Bids due next week on Vector gas assets

Vector [NZX: VCT] is due to find out how much it can sell its gas transmission and non-Auckland distribution assets for when bids roll in next week.

It is understood that all of the bidders are based overseas. A report in The Australian has named Hong Kong’s Cheung Kong Infrastructure and Powerco, which is owned by AMP Capital and Queensland Investment Corp, as interested bidders.

Regulatory disclosures indicate the businesses have a regulated asset base of about $695 million, though their market value is likely to be higher. 

In June the electricity and gas lines company said it had hired Goldman Sachs to advise on options for the assets after receiving unsolicited bids.

“Whilst the board and management of Vector believe these are highly attractive assets, we constantly review our portfolio and will always consider offers which maximise value for our shareholders,” it said at the time.

The assets on the block involve Vector's 2288km of gas transmission lines, stretching mainly up the west coast from Tawa to Kauri north of Whangarei, with branches to Gisborne and Hastings, plus its local gas distribution network outside Auckland.

The distribution assets, which connect with gas consumers, are located mainly around Hamilton and Tauranga.

Vector does not break out financial figures for the assets on the block, although its overall gas transportation business, which includes Auckland distribution, had external revenue of $152m and earnings before interest and tax of $118.7m.

Returns from the gas transportation businesses are restricted by Commerce Commission regulations, so they tend to attract buyers who can increase returns through tax structuring or lower capital costs.

According to regulatory disclosures, the transmission business has regulatory revenue of about $88 million and operating profit of about $55m.

The total distribution business, including Auckland, has a regulated asset base of about $483 million, regulated revenue of $75m and operating profit of $56m.

About 60% of distribution connections and gas conveyed is in Auckland, so the non-Auckland distribution business may comprise about a third of the total.

Vector’s annual meeting takes place in Auckland this afternoon.

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