Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – April 2016 Decisions

Vector Gas Sold, Maui Pipeline Next?

A quieter month at the OIO. The most significant approval was First Gas Holdings Limited, Australian Public (63%), Canadian Public (34%) and various (3%), receiving approval for an overseas investment in sensitive land, being their acquisition of rights or interests in 100% of the shares of Vector Gas Limited which owns or controls a freehold interest in approximately:

0.6ha of land at Pirongia;
0.5ha of land at Derby Road, Taranaki.

Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 100% of the shares of Vector Gas Limited, the consideration of which exceeds $100m. The vendor was NGC Holdings Limited, New Zealand Public (98%) and various (2%): consideration was $952,500,000. The OIO states: “The Applicant intends to grow the Vector Gas Limited business with a focus on increasing the resilience of the gas transmission network and delivery of increased gas network access for customers. In particular, the Applicant intends to invest significant resources into growing residential and commercial gas connections on its non-Auckland gas distribution network, increasing competition for the benefit of energy users.”

Jessica Gardner in the Sydney Morning Herald gave an Aussie perspective on the deal (9/11/15): “The executive running Colonial First State Global Asset Management’s infrastructure investment funds believes an $882 million deal to buy a Kiwi gas pipeline business has put the fund in pole position to also snap up the related Maui pipeline asset. Gavin Kerr, Colonial’s Infrastructure Investments Director, said Vector Gas, which the fund bought from Kiwi infrastructure company Vector for $NZ952.5 million ($A882.3 million), was the ‘natural owner’ of the Maui pipeline; given it is the asset’s operator”.

“The Royal Dutch Shell-owned Maui pipeline was put up for sale by its owners last month and is expected to fetch about $NZ300 million. ‘It’s true to say we have an interest (in the Maui pipeline) and I think that we, having acquired Vector Gas, are in a strong position to successfully acquire that pipeline’, Mr Kerr said in an interview. The Vector Gas deal, which was first revealed by the Australian Financial Review’s Street Talk column on Sunday night, was ‘hotly contested’ Mr Kerr said. ‘We recognised that this was a quality asset and we also appreciate that these sorts of opportunities don’t come along all that often’, he said”.

“The price paid by Colonial beat two New Zealand utilities players, Power Co and CKI, and a third Japanese bidder. On an enterprise value to earnings before interest, tax, depreciation and amortisation multiple, Colonial paid 10.2 times forward EBITDA, Mr Kerr said. The deal delivered the $NZ3.3 billion Vector a gain of about $NZ167 million. Vector Gas owns gas transmission pipelines and distribution networks and is a provider of pipeline management services”.

“The proceeds of the sale, which is expected to be completed by the end of March 2016, will initially be used to repay debt. The deal between Vector and Colonial could be the first of many. The two parties also entered a memorandum of understanding to consider opportunities to co-invest in regulated and unregulated energy infrastructure, both in New Zealand and offshore, and to co-operate operationally on gas distribution activities”.

“The Colonial investment was split between two of its funds, with the Global Diversified Infrastructure Fund taking the lion’s share. Mr Kerr said that fund had another $US600 million ($A851 million) to spend over the next two to three years to finish off the $US1.5 billion raised for infrastructure investment. The fund’s most recent investment was $70 million for a 25% stake in bulk liquid storage business ANZ Terminals. The portfolio also includes airports in Brisbane and Adelaide and European utilities businesses”. Mr Kerr said ‘favourable’ Government policies – including the encouragement of states to divest infrastructure like ports and electricity networks for spending on new assets – were ‘helping to generate some (infrastructure) deal flow. The market definitely has improved in the last few years’, he said”.

Americans Take 100% Of Flock Hill Station

Flock Hill Manager LLC, United States of America (100%) received approval for the acquisition of rights or interests in the remaining 10% of the shares of Flock Hill Holdings, an unlimited incorporated company which owns or controls:

a leasehold interest in approximately 13,988 hectares of land at State Highway 73, Cass; and
a freehold interest in approximately 28.7 hectares of land at State Highway 73, Cass.

The vendor was Broadleaf Limited and Constitution Limited, New Zealand (100%); consideration was “withheld under section 9(2)(b)(ii) of the Official Information Act”. The OIO states: “The Applicant currently intends to increase its interest in Flock Hill Holdings (being the holding company of Flock Hill Station), through buying out the 10% minority shareholders (the “Vendors”)”.

“The Applicant’s buy-out of the Vendors is necessary for the Applicant to pursue a dramatically revised method of farming, which will necessitate substantial upfront capital expenditure. The Applicant forecasts significant improvements in Flock Hill Station’s productive potential, through its plan to transform the farming operations from a livestock based business, to a pasture generating business”. See our February 2010 commentary for details of the Americans’ original purchase of Flock Hill.

Caltex Gets Retrospective Consent For Dunedin Diesel Stop

Chevron New Zealand, Chevron Corporation, United States of America (100%), received retrospective approval for the acquisition of a leasehold interest in approximately 0.3 hectares of land at 170 Fryatt Street, Dunedin. The vendor was Port Otago Limited, New Zealand (100%): consideration was $634,029. The OIO states: “This is a retrospective application which relates to the Applicant’s acquisition of a leasehold interest in land. The Applicant has developed the relevant land into a diesel refuelling facility. The development of the Dunedin Diesel Stop created several FTE (full time equivalent) jobs during the construction period and required the introduction of significant development capital. The Dunedin Diesel Stop opened in September 2013”.

New Marina For Queenstown

Lakes Marina Projects Limited, Nasser Barabi, United States of America (40%), Iraj Barabi, United States of America (40%) and Alan John Kirker, New Zealand, (20%) received approval for the acquisition of:

a leasehold interest in approximately 0.8 hectares of land at Sugar Lane, Frankton, Queenstown; and
a leasehold interest in approximately 6.9 hectares of land at Part of Lake Wakatipu.

The vendors were the Queenstown Lakes District Council, New Zealand (100%) and Her Majesty the Queen (through the Commissioner of Crown Lands), New Zealand (100%); approximate total lease consideration was $3,000,000. The OIO states: “The Applicant intends to develop and operate a marina on the onshore and lake bed land. The Applicant has received the necessary resource consents from the Queenstown Lakes District Council and the Otago Regional Council to undertake the development of the marina. Stage One of the marina development will include the development of 77 marina berths, 17 floating sheds, 4 buildings on land, a wave attenuator (breakwater), a fuelling station, and a carpark that will accommodate up to 136 vehicles”.

Tracey Roxburgh at the Otago Daily Times reported on the earlier Environment Court decision (6/6/15): “A $10 million, 195-berth marina on Lake Wakatipu has been given the green light by the Environment Court. Lakes Marina Projects co-director, Iraj Barabi, of California, said he and fellow directors Alan Kirker, of Queenstown, and his brother Nassar Barabi, were ”very excited” to finally be able to progress the development, and construction would possibly begin early next year”.

‘”‘We have been ready to start the project (for some time]) but there are agreements and legal things we’ve got to work out. Next year, early next year, we’ll start’. The company was granted consent by the Queenstown Lakes and Otago Regional councils in February – subject to 88 conditions – but the decision was appealed to the Environment Court by Ian and Annette Tulloch. In his written decision, dated June 3, Judge Jon Jackson said DM Warrington and Marina Baches Management became section 274 parties to that appeal. However, subject to five amended or additional conditions, the appeal was resolved and consent granted”.

“Those were for the company to consult the Tullochs and Marina Baches Management Ltd before submitting the construction site management plan to the Council; three parking conditions, including installing barrier arms, or similar, charging commercial rates for those parks; and erecting signage identifying 14 long-term parks. Two other conditions related to the Sale and Supply of Alcohol Act, restricting the marina to four licensed premises and prohibiting any off-licences”.

“Judge Jackson said the appeal was otherwise dismissed and made no order for costs. Mr Kirker said the trio had worked for more than four years on the project and if construction began early next year, it was hoped the first of two stages would be complete next Christmas-New Year. ‘The community, as you well know, they’ve been behind us 100%. The community, I would say, (will be) ecstatic. ‘It’s here. It’s going to happen'”.

“Lakes Marina Projects was named in 2012 as the Council’s preferred developer for the marina. On completion it will comprise 195 berths – 85 being constructed in stage one, a 320m breakwater, a 150m retaining wall, a jetty and associated features; a car park and a total of 17 buildings, to be leased to users of the marina for personal and/or commercial activities ancillary to the marina”.

And, finally for April, Matthew & Kumud Dunn, United Kingdom (100%), received approval for the acquisition of a freehold interest in approximately 15.4 hectares of land at 480 Portobello Road, MacAndrew Bay, Dunedin. The vendor was Mary Gladys Hellyer, Octagon 2008 Trustees Limited and GCA Legal Trustee 2005 Limited, New Zealand (100%): consideration was $330,435. The OIO states: “The Applicants intend to migrate to New Zealand with their family and reside in New Zealand indefinitely. They intend to build a new residential family home on the land”.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.