from about 50-50 to approximately 60-40 as a result of the UnitedNetworks buyout, but Standard & Poors' barely changed credit rating showed it was confident in Powerco's ability to complete the acquisition.
Powerco employs about 300 people around the North Island and 150 people in Queensland, where it has a network services operational base.
