|
December 1998 decisions More electricity assets sold: Power New Zealand (Utilicorp) buys electricity lines business from TransAlta …
Power New Zealand Ltd, 78.65% owned by Utilicorp United Inc of the U.S.A., and 10.84% by Waitemata Electricity Region local authorities, has approval to acquire the electricity lines business of TransAlta New Zealand Ltd, 67% owned by TransAlta Energy Corporation of Canada, for a suppressed amount. The purchase includes 1.6 hectares of land at 26 Bouverie Street, Petone. Although the OIC suppressed the price paid, the day it gave its approval (9/12/98), NZPA reported that Power New Zealand paid TransAlta $590 million and was borrowing $1.05 billion from a syndicate of banks to pay for this and the Trustpower purchase (see below). The TransAlta business was valued at $340 million in its 1998 annual report (Press, 14/11/98, “TransAlta NZ powers ahead”, p.23; 9/12/98, “Power NZ earnings may double”, p.28). The purchase is a result of the Electricity Industry Reform Act 1998 which forces companies to choose between electricity supply (power generation or retail sale) and lines networks. TransAlta was one of the few companies that chose to acquire retail sales businesses and generation facilities. Power New Zealand is one of the few that has been aggressively acquiring lines networks outside its home area. Shortly following this acquisition, it paid $485 million (twice book value) for Tauranga-based TrustPower’s network. That made it the largest network operator in the country with 470,000 customers or about 30% of the market (Press, 21/11/98, “Energy companies scramble for position”, p.26; New Zealand Herald, 27/11/98, “Where to now for rationalised new-look electricity companies?”, by Mark Reynolds, p. C2). We have covered this extensively in relation to OIC decisions in October and November 1998 where TransAlta acquired the retail businesses of Southpower (Christchurch) and Power New Zealand. TransAlta’s sale was opposed by the Hutt Mana Energy Trust which represents 83,000 people in the Hutt Mana region and has 12% ownership of TransAlta New Zealand. It had been “pushed by TransAlta into bidding for the lines business with a partner suggested by them”, but had been unsuccessful. The Trust sought a High Court injunction to stop TransAlta from holding a shareholders’ meeting to vote on the sale, including full page advertisements in Wellington newspapers saying the power would be delivered by Canadians over lines owned by Americans. It wanted to force TransAlta to negotiate a new deal with Power New Zealand that would give the Trust a 26% stake in a company owning lines in the Hutt and Wellington, to give it some influence to protect consumers. It said the sale of the lines business was contrary to the terms of a shareholders’ agreement with TransAlta which required TransAlta Canada to consult with the trust – and this had not happened. Power New Zealand said the nationality of the companies’ owners were irrelevant. It made a commitment to hold line charges for consumers for three years (Press, 10/12/98, “Energy trust seeks help to block sale”, p.28; Dominion, 11/12/98, “TransAlta vows to fight trust”, p.11). The original sale of local body owned power companies to TransAlta roused bitter local opposition and a series of broken promises from the local authorities. The Trust was a last remnant of local influence, but one that seems to have been outmanoeuvred once more.
… and from Trustpower…
Power New Zealand Ltd and its 78.65% shareholder Utilicorp United Inc (through subsidiary Utilicorp NZ Ltd) of the U.S.A., have approval to acquire the electricity lines business of Bay of Plenty based Trustpower Ltd including Power Construction Ltd, and 1.2 hectares of land at 40 Alach Street, Tauranga, and Te Ngae Road, Rotorua. The price is $485,000,000 – twice book value. Both Power New Zealand and Utilicorp required approval because Trustpower didn’t trust Power New Zealand’s shareholders to approve of the deal: “Trustpower required UCU (Utilicorp United Inc) to enter into a backup agreement with Trustpower on the same terms as that entered into with Power New Zealand, except that the UCU agreement is not conditional upon UCU shareholder approval. That agreement will only come into effect in the event that Power New Zealand fails to satisfy the shareholder approval condition on its agreement.” The purchase covers “all the core assets used in Trustpower’s electricity lines business. Those assets include 17 zone substations, two 33 kV switchyards and approximately 8,000 distribution substations, and all lines and cables and all existing customer connections. In addition, fixed assets comprising plant and equipment, motor vehicles and stock used in the lines business will also be acquired.” Further comment on this decision appears above, in relation to Power New Zealand’s takeover of TransAlta’s lines business.
…and Natural Gas Corporation buys Waikato Electricity’s retailing business
The Natural Gas Corporation of New Zealand Ltd has approval to acquire the WEL Energy Group Ltd’s electricity retailing business for a suppressed amount. WEL Energy Group is owned (94.17%) by the WEL Energy Trust, and the remainder in public shareholdings. Though the OIC suppressed the amount paid, it was made public before the OIC released its censored decision on 29/1/99: $89.9 million (Press, 20/1/99, “NGC pays $89m for supply firm”, p.27). The Trust has fought desperately to maintain local control of its electricity resources, first to get rid of Utilicorp’s “cornerstone shareholding” (one of the first overseas investments in electricity in the country) , then to disentangle itself from the battle between Mercury, Power New Zealand, and Utilicorp for control over electric power distribution in the northern North Island. Having finally achieved those aims, it has found itself with a pyrrhic victory – undermined by the Electricity Industry Reform Act, which forced the sale of part of its assets. The purchase includes WEL’s customer base, meters and metering equipment, billing system, debtors, call centre, staff, meter reading contracts, and “certain existing electricity hedge contracts”. It also includes a licence over the WEL brand. Natural Gas Corporation has not been a large contender in the scramble to control electricity assets, though it was clearly relishing the concept. In a sense it was forced to enter the market by Contact Energy, at time of writing one of the big three in electricity retailing. Contact purchased the Enerco gas retail operation from Southpower shortly before Southpower’s electricity retail operation was itself sold to TransAlta. Contact is therefore competing head-on with Natural Gas Corporation, but with a much larger number of customers. (Natural Gas Corporation had 42,000 customers in 1996; Contact 430,000 at the end of 1998.) Paradoxically, Enerco is Natural Gas Corporation’s largest wholesale customer. The Corporation is the biggest wholesale gas supplier in the North Island. Nonetheless, Natural Gas Corporation is no stranger to electricity. It jointly owns a 25MW cogeneration plant at Kapuni with Bay of Plenty Electricity. Its one-third shareholder, Australian Gas Light (AGL), which has managed the company’s gas retailing operations since 1993, has significant electricity interests in Australia, where it is Australia’s largest publicly listed utility. Indeed AGL has sought Commerce Commission clearance to buy 40% of Contact Energy, and in January 1999, took 7.9% of TrustPower with a view to forming a “strategic alliance”. Natural Gas Corporation is also working quickly to accumulate more of the gas retail market, including those operations of Powerco (New Plymouth), and BP’s share of Liquigas (see below). In a move that paralleled the electricity reforms, the company has split its operations into three: gas processing and co-generation (tentatively called Taranaki Production Services), gas transmission (TransGas), and energy marketing and distribution (NZ Gas Light). (Press, 20/8/98, “Lower interest charges key to sharp profit increase by NGC”, p.21; 16/10/98, “NGC seeks business”, p.31; 12/11/98, “Electricity attracts interest from NGC”, p.32; 7/12/98, “AGL looking for efficiency”, p.13; 30/1/99, “TrustPower issue to AGL”, p.23; New Zealand Investment Yearbook 1998, Datex, p.75; The New Zealand Company Register, Vol 35, 1996-97, p.74).
Natural Gas Corporation buys BP out of Liquigas
Natural Gas Corporation of New Zealand Ltd has approval to acquire up to 35.25% of Liquigas Ltd from BP Oil New Zealand Ltd, and BP’s wholesale LPG business. It is paying $24,000,000 for the acquisition. BP Oil New Zealand is owned by British Petroleum Company Plc of the U.K. The approval includes “five hectares of leasehold situated at the corner of Breakwater Road and Pioneer Road, New Plymouth and the Otago Harbour” [sic]. The purchase gives Natural Gas Corporation 60% of Liquigas (it already owned 25%), and buys it the rights to supply LPG to BP’s stations in Aotearoa (Press, 5/12/98, “Nat Gas in Liquigas”, p.25).
St Lukes manager, Westfield of Australia, buys out Bankers Trust
Westfield Trust, manager of St Lukes Group Ltd, the major owner of shopping malls, has approval to buy out St Lukes’ controlling shareholder, BT Funds Management Ltd. BT (Bankers Trust) is owned in the U.S.A., though its parent company is currently going through a very messy US$10.1 billion forced marriage with Deutsche Bank of Germany – messy because, before the takeover can be completed, Deutsche Bank is having to settle up for its financing of concentration camps and profiting from their victims’ slave labour and expropriation of their assets during the war. A takeover was reportedly more or less forced on Bankers Trust because of its losses in speculation during the Asian financial crisis – it has a reputation for being one of the more aggressive and risk-taking of the large U.S. banks. See our commentary in November 1996 for its exploits in this country. Westfield managed St Lukes’ ten malls (nine in the North Island and Riccarton Mall in Christchurch, covering a total of 53 hectares) until the takeover of the company and paid $326,342,729 for the purchase of 47% of the shares. In 1997, when Westfield took over management of St Lukes, Bankers Trust had a 16% stake in Westfield, which belongs to the wealthy Lowy family. Westfield owned shopping centres in Australia with sales of A$6.2 billion and American centres with sales of US$4.8 billion. St Lukes has been berated by retailers, including Underground Fashions, Michael Hill Jewellers, and Hallenstein Glassons, for its rent increases and its turnover-based rents. In 1996, “Michael Hill’s joint managing director, Howard Bretherton, called St Lukes a carnivore which did not care about its tenants.” Some accused St Lukes of trying to bring Sydney-scale rents to Aotearoa. Rents were being raised from $1,300 a square metre to between $1,500 and $1,700 (Press, 19/10/96, “Shop rents upset third retailer”, p.29). Westfield continued that pattern when it took over as manager from 1/5/97 for a ten year contract. It was expected to lift occupancy costs to about 15% of turnover from under 10%, given that it was being paid a management fee of 5% of gross revenues. Bretherton again expressed his concerns, saying Michael Hill was paying similar rents in Auckland as in Australia, and that Westfield was “a very, very aggressive and extremely demanding landlord. Their objective will be to crank up rental prices… Westfield is difficult to deal with and I would say to small retailers to go to arbitration and to join with other retailers to find someone as tough as Westfield to do their negotiating.” Hallensteins commented in March 1997 that St Lukes and other landlords were seeking “unrealistic” rent increases (Press, 11/4/97, “Mall tenants could face rent increases”, p.13). Indeed in 1998, a coffee bar owner filed an action in the Auckland High Court demanding $1.5 million in compensation from St Lukes as compensation for allegedly negligent advice and breaches of the Fair Trading Act. Ivan Heys, Robert Harris franchisee in Auckland, claimed St Lukes misled him about their redevelopment around his café, Cuchina’s, in WestCity Centre, Henderson. The café was place in liquidation shortly before the action in August 1998. The major doorway he says St Lukes promised by the café was downgraded, losing him more than two-thirds of the pedestrian traffic he had expected. He said “at [St Lukes] you were just a tenant… you get treated like a nobody” (National Business Review, 21/8/98, “David v Goliath as coffee bar takes aim at St Lukes”, p.13).
Brambles leases Wellington warehouse from Building Solutions Ltd
Brambles New Zealand Ltd, a subsidiary of Brambles Industries Ltd of Australia, has approval to acquire a lease over five hectares at Jamaica Drive, Grenada North, Wellington from Building Solutions Ltd for $14,968,125. Building Solutions will buy the land from its current owner, Turners and Growers Ltd of the U.K. (with whom it has a conditional agreement to purchase), and build a warehouse, office and amenities block on it, and form and seal the yard. Brambles, a major transport company, has a division it calls “Recall Total Information Management”, which manages and stores documents and information. It requires “good secure high stud warehousing for physical records”. Brambles will lease the purpose-built facility from Building Solutions for its Wellington operations, consolidating four warehouses on to one site.
Westpac buys more mortgages from Housing Corporation
The Home Mortgage Co Ltd, a subsidiary of Westpac Banking Corporation Ltd of Australia, has approval to acquire more mortgages from the Housing Corporation of New Zealand for a suppressed amount. It has previously bought mortgages from the Housing Corporation, for example in September 1998, and gained retrospective approval for purchases in October 1998. In all cases, the price paid has been suppressed.
Tip Top Ice Cream of Australia completing 1996 purchase of New American
Tip Top Ice Cream Company Ltd of Australia has approval to acquire two hectares of leasehold land at 50 Luke Street, Otahuhu, Auckland for $1 from Country Foods New Zealand Ltd, a subsidiary of New Zealand Co-operative Dairy Company Ltd. The land includes or adjoins a reserve or public park, and the foreshore. “On 5 November 1996, Tip Top entered into an agreement (the Assets Agreement) with United Dairy Foods Ltd (UDF, a subsidiary of New Zealand Co-operative Dairy Company Ltd) to purchase the assets of UDF relating to its existing business of manufacturing a range of frozen novelty and scoop ice-cream products. Consent was subsequently sought and granted by the Commission on 7 March 1997. The transfer of the leases is the second stage to the transactions outlined in the applicants’ initial application for consent to the Commission in 1997. A provision of the Assets Agreement required Tip Top to obtain consent of the Commerce Commission to the purchase of certain assets of UDF’s business of manufacturing take home ice-cream products sold under the brand “New American“. If Commerce Commission approval was obtained, then UDF could require Tip Top to purchase the assets of the “Take Home Business”. The leasehold land, the subject of this application, forms one of those assets of the “Take Home Business”. The consent of the Commerce Commission has now been obtained to the sale to the applicant of the assets of the “Take Home Business”. In March 1997, Peters and Brownes Foods Ltd of Australia received OIC approval to acquire Tip Top Ice Cream Company Ltd and Tip Top Investments Ltd from their owner, the Heinz Group of the U.S.A. Tip Top is the Aotearoa brand leader in ice cream and ice cream products. Heinz decided that it no longer fitted with its line of business, having acquired it as part of its takeover of Watties in 1993. Heinz put Tip Top up for sale (along with Tegel Foods) in November 1996. Tip Top then held about 80% of the national ice cream market (New Zealand Herald, 14/11/96, “Tip Top, Tegel go up for sale”, by Geoff Senescall). This followed an attempt by Tip Top to take over competitor New American Ice Cream which was quashed by the Commerce Commission saying that it would give it a dominant market position. It left open the possibility of taking over only the “take home” products: the frozen novelty, dairy desserts and scoop ice cream operations (Press, 25/10/96, “Tip Top trims bid for New American”, p.19).
SEA Holdings gets approval to increase shareholding in Trans Tasman to 60%
SEABIL (NZ) Holdings Ltd, owned by SEA Holdings Ltd of Hong Kong (but registered in Bermuda) has approval to acquire up to 60% of Trans Tasman Properties Ltd, and retrospective approval to acquire the 48.4% it actually has. It had approval only for 45%, and increased from 44.94% to 48.39% in May 1998 due to it taking up 8,000,000 shares in a shortfall from a 1:5 share issue (“Trans Tasman Rights Issue Results” notice to the New Zealand Stock Exchange 14/5/98, and “Trans Tasman Change in Substantial Shareholding” notice 27/5/98). To increase from 45% to 60% (due to a notes conversion) would cost SEA approximately $137 million for 109.3 million mandatory convertible notes and 56.9 million ordinary shares acquired during the 1995 Trans Tasman rights issue. Trans Tasman is currently 54.78% overseas owned (including approximately 8% in the U.S.A.), and the change approved would take it to 66.9%. Trans Tasman’s properties include the Fletcher Challenge complex at Great South Road, Auckland, the Finance Centre at the corners of Queen, Albert, Durham and Victoria Streets, Auckland, and a property of six hectares at 196-208 Middleton Road, Johnsonville, Wellington.
Kinki of Japan buys more land for car sales in Auckland
Kinki Company Ltd of Japan has approval to acquire a one hectare car sales yard at 1120 Great South Road, Mt Wellington, Auckland for $2,295,000 from The Melanesian Mission Trust Board. It adjoins reserve land. “KCL is able to source good quality low cost vehicles in Japan which in turn will become available to consumers in the car retail market of New Zealand… the proposed acquisition is a continuation of the expansion of KCL and Japan Auto in the New Zealand motor industry. The land is currently a car sales yard comprising a yard, grooming area, and administration offices. KCL state they intend to retain the land as car sales yard. As with the existing properties owned by KCL, the land will be purchased by KCL and leased to Japan Auto… once Japan Auto starts operating from the property, it is anticipated that approximately 30 to 40 motor vehicles will be sold per month from the premises.”
Sovereign buys land in Takapuna for headquarters for $11m
Westside Properties Ltd, a subsidiary of Sovereign Ltd, in turn now owned by ASB Life Assurance Ltd, part of the ASB Bank, has approval to acquire Hurstmere on Strand Ltd which owns a 0.6 hectare property at Hurstmere Road and Channel View Road, Takapuna, North Shore City, Auckland, for $11,100,000. The vendors are J.A. and B.A. Wiltshire and D.H. Rishworth of Aotearoa. ASB is 75% owned by the Commonwealth Bank of Australia (CBA) and 25% by the ASB Bank Community Trust. Approval for its takeover of Sovereign was given by the OIC in November 1998. Sovereign intends to build a new corporate headquarters on the site, including car parking, retail space, restaurants, commercial and office space.
South Waikato District Council sells closed road to Carter Holt Harvey
NZ Forest Products Ltd has approval to acquire a closed road from the South Waikato District Council for $26,000. It is six hectares at Kokako Road, Lichfield, South Waikato which is “a long narrow strip of closed road that protrudes into adjoining forests owned by the Company. For security of the forest the land needs to be acquired.” NZ Forest Products is a subsidiary of Carter Holt Harvey Ltd, itself 51% owned by International Paper Company Ltd of the U.S.A.
Wairarapa’s Dunolly Station sold for forestry with Craigie Lea Station
Four residents of the Netherlands have approval to acquire the 634 hectare Dunolly Station, on Craigie Lea and Douglas Roads, Carterton District, Wairarapa for $1,012,000. They are all members of the Van Bergen family. The vendors are Warren and Judy Tocker. “Mr Renatus Van Bergen has been the co-ordinator of the development of the Craigie Lea property neighbouring Dunolly Station on behalf of his parents [who own Craigie Lea] and has therefore developed firsthand knowledge of the development of afforestation projects including co-ordinating PF Olsen and Co Ltd’s direct management.” They intend to convert Dunolly into a forestry operation in conjunction with Craigie Lea. In July 1997, we reported that Mr Johannes Christian Van Bergen, a resident of the Netherlands, had approval to acquire the 1,831 hectare Craigie Lea Station for $1,300,000. ‘… the land is currently uneconomic farmland requiring development and capital to re-establish it as a viable option. The applicant intends to develop the property for afforestation purposes utilising the services/expertise of New Zealand forestry consultants.’” The applicants in the present purchase are R.W.N. Van Bergen, A.H.M. Bunnen-Van Bergen, E.F.M. Van Bergen, and J.W.M. Van Bergen.
Other land for forestry
Kenepuru Sound, Marlborough, farm sold to U.S.A. for dude ranch
Equusloco, owned by Mr J.E. Loudermilk and Ms G.W.I. Doll of the U.S.A. (and who are “seeking New Zealand permanent residency”), has approval to acquire 220 hectares at the head of Waitaria Bay on the northern shores of Kenepuru Sound, Marlborough Sounds, for $630,000. They say the property, which they intend to be their place of residence, has been allowed to degenerate over the last five or more years. They will continue grazing but also carry out remedial and development work to increase stocking rates and develop the forestry operation on the property. They “also wish to build a new house for themselves on the property and renovate the existing building to provide accommodation for up to eight guests, which then will operate as a dude ranch. It is also intended to operate a horse riding and training school on the property as Ms Doll has particular qualifications in that field. Ms Doll would also use the property as a base in which she would hope to generate a consultancy business in respect of horse training throughout the country.”
Gourmet Paprika buys land at Woodhill, Northland for hydroponic peppers
Gourmet Paprika Ltd, 25% owned each by A. Botman and T. Zweltslot of the Netherlands, has approval to acquire 11 hectares of land at 29 James Mackie Road, on the corner of State Highway 16, Woodhill, near Helensville, Northland for $600,000 from Aad Johannes Bloom of Aotearoa. The other 50% of Gournet Paprika is owned by P. Martin (33.4%) and C.M. Martin (16.6%), both of Aotearoa. Gourmet Paprika is “in the business of growing peppers hydroponically for export, particularly to Japan”. It acquired land in 1994 and 1995 near Helensville to establish the operation, which has now grown substantially and needs to expand. The land in this application is “in close proximity” and is at present “bare, grassed land with a farm building on it”. Gourmet Paprika intends to “conduct earthworks on the land and create a level building platform, to enable the construction of a seven hectare glass house for the production of peppers hydroponically”. The establishment of the business, including a lease of Helensville land, was first approved in June 1994. The company then had 1,000 shares owned by Paul Martin of Aotearoa (334), and Adri Botman and Ton Zwetsloof of the Netherlands (333 each), with a total capital of $600,000. By December 1995, the current shareholding was in place, though C. M. Martin was then resident in the U.S.A. At that date it gained approval to buy six hectares of market gardening land at Woodhill for $400,000 from Paul Martin. The company proposed to erect a three hectare greenhouse and packing shed on the land.
Hauraki District Council sells 3 ha. of legal road in Waihi to expand Martha Mine
Waihi Gold Company Nominees Ltd, which is 67.06% owned by Normandy Mining Ltd and 32.94% by AUAG Resources Limited, both of Australia, has approval to acquire 3.4 hectares of land at Waihi to expand its Martha Mine. The land is a legal road and is owned by the Hauraki District Council, “but it is anticipated that the roads will be stopped and the land sold by the Council”. The price is “to be advised”. The extension to the mine “involves gaining access to ore below the level of the currently licensed pit. To reach this ore, it is necessary to bench back (or extend) the perimeter of the existing pit, and the additional land is required for this, and to provide sufficient buffer between the extended mine and the surrounding residential uses. If the extension proceeds, the life of the mine will be extended for about an additional seven years beyond the current estimated life of the mine of 1999.” In February 1999, a 15m by 40m hole opened up over old workings near the mine. The company has regularly bought up neighbouring properties for mine expansion or because the owners got sick of the vibrations, noise and dust and wanted to move out (New Zealand Herald, 13/2/99, “Waihi, lake resort or just the pits”, by Melissa Moxon, p.A10). In another decision this month, it does just that. The company gained approval to acquire two hectares at 2 Savage Road, Waihi, for $240,000 from R.T. Motion and L.E. Holmes “which is directly adjacent to the extended Martha Hill mine licence area”. See September 1998 for the previous purchases by the company.
Other rural land sales
A resident of the U.S.A., Eunice Elizabeth Millikin Loving, has approval to acquire a block of Closeburn Station on the Glenorchy-Queenstown Road, Queenstown, Otago. The station is owned by J. F. Investments Ltd, which is 70% owned by David Salman of Indonesia and 30% by D. Broomfield of Aotearoa. They are subdividing nine hectares of the station as “lifestyle properties”, each of which will have a share of the remaining 926 hectares which will still be farmed (see our commentary on the July 1998 decisions for details). This sale is of 0.4671 hectares plus a share of the remaining station, for $550,000. The land adjoins Lake Wakatipu and conservation land. Mrs Loving is buying the property to give to her son, Phillip Anderson Loving, over a period of time to avoid U.S. gift duty. He and his family “intend to apply for and take up New Zealand permanent residency once his children (currently aged 11 and 12) complete their schooling”. |
 |