Global Economics

HK Tycoon Li Ka-shing Wins New Zealand Battle


The battle for Vector's Wellington electricity network has been won by Li's Cheung Kong Infrastructure with a $614 million bid

Cheung Kong Infrastructure will buy the Wellington electricity network currently owned by Vector in New Zealand for NZ$785 million ($614 million).

Goldman Sachs JBWere conducted an auction of the assets on behalf of Vector, putting the investment bank on the other side of the table from a Li Ka-Shing company and one of its key Hong Kong relationships. Media has speculated that other parties bidding for the asset included: China's power grid operator, State Grid Corp; Westpac Banking Corp's Hasting Funds Management; and Macquarie.

The Wellington electricity network serves customers in Lower Hutt, Upper Hutt, Porirua and Wellington City. It was acquired by Vector in 2002 from Aquila, an American company. Prior to that, it was owned by Transalta, a Canadian company.

The sale is subject to conditions, including approval by Vector's shareholders and approval by the New Zealand government's Overseas Investment Office (OIO), which vets all asset sales to foreigners which involve sensitive land and significant businesses.

On April 11 the OIO rejected a proposal from Auckland Airport to offer the Canada Pension Plan Investment Board a 40% stake. This has led to some speculation about how the OIO will perceive the sale of energy distribution assets to a Hong Kong-based company. But the assets have been owned twice in the past by non-New Zealand entities and this was cited by analysts as a reason why approvals for the deal are expected to be smoothly forthcoming.

"We are pleased with the outcome of the strategic review process that began in August last year, which has now resulted in this sale," says Vector chairman Michael Stiassny in a written statement. "This price represents a positive outcome for all Vector stakeholders." Vector said it will use the money it receives from the sale to retire debt.

Vector is a New Zealand energy infrastructure group which provides energy and energy services to more than one million homes and businesses across New Zealand. Its activities include electricity distribution, gas transmission and distribution, electricity and gas metering installations and data management services (including in Australia), natural gas and LPG. It also owns fibre-optic networks in Auckland and Wellington which deliver high-speed broadband services.

Vector is 75.1% owned by the Auckland Energy Consumers Trust and the rest is owned by institutional and retail investors. The price seemed to slightly disappoint shareholders, though, as Vector shares fell by one cent to NZ$2.10 yesterday.

Cheung Kong Infrastructure is the largest publicly listed infrastructure company in Hong Kong. It has businesses in Hong Kong, mainland China, Australia, the United Kingdom, Canada and the Philippines. Trading in Cheung Kong Infrastructure was suspended on the Hong Kong stock exchange pending an announcement.

Anand is a writer at FinanceAsia.com .

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