PWC - xmas is early?

[willy_wonker]

Willy is in a happy mood and would like to share his investments ideas with the boys.

PWC = 8 cent div + corporate activity

Come on boys, what are you waiting for?

[:p]:)

[CAM]

there is no imputation credits on that divi.... right?????

[mikescott]

ABN it has very good analyst who be saying nobody will buy Powerco as there is regulation risk and no company will buy a company where profits they can be taken away by government. Anaylst he also be saying that this company be worth no more than $1.96 and councils they be dreaming to believe they be getting premium. Maybe big discount.

[Nimble]

Dividend actually 8.8 cents, no imputation credits attached, record date 4/6, payment date 18/6.

Three other brokers valuations as at the 7/5/04 were considerably higher. None of them include a premium for control (Council wants 25%) and were done before Commerce Commissions announcement.
First New Zealand Capital's 12-month target of $2.08,
Forsyth Barr's $2.29
ABN Amro's $2.38

Over 20 expressions of interest so far in PWC. Indicative bids due mid June. Buyer to be announced in July.

[willy_wonker]

If you follow the analyst recommendations, then you are no better than a fund manager, and we all know why we dont put money with the fund managers.

Didnt the analyst say TEL was worth over $17 during the tech boom? Anyway, analyst are good for making the institutions look good.

[mikescott]

It be depends on which analyst to listen to. Some good, most very bad. But a few is very good. I be thinking Mr Miller at ABN is good.

[i_claudius]

You have to question ABN's credibility on this issue.ABN are Powerco's broker.They organised PWC's bond issue and had the highest published valuation of the company.How can new regulation risk to less than 15% of the company's business turn it into a complete dog so quickly?
Who thinks senior Powerco management likes the idea of being taken over?THEY were doing the taking over,remember?
PWC have paid their broker to dirty the deal.It won't work.This is one of life's plums.
Back up the truck.I have.

[mikescott]

You be not making sense because if ABN be wanting to dirty deal, then ABN be get share price of Powerco higher so it is be then hard for any company to take it over as price high. If price is low then easy for Powerco be taken over. I thinking Mr Miller is be right about gas regulation as this is big risk of government taking profits away. Who be wanting to take such risk?

[Lawso]

minder

Are you saying that punters like me, who bought the offer in 10/02 @ 160 should take our profit and get out of PWC now?

[Binklebonk]

quote:Originally posted by minder


ABN it has very good analyst who be saying nobody will buy Powerco as there is regulation risk and no company will buy a company where profits they can be taken away by government.

Lot's of people invested in the most regulated listed company in NZ - TEL and have done quite well.

[Binklebonk]

quote:Originally posted by minder


ABN it has very good analyst who be saying nobody will buy Powerco as there is regulation risk and no company will buy a company where profits they can be taken away by government.

Lot's of people invested in the most regulated listed company in NZ - TEL and have done quite well.

[willy_wonker]

You are right Binkle. The government talsk alot, but yet to regulate anything. Telecom is a good example. There have been alot of talk about the power sector for many years, yet the power companies continue to make huge profits.

[Nimble]

The Government also talked about regulating airports but nothing eventuated.

[Nimble]

Bids and announcement of successful bidder (June/July) will occur way before a Government decision on whether to regulate or not occurs. Bidders will just have to take into consideration the chances of it occuring.

Draft Report released by Commission: 21 May 2004
Written submissions on draft report due: 2 July 2004
Conference on Draft Report: 22,23, 26-28 July 2004
Cross submissions following conference due: 13 August 2004
Final report provided to Minister of Energy: By 1 November 2004

[boring]

Every once in a while, the spectre of Government regulation causes some weakness in the share price of this company.

Although you have to be aware of the slight risks whenever the commerce commission rattles it's sabre, I've always considered this to be an opportunity to buy more at a good price.

At the end of the day, NZ badly needs investment in good infrastructure for it's utilities, so I can't imagine any Government wanting to enact some sort of oppressive profit regulation regime on utility companies.

Companies such as PWC & CEN can form a solid basis for a share portfolio. You can then add more speculative shares to build a portfolio that resembles a pyramid, low risk at the bottom, high risk at the top.

[truedragon]

Took a dive into the PWC, just in time to grab the divvy. I think with the bidding of government stack around the corner and the high yield, my little stack will be at least okay and hopefully some fire work ;)

DISC: Hold PWC (again)

[willy_wonker]

PWC is only trading at around PE 14x. A large power company can cut huge cost from buying it out and merging existing operations. If someone takes out the councils holding will trigger a takeover of the entire company. I think we should know the outcome of the bids and buyers intentions in a few weeks.

Dont forget that oil and natural gas global prices continues to go up.:)


disc: PWC holder :)

[willy_wonker]

Further increase in power prices expected as a result of Maori interest in the river.

http://www.stuff.co.nz/stuff/0,2106,2933151a13,00.html

[mikescott]

WW, if you be wanting exposure to the power prices they increase, you be NOT buying PWC but Contact ot Trustpower. You be sure you know what you are be writing?

[trendy]

Good point Minder. 30% of NZ electricity generated (kWh) is fossil fueled and often sets the marginal cost of supply (wholesale spot price of cost of the next MW of generation). Spot prices also influence long term hedge contracts.

The 30% of fossil generation is fired by gas and a little coal. Soon to be a lot of coal at Huntly. New Plymouth is or has been converted back to oil firing (orginally had oil firing and was decomissioned in mid 90's).

Willy I can assure you that electricity prices will go up on the back of oil and coal prices in NZ. Simple economics show that as prices go up demand growth often decreases...for PWC this would NOT be good.

[willy_wonker]

Thanks for the warning guys.

I am buying PWC for the div and the possible takeover.

[kiwi_on_OE]

Trendy - I disagree with your last para, I don't see power price increases having any effect on PWC. How many people have an alternative electricity supply? They might use less power, but they'll still have the connection. This is of course assuming that PWC charge a fixed amount per connection, and don't have any volumne related charging.

On a different note, I do wonder about their tax situation. I see that they get tax refunds. Why is this? I wondered if it is because their published accounts use more aggresive accounting policies than they use for the tax man, and as a result they can show a loss to the tax man and a profit to the shareholders. Getting one over the tax man is ok, but if the tax accounts are more accurate, and they are misleading the shareholders then I'd be a bit worried.

[J. Holmes]

Kiwi - thats the difference between tax accounting and financial accounting. Tax accounting follows the tax legislation, financial accounting follows GAAP - there is a mismatch.

Don't sweat it that they got a tax refund, it simply means they overpaid their tax somewhere along the line (it could have been from a tax year long ago).

[willy_wonker]

Dont understand a word you guys said. Thank God for my accountant. PWC shares are looking good for those that bought before it went ex dividend. :)

[kiwi_on_OE]

John(?) - GAAP = do what you want. Their tax refunds seem to be ongoing rather than a one-off. My thinking is more along the lines that they aren't depreciating their assets quickly enough, and so are lowering their expenses and boosting their bottom line. Maybe their tax return is more accurate and they are really making a loss each year.

Or maybe not, I'm just a bit wary when tax paid doesn't correlate with profits - most other companies seem to manage it.

[willy_wonker]

A good article in the NZ Herald on PWC and the electricity sector.

http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3573319&thesection=business&thesubsection=dialogue&thesecondsubsection=&thetickercode=

http://www.stuff.co.nz/stuff/0,2106,2944494a13,00.html

[Futurz]

Powerco Limited Announcement (issued @ 8:38am)

PWC18/06/2004FLLYR REL: 0838 HRS Powerco Limited FLLYR: PWC: Powerco

Revises Financial Statements Potential changes to Powerco's ownership have had an impact on Powerco'spreviously reported results of the year ended 31 March 2004, the Companyannounced today. The recent announcements that the company's three major shareholders, the NewPlymouth District Council, the Taranaki Electricity Trust, and the PowercoWanganui Trust, are considering selling their Powerco shares have triggeredthe financial statement revision. Under tax law, a significant change in shareholder continuity will lead tothe Company potentially losing the benefit of its accumulated income taxlosses. Powerco Annual Reports since 2000 have recorded the benefit of theseavailable losses under current GAAP, noting that this future income taxationbenefit asset is reliant on shareholder continuity. Powerco Chairman Barry Upson said the potential sale meant the Company wasnow compelled to change its ownership continuity assumption, and this in turnhas led to the restatement of the company's financial results. He said theCompany had sought extensive advice to ensure its actions were consistentwith appropriate accounting standards. A change in shareholder continuity oncarried forward tax losses is well understood by the market. Mr Upson said the Powerco annual result announcement was made in April thisyear, before the major shareholders had informed the market of theirintention to seek indicative bids for their shareholding. "The result we announced in April complied with accounting standards at thetime, but because shareholder continuity can no longer be assumed, we mustnow revise our financial statements since these are about to be released toall shareholders," Mr Upson said. "The potential change in shareholder continuity no longer makes the assetvaluation of future income taxation benefits "virtually certain" as requiredby accounting standards. The write-down of this asset by $27.6 million inthe balance sheet impacts the reported profit of $55.1 million announced inApril 2004, down to a revised profit of $27.6 million" Powerco has received an unqualified opinion from the Company's auditor forthe revised financial statements, which are included in the annual reportshortly to be released. Mr Upson noted that there would be no immediate cashflow or operationalimpact on the Company. If Powerco does lose the future income tax benefitasset, this will result in the Company becoming a cash taxpayer earlier thanexpected. This will have no financial impact for taxpaying shareholders, asonce Powerco eventually becomes tax paying, they will receive imputationcredits, which can be attached to dividends. There will be no impact on the dividend paid to shareholders today the 18thJune, said Mr Upson. This release is consistent with the continuous disclosure obligations set bythe NZX for listed issuers. Powerco is New Zealand's largest gas distribution business and second-largestelectricity distributor, based in New Plymouth.

[i_claudius]

A nice opportunity to add to my holding at $2.02.
Friday's profit restatement announcement confirms the takeover is on it's way.
You only make these accounting changes when you are "virtually certain" something exists or not.By booking this change the company is admitting it is certain the takeover will happen.

[willy_wonker]

I am in the same boat as you Claudius. :)

The wind is picking up and our sails are at full mask. :)

[Nimble]

Any prospective buyer of PWC according to the above release would not be able to use any accumulated tax losses and instead would have to pay tax. If we ignore the one off right down of the accumulated tax losses the most recent result could be restated as;

Before Tax earnings of $42.928 – Tax at 33% $14.166 = $28.762 which gives us a PE of 22.6 based on the current price of 206 (vs NGC 17.6, CEN 28.6). I'm certainly not an accountant but I find it helpful to ask will there be a buyer prepared to pay a PE of 22.6? And PWC's price will only rise from here if someone is prepared to pay a higher multiple than this. The yield is still very attractive but how much higher can the PE go?

[good news]

WW.. i think your boat has sprung a leak...PWC down 6c today.. indicatives bids due tomorrow??

[Liberty]

Maybe I sold my holding to you Claudius...at 202...trendline break sell signal given yesterday.

Technically PWC has been weak for quite a few days. The only question was whether the primary uptrend would be reconfirmed...it wasn't. Today's fall was not all that surprising.

[Nimble]

Liberty, With the aim of improving my TA skills would mind confirming where your trend line started, I'm guessing early March. The reason I ask is there appears to be another trendline starting in July that is confirmed a number of times which is currently at 197, tonights close.
Discl. recently sold, happy to buy back in if trend reverses

[Liberty]

Hi, Nimble. I see where you mean.

I drew a trendline based on the two low points in March 03; this line was confirmed at the end of this March; and price action fell below this line Monday.

What has concerned me as much as the price fall, has been the rising volume associated with it. For five consecutive days the volume has increased while the price has fallen or held steady. That was bearish enough, but the trendline break yesterday tipped me out.

However I can see what you mean - a trendline could be plotted, (rising less rapidly) from July last year, and it fits the price action of the last 12 months much more readily.

I've been doing this for only two years. My TA skills are improving but I have much still to learn. It would be great if Phaedrus could add his opinion.

Cheers.

[truedragon]

PE or no PE, I think some insider thinking the TO is not going to happen or offer low.... otherwise why the 3% drop?

DISC: Hold PWC

[Nimble]

Thanks Liberty, good explanation and observation on volume!

I bought PWC on the 20/4 at $1.98 expecting a good result and after seeing it bounce off the trend line. Once half the shares came up for sale decided to hold till offer made to all shareholders, which may still happen. Frustrated to see price and profits come all the way back from a high of 224 to my entry point. Sold at $1.99 using a breakeven stop.

Would be interested to hear if others would have used a long term moving average or trailing stop to protect their profits. Are currently trying to move away from shorter term trading 2-4 months to longer term trades/holds, in order to reduce workload but finding giving up lots of short term profits in order to stay in trends.

[willy_wonker]

quote:Originally posted by good news

WW.. i think your boat has sprung a leak...PWC down 6c today.. indicatives bids due tomorrow??


Good opportunity to purchase more shares at a lower price.
Willy is loving it. Dont forget it is a energy stock and not a dotcom stock. :)

[Liberty]

Nimble, explain your rationale for using a breakeven stop?

[good news]

87k on offer at 1.95 .. 2k on bid at 1.94 .. looks like its heading south..hope your pockets are big

[Nimble]

Liberty, I generally calculate three stops but only use one at any one time.

1. Initial stop, just below entry price at closest support or trendline
2. Breakeven stop, price I need to sell at to recover capital and cost of entry & exit brokerage. This is normally only 1-2 cents above entry but could be 2-5% above initial stop. As soon as price has moved above breakeven I move my stop to breakeven.
3. Trailing stop or Trendline stop

Rationale: This drastically reduces the number of loosing trades I make and the sizes of the losses. If your strike rate at picking winners is 50%, then minimising the size of the losses and letting your profits run makes a big difference to overall profitablility. Instead of 50% of my trades being 2-5% losses a good portion of these are now neutral or breakeven.

[willy_wonker]

Good News, you have no faith.

You dont buy a blue chip stock for a few day story. Those that buy good stock and hold will reap the benefits. Eg: have a look at the CEN share price back in feb-march 2003 when it dropped from $5.71 to $4.80 and today trading at $5.88 with further possible corporate activity.

[Phaedrus]

Nimble, trendlines are no more than a simple means of monitoring trends, so it is only logical to monitor the trend that you are interested in [u]from its start</u>, whenever possible. As Murphy puts it, trendlines should include all price action. I have marked your trendline in light green - it is not as valid (or as timely) as the textbook trendline as used by Liberty (plotted in dark green). I always feel free to bend the rules if it suits me, but this is just another example of how it's usually best to stick with the conventions. Would it be true to say that your breakeven stop was hit because you had no profit taking strategy? Good on you for acting on it though - it always hurts to make a profit and then see it slip through your fingers. You seem to have a good grasp of basic principles when you say you give up "lots of short term profits in order to stay in trends." That's how it is.
The chart shows a long-term moving average such as would be used by long-term traders and a shorter-term moving average (magenta) such as would be used by short-term traders. To avoid cluttering the chart I have not marked the buy/sell signals these generated - you can easily see where they are. I like the trendline break signals best.
The rising volume on a falling price that Liberty speaks of is a classical indication of weakness in a share price. This shows up beautifully on a chart, though it needs to be on one of much shorter period than the 3 year example shown here. Let me know if you want me to post this.

http://home.ripway.com/2003-11/39768/PWC001.gif

[ananda77]

Hi there!

Phaedrus, despite the sell-signal in the chart, I think in this case it is a hold if not a buying opportunity. The reason is corporate activity.
Even if the council will not get a premium of 25% over a base valuation of $ 1.93, I personally would love to have an early x-mas and be happy with a 10-15% premium, especially after the recent dividend payout. This would bring the price range back to $2.12-2.22

[Phaedrus]

Ahh KGB, you are looking at the possibilities, some would even say speculating, though I prefer to call that sort of thing "scenario trading". You may well be right, you may be wrong.

I try to concentrate on the little I know. Using simple trend-following techniques this stock has given a 47% return in about 15 months - by my standards, a very successful investment.

One measure of the "efficiency" of a trading system is the percentage of any given price rise that that is actually "taken out". (Nobody can get 100%, buying at the exact bottom and selling at the exact top.) I have found that it is very difficult indeed to do better than about 70%. This trade took out about 67% of the uptrend. For mere mortals such as myself, this is as good as it gets.

I have a bird in the hand. You have two in the bush.

[ananda77]

Of course you cannot be faulted on that one. Buy into a quality stock early enough than you don't have to worry about holding when the price drops, you just sell at some arranged parameters set by yourself.
In my case, PWC was never my preferred stock to hold over the likes of TPW or ANZ. I bought in rather late, that's why I have to have the two birds in the bush, but I am confident $1.93 will hold.

[Nimble]

Phaedrus, Thanks for your comments and graph. I take your point about starting where ever possible a trendline from a low or high. Did however notice your down trendline doesn't exactly start from the top.
Could you elaborate more on the "no profit taking strategy". Doesn't buying close to an up trendline with the aim of selling once the trendline breaks qualify?
I also note you use a logarithmic scale for prices (not sure this is the correct term). What is the rationale for this. By using the standard format I end up with slightly different answers.

[mikescott]

Should be announcement on how many (if any) bidders for PWC today. If there are, share price may not recover still as there's some rather smelly activity on the market with a couple of brokers sitting on the stock - are they acting for the potential buyers?

[willy_wonker]

I am thinking the same thing as you Minder.

Something smells. Oh well, Willy is ready to pick up more cheap stock, thanks for coming.

[Phaedrus]

Nimble,
The reason for using Logarithmic price scales is so that growth at a steady rate is depicted by a straight line. Say you had a $10 stock that was going up 1% per week. In the first week it would go up 10 cents, but by the end of a year it would be going up by 16 cents/week. Without a log price scale, this would appear to be an ever increasing growth rate, and you would have to be drawing a series of unconfirmed trendlines of ever increasing steepness. Using a log price scale gives a single straight trendline, as befits a linear growth rate. A good example of this is the FBU chart - using a log scale this gives a single unbroken 3+ year trendline with multiple confirmations. Using a linear price scale gives a series of unconfirmed, conflicting and largely useless trendlines.
You comment that my downward trendline does not start from the top. True. A trendline drawn from the peak here is never confirmed and price action moves away from it to the point that it becomes irrelevant - useless. So, you draw a second, steeper tentative trendline - with the same result. Because PWC is an an accelerating downtrend here, the same thing happens again. And again. But, look what happens with the fourth tentative trendline. It gets confirmed. Again and again. Now we have something more dependable and more useful, so when such a trendline is broken we look very seriously at acting on this and buying at this point. The chart below shows the principles involved much more clearly than all these words.
In practice, I too found your light green trendline of some use (and comfort!) BUT when April 04 price action confirmed the old tentative trendline, the light green trendline was superceded. A valid "secondary" trendline will never be steeper than a valid primary trendline. Short-term trends are steeper than medium-term trends which in turn are steeper than long-term trends.
With your buying so late in the uptrend, I wrongly assumed that you were interested in a short-term trade. I guess I was asking what your plan was eg selling when the short-term trendline was broken, or when a 30sma was crossed, something like that. Buying near a confirmed valid trendline with the intention of selling should that trendline be broken, is quite a reasonable trading plan. Good on you for using a break-even stop - not many people do. If I were in your shoes, I would class this as a successful trade.

http://home.ripway.com/2003-11/39768/PWC2001.gif

[willy_wonker]

Wow.. Willy now knows why he failed university.

Willy only needs to know how to BUY and SELL, simply.

[willy_wonker]

Last chance for PWC.

DJ MARKET TALK/NZ: Info On PWC Bids Due Later Today&lt;PWC.NZ&gt;

[Contact Us: 644-471 5990, djnews.wellington@dowjones.com]

1425 [Dow Jones] New Plymouth District Council to make statement late this
afternoon on how indicative bidding for 53.7% stake in Powerco (PWC) has gone,
says sale adviser PricewaterhouseCoopers; indicative bids closed yesterday.
PricewaterhouseCoopers has previously noted interest in stake from Australia,
Asia, North America with over 20 parties requesting information memorandum. Stake
made up of NPDC's 38.2%, Taranaki Electricity Trust's 11.8%, Powerco Wanganui
Trust's 3.7%. Single buyer would trigger takeover for whole of company; PWC last
+0.5% at NZ$1.97. (WES)
:D

[truedragon]

2% surge.. what the **** is going on with this one... bid related no doubt.

DISC: Hold Some PWC

[ananda77]

Hi there!

Look at FEG, UNL, etc. in the past. Everytime a sale was near completion, a substantial drop in shareprice happened.
Isn't this called 'Arbitration Trading'?

[willy_wonker]

Ananda, it is call buying opportunity !
You and I picked up some cheap (maybe) stock yesterday.

Those that have no faith and runs away due to a few cent flutuation will never make money.

[Benlamnz]

awesome!

PWC
24/06/2004
GENERAL
REL: 1545 HRS Powerco Limited
GENERAL: PWC: Powerco - Indicative Bids Received
New Plymouth District Council has provided the following news release:
Indicative bids for the shares held by the New Plymouth District Council and
Powerco's two other major shareholders have now been received by
PricewaterhouseCoopers (PwC).
A preliminary review by PwC confirms ongoing keen interest in the opportunity
to acquire the stake of the major shareholders.
The bids, which are from both local and offshore parties, will be considered
by the council's Equity Subcommittee on 30 June and by full council on 1
July. A final decision on the sale is likely to be made within eight weeks of
the 1 July council meeting.
The majority of bids have been priced at a premium to the current market
price.
End CA:00101780 For:PWC Type:GENERAL Time:2004-06-24:15:45:39

[i_claudius]

oops.
How dumb am I?Thanks for your stock,Liberty.
Guess there's some hope for we geometrically challenged types after all.
Must dash....the new car's being delivered.

[Benlamnz]

ww:

any opinion as to what the bids range at? Right now everyone is guessing and the 2.07-2.09 is no where indicative enough of what the bids are at.

[Liberty]

I hope you profit well Claudius...I'm still happy to be out.

[i_claudius]

How very gracious Liberty.
Do come and see me on UKTV (SKY 4) tonight at 9.30 and I'll show you how my grandmother Livia or my uncle Tiberius likes to treat you republicans.
Ave

[Benlamnz]

please keep the political feud in the Reegan thread guys.

[boring]

I'm not so sure I'm comfortable with 53.6 percent of this company possibly ending up in control of a foreign company. Not because of any xenophobia, but concern that a full takeover may be initiated and PWC possibly being delisted.

Whilst I'd enjoy the short-term capital gain probably resulting from a full takeover, I'd prefer to keep PWC as a bottom-draw core portfolio holding. I class PWC similar as CEN, doesn't require a great deal of my attention, a good infrastructure holding.

http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3574651&thesection=business&thesubsection=energy&thesecondsubsection=electricity&thetickercode=PWC

[willy_wonker]

quote:Originally posted by Benlamnz

ww:

any opinion as to what the bids range at? Right now everyone is guessing and the 2.07-2.09 is no where indicative enough of what the bids are at.


Brokers valuation range from $2.00 - $2.40.

From past experience, when there are more than one buyer, the competition usually hots up and the price will go higher. I assume there will be an independent valuation? Anyway it is all good news and Willy is again laughing all the way to the bank. :)

[Lawso]

Second Xmas coming for PWC holders :)

[duncan macgregor]

funny business this I thought I should jump before the divi then I decided to collect and jump Immediately after. It dropped to far for that, then curses dropped more. Now that the price Is back to where It all started I still hold out for more. My system Is shot down In flames on this, but what the hell I bought In at $1-64 . I now think ride It out on a daily basis finger on the button. I would hate to miss out a big jump at the end. I think after the latest deals are resolved the share price will go flat for a while, not worth holding, but at the moment expectations are high.
WHO NEEDS A BLOODY SYSTEM ANYWAY THIS IS FUN GO DUNK GO
macdunk

[willy_wonker]

All good things take time, grasshopper. :)

[ananda77]

Of interest would be to know, wether the base valuation of $1.93 (I am counting on that one) is inclusive of the recent dividend payout.

If not, than the current market price would reflect the new base valuation for pwc and it is likely that the council has now selected the five bidders, who are willing to at least meet that price.

In this scenario, the real bidding for pwc would start now with the council taking the 25% premium position for starters. In the process anything between 5 to 25(%) could happen of course, which would result in a price range of $2.11-$2.51.

Taking the middle way, I personally assume that pwc will be sold with a 10-15(%) premium at a price between $2.21-$2.31. A premium has to be paid, otherwise institutions and the majority of shareholders would be unlikely to sell.

Hold PWC YES, speculative buy PWC yes with a more than average chance to win.

[Binklebonk]

Good news, the write off of the tax assets may have been premature - it had all the hallmarks of an oversight. It didn't make sense for 4% too many shares being sold to be responsible for losing $m's of tax assets.
The sensible thing of the sellers was to limit the block being sold to 49% which has now been reported.

[willy_wonker]

Hey BB, where did you get the info from?

Do you have a link. Thanks.

[mikescott]

quote:Originally posted by willy_wonker

Hey BB, where did you get the info from?

Do you have a link. Thanks.


Yes - African tragedy. :D

[Binklebonk]

On this site

Taranaki Electricity Trust yesterday committed to selling its 11.8 per cent stake in Powerco, said Craig Rice, a partner at PriceWaterhouseCoopers, running the sale.

That follows a vote by New Plymouth District Council on Thursday to sell its 38.1 per cent stake.

Mr Rice said the two organisations had committed to continuing with the sale and selling "if the price is right" for their combined 49.96 per cent.

[kiwi_on_OE]

They may sell only 49%, but I believe that would still initiate a t/o bid. Of course if the price is below mkt price (!!!) then the buyer might succeed in only getting 49%. Given the size of the tax benefits, it would be interesting to know if it would be possible to place a chunk of the shares with existing shareholders, and maybe get the company to buy some back, just to keep the tax benefit. Arguably the tax benefit issue might make the company more valuable to existing shareholders than it would be to an outside party that would be likely to lose the tax benenfits.

[Binklebonk]

What puzzles me somewhat is that the process started off with 2 shareholders with 49% putting shares up for tender. Then one other shareholder with a modest 3% or decides to join is because the level of interest is at an attractive level. Between the 3 of them, the final 3% worth around $20m potentially triggers the loss of $27m in value by way of tax assets.
Why wouldn't someone be able to work out an arrangement whereby the final 3% is sold as an option deferred the sale for a year so that the tax assets are saved? or does this indicate that the $27m is neither here or there in the grand scheme as a much bigger stake is being sought, or is it that the 3 large holders are playing poker.
Must be interesting developments going on behind the scenes.

[willy_wonker]

Losing the tax lost claims is not an issue to the buyer. The buyer will either use a tax heaven company and are leveraged to purchase the assets.

[willy_wonker]

Thank you for your usual informed and to the topic comments.

Wonder why Sharetrader has banned you so many times and changes your name from Matrix/Nightmare/Minder.

[Lawso]

Gee thanks, Minder. That's really helpful and relevant.

[Lawso]

How come minder's post, which I've just responded to, is timed at 8.24 when by my clock it's now 7.33??

Minder get George Bush to fix it just like Iraq. Only there is no Oil.

[truedragon]

Anybody know the bidding prices offered?

DISC: hold PWC

[willy_wonker]

It should be between $2.20-$2.40 maybe higher due to a large number of interested parties.

[truedragon]

hey ww, do u know when they will annouce the bid price officially?
Cheers,

[Shamrock]

Did anyone else hear that PWC has been placed on credit watch by S&P's?

[Jim]

Yes, I do

[Benlamnz]

Here us the credit watch story. just the standard stuff relating to the potential ownerhip change and implications. Nothing to worry about on the earnings front.


SP places Powerco ratings on creditwatch developing
Source:
SYDNEY, July 14 AAP
Published:
Wednesday July 14 2004, 1:17 PM

Standard Poor's Ratings Services today placed its BBB-plus long-term and A2 short-term ratings on Powerco Ltd on CreditWatch with developing implications pending the outcome of a proposed sale of more than 50 per cent of its shares by three shareholders.

It said the recently rated credit enhanced notes that benefit from the financial guarantee provided by XL Capital Assurance Inc are unaffected by the rating action.

The rating action reflects the prospect that a change to the controlling shareholder and any rating action may affect covenants within Powercos existing debt issues, and influence the business and financial risk appetite of the company, said Standard Poor's credit analyst Colin Atkin, associate director, Corporate Infrastructure Finance Ratings.

He said the financial strength of the new shareholder may also positively or negatively influence the stresses on the company's core cash flows and will need to be viewed in light of the new owner's ultimate shareholding and reliance on distributions from Powerco.
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Powerco owns New Zealand's largest gas distribution network and its second-largest electricity distribution company.

[willy_wonker]

quote:Originally posted by truedragon

hey ww, do u know when they will annouce the bid price officially?
Cheers,


We should know the price and successful buyer by early Sept 2004. A full t/o bid should follow after the announcement. :)

Credit watch does not affect current shareholders. Will only affect the successful buyer.

[Benlamnz]

looks like some less informed sold out after the credit watch news. As a target company nothing fundamental, including the yield, has changed. will deifinitely top up on further weaknesses. Incidently McEwen has this to say in th NBR:

Powerco shares rally as energy sector boils over
The National Business Review - 16 July 2004 : 41-03

SHARE OF THE WEEK





Contact Energy might be the name on everyone's lips at the moment but another energy stock is also creating headlines.

New Plymouth-based Powerco has remained on investors' radar since local councils, which own a combined 53.7% stake, put their holdings on sale a few months ago.

The potential changes to ownership have already had an impact with the company revising its profit announcement down to $27.6 million from $55.1 million.

This is to offset potential tax liabilities arising from the change in shareholder continuity under tax law.

New Plymouth District Council has said little about a pending sale except that indicative bids, both local and overseas, are in and that the decision was influenced by talk of a merger between Powerco and gas pipelines company NGC.

It also said it wanted a premium of more than 25% on the stake's market price.

The decision to sell initially sent the shares higher before a drop in response to the revised profit announcement, even though the accounting changes are likely to have no effect on the company's forecasted earnings.

Some analysts say Powerco shares are fully valued and the company is also vulnerable to gas-sector regulation, inferring that the councils may struggle to get the price they are after.

The company is expected to produce a flat result in 2004/05.

A final decision on the sale - likely to be worth around $400 million - was expected in mid-August.

[willy_wonker]

Weakness on PWC is an opportunity.

Willy is alway watching and waiting.:)

[ananda77]

Powerco shares rally as energy sector boils over

(The National Business Review - 16 July 2004 : 41-03)

A final decision on the sale - likely to be worth around $400 million - was expected in mid-August.

I assume the 400m would be for the council package. Thus the total TO-value would be around 800m = approx. $2.50/share

Willy Wonker, I just think some people do not know the meaning of x-mas.

[willy_wonker]

Ananda, xmas means different things to different people. Some will have more than others, while others will have nothing. In this case, Santa have given it to us early and it is up to us to take it or leave it. But then if we eat too much during xmas, we may regret it and have to pay money for diets and gym membership. :D

[ananda77]

Willy Wonker

But then if we eat too much during xmas, we may regret it and have to pay money for diets and gym membership.

Just that I would be twice as wealthy today had I not sold tooooooooo...early all the time!

None more of that!! :) ;)

[Benlamnz]

Round 2 of the electricity merry go around...
Greg Martin better make sure he get his game this time or heads may roll, especially if Origin succeed with a right field bid, again.



Aussie giant still hungry for Powerco
25 July 2004

By GARRY SHEERAN

Powerco will be firmly in the sights of Australian energy giant AGL as second prize after it missed out last week on Contact Energy.


Suggestions AGL's bid for Contact stumbled on competitive issues were discounted by one analyst.

"AGL missed out because it did not put enough on the table," he said.

Origin Energy, another Australian power company, paid $1.68 billion ($5.67 a share) to Contact parent, US-based Edison Mission, to take control of New Zealand's energy giant.

Market rumours said AGL had bid $5.50 a share for the Contact stake.

"For the sake of $50m, AGL missed out on a once-in-a-lifetime opportunity to cement its place in the New Zealand energy industry and add significant value to its investment here," said the analyst.
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AGL entered the New Zealand marketplace in 1992 with the acquisition of an interest in NZ gas pipeline player NGC Holdings.

It took a controlling 66% stake in NGC in 1999.

Securing a 51% stake in Contact would have given AGL control over New Zealand's largest wholesaler and retailer of natural gas and generator of 30% of of the nation's electricity.

In that situation, it would have needed clearance from the Commerce Commission on competition issues. Some speculated this hindered its Contact bid.

But one analyst said such issues had been overcome in similar situations in the past by undertakings to divest assets to meet regulatory requirements. "That's what Shell did when it bought the assets of Fletcher Energy in 2000 and what Graeme Hart did when he bought NZ Dairy Foods a few years later."

An early indication of the benefits likely to flow to successful Contact bidder Origin Energy has been seen in the effect of the purchase on that company's share price. Origin shares were trading at $A5.80 shortly before a halt was put on their trading on the Australian Stock Exchange last week ahead of the announcement of the successful Contact bidder.

Late last week the shares were trading up A35c at $A6.50, or an increase in market valuation for the Australian gas and electricity retailer of $A234m ($NZ262.9m).

With Contact out of its reach, the next big-bang buy for AGL on the New Zealand scene is Powerco, the Taranaki-based gas distributor and electricity lines company created from the merger of more than 35 smaller energy businesses over the last decade.

PricewaterhouseCoopers has shortlisted five potential bidders for the 53 per cent stake, worth around $350m, being sold off by the New Plymouth District Council, Taranaki Electricity Trust and Powerco Wanganui Trust.

Both Origin and AGL are understood to have been among indicative bidders, along with Australian Pipelins Trust and may be Singapore Power, which has been buying energy assets in Australia.

Final bids for Powerco are due on Friday, with an announcement of the successful bidder expected within two weeks.

"The pressure will really be on AGL not to miss out again at the last round," said the analyst.

With AGL-controlled NGC in gas transmission, and Powerco in both gas and electricity transmission, there were big opportunities for AGL to create value through bringing the two companies together.

The analyst estimated synergies and cost-cutting by combining the two companies could eliminate $30m of costs, and create $210m of value.

Powerco and NGC entered merger talks in early April before Powerco's cornerstone shareholders threw a spanner in the works by announcing their intention to sell.

[duncan macgregor]

Hi guys, I am loaded up with PWC cant make my mind up sell now,or when It all happens In august. I expect the price to drop back later, with a bubble rise In the short term. I am not up with the play when It comes to this sort of thing replies and Ideas gratefully received . Thanks In advance. MACDUNK

[ananda77]

duncan macgregor:

Why did you buy the shares in the first place?

Are you happy with the profits you would make right now?

What are your reasons to suggest the share price will drop back later?


Powerco quarter profit takes jump

28.07.2004

Gas and electricity networks company Powerco's net profit after tax for the three months to June was $14.4 million, up from $13.1 million for the same period last year.

...The deal is subject to Taranaki Electricity Trust and Powerco Wanganui Trust also selling their stakes. A final decision on the sale - likely to be worth $400 million - was expected in mid-August.

Mr Upson said Powerco understood the council expected to receive final bids shortly.

I personally will hold.

[willy_wonker]

quote:Originally posted by duncan macgregor

Hi guys, I am loaded up with PWC cant make my mind up sell now,or when It all happens In august. I expect the price to drop back later, with a bubble rise In the short term. I am not up with the play when It comes to this sort of thing replies and Ideas gratefully received . Thanks In advance. MACDUNK


If it happens there will be a full t/o offer for all shareholders, so why sell now?

[duncan macgregor]

I agree Rawdata the more I dig the more mixed messages I come up with. The share will drop In price after this Is over Its what happens In the short term I am trying to work out.
MACDUNK

[airedale]

Definitely a hold and possibly a buy more in the future.
Look back at all the energy stocks like Contact, NZ Refining,Fletcher Energy, United Networks, Horizon Energy, etc. They all were or are in long term uptrends. Perhaps someone else can think of a decent sized energy stock which was a fizzer.

[wsheridan]

quote:Originally posted by airedale

Definitely a hold and possibly a buy more in the future.
Look back at all the energy stocks like Contact, NZ Refining,Fletcher Energy, United Networks, Horizon Energy, etc. They all were or are in long term uptrends. Perhaps someone else can think of a decent sized energy stock which was a fizzer.


Exxon[xx(]

[airedale]

Wsheridan, OK, I should have said energy stocks listed on the NZX.That includes electricity,gas, oil, refineries,etc.

[truedragon]

I sold my PWC today because not because I don't like the stock but rather that I am too heavily geared for my liking.

I took the divvy and made a profit, so even if I miss out the what I think a bid of around 2.30+ to come. I get a few good nite sleep. I will get back in if for some mysterious reason there is a substantial drop in the next few weeks though. Good luck to all the holders and non-holders like me [:o)]

[trendy]

Truedragon in trading you do what you think is right. So good on ya.

I made a very nice profit a few months on PWC. But have stood aside as short term trend is crabbing (long term has been heading up since early 2003), even with the announcement hanging over it.

[willy_wonker]

You guys make me laugh ..lol

I bought a fair number of PWC before the div and a happy holder till the end. The electricity sector is going through consolidation. Do you know what that means? Have a look at the primary and the freight sector share prices... lol

Traders will never make big money.

[trendy]

Willy the electricity industry has two parts (1) regulated wires businesses and (2) unregulated energy businesses. PWC is a wires business, they may consolidate but will still be a regulated business.

disc: I work in this industry.

[airedale]

Hi, Trendy, of course PWC has interests in Tasmania and Queensland which are non-regulated, or at least not regulated like the NZ electricity part of the business.

[willy_wonker]

PWC is a great compliment for a large firm who wants to increase the lines side or who doesnt have a lines business. All in all one can reduce huge cost by merging or taking over PWC and use existing management.

[mikescott]

Just received this on my email :

J NZ's Powerco Stake Sale Attracts Strong Overseas Bids&lt;PWC.NZ&gt;

WELLINGTON (Dow Jones)--The sale of a 53.7% stake in New Zealand-based Powerco Ltd.
(PWC.NZ) has attracted strong interest from offshore investors who will make their final
bids next week, PricewaterhouseCoopers said Friday.
"There's certainly good offshore interest in the opportunity to make the final
bids," said Craig Rice, a partner at PricewaterhouseCoopers, which is leading the sale
process.
Powerco is a gas distribution and electricity networks company.
"We are hopeful there will be a good outcome," Rice told Dow Jones Newswires. Final
bids are due Aug. 6 and the successful bidder will be announced sometime in mid August.
"After the final bids are in we will need some time to potentially hold further
discussions and analyze the bids...it might take up to two weeks from (Aug. 6) to
conclude the process," Rice said.
The New Plymouth District Council, the Taranaki Electricity Trust and Powerco
Wanganui Trust decided in April to sell their combined stake in Powerco, New Zealand's
second biggest energy networks company.
Powerco has about 295,000 electricity customers and 106,000 gas customers in New
Zealand's North Island and is building a gas network in the Australian state of Tasmania
for commercial and residential use.
Rice, who declined to reveal the parties who had expressed interest, said due
diligence is still being carried out by some of the potential buyers. Up to five parties
were allowed to put in their final bids but the actual number of parties competing in the
final bidding process isn't being revealed.
The Powerco stake is worth around NZ$363 million at the company's current share
price. The successful buyer will need to make a takeover offer to all Powerco
shareholders.
Under New Zealand's Takeovers Code, a purchase of over 20% of a listed company
requires the buyer to make an equal offer to all shareholders.

[willy_wonker]

DJ NZ Council Says Outcome Of Powerco Sale To Be Known Soon&lt;AGL.AX&gt;&lt;PWC.NZ&gt;

WELLINGTON (Dow Jones)--The New Plymouth District Council expects the winning bidder
for a 53.7% stake in New Zealand's Powerco Ltd. (PWC.NZ) to be announced a few days after
the closing date for final bids.

New Plymouth Mayor Peter Tennent said in a statement Wednesday the council is
confident of obtaining a "good premium" for the Powerco stake. The closing date for the
final bids is Friday.

The New Plymouth Council, the Taranaki Electricity Trust and Powerco Wanganui Trust
decided in April to sell their combined stake in Powerco, New Zealand's second biggest
energy networks company.

"We hope to make an announcement soon and remain confident of a strong premium on
our shareholding," Tennent said.

Powerco has about 295,000 electricity customers and 106,000 gas customers in New
Zealand's North Island and is building a gas network in the Australian state of Tasmania
for commercial and residential use.

Media reports have tipped global finance and banking company Bab**** & Brown L.P.
(BAB.XX) and Australian Gas Light Co. (AGL.AU) as among the short-listed bidders for the
Powerco stake, which is valued at NZ$360 million at current prices.

-By Shri Navaratnam, Dow Jones Newswires; 64-4-471-5990;
shri.navaratnam@dowjones.com
-Edited by Sharon Vong

(END) Dow Jones Newswires



Wednesday 04 August 2004 10:47:08 AEST

[willy_wonker]

Council to reveal Powerco stake fate

09.08.2004
By CHRIS DANIELS AND PAUL PANCKHURST

It's all eyes on New Plymouth today as the sharemarket waits to discover the fate of a 53.6 per cent stake in listed lines company Powerco.

The New Plymouth District Council - one of three regional bodies trying to sell out of the company - has scheduled a media briefing for 10am.

Council spokesman Nick Maybury said last night the briefing was "concerning the sales process for the Powerco shareholding - I can't tell you anything more than that.

"All will be revealed."

Bids closed on Friday for the stake held by the council, Taranaki Electricity Trust and Powerco Wanganui Trust.

If the stake has sold, the buyer will be required to make a takeover offer to the rest of the company's shareholders.

The Business Herald was told that bidders from Australia had included ANZ Private Equity and an infrastructure fund of investment bank Bab**** & Brown.

The last share price for Powerco was $2.15.

The New Plymouth council has consistently talked of wanting a premium for its stake but finance industry insiders are sceptical that it will get more than the market price.

New Plymouth Mayor Peter Tennent has said the council is confident of "a good premium on our shareholding".

"I would be really surprised if they got anything like market," said one sharemarket player last night.

The reasons for doubt include the "regulatory risk" - the possible effects of Government rules for the sector on profitability.

However, one analyst was last night picking a price of $1.95 to $2.20 - if the stake sold.

The analyst said Powerco could be "a beachhead" if an overseas company wanted to make a play for another listed New Zealand power company, the Australian-controlled NGC.

Speculation is increasing that AGL - NGC's majority shareholder and also a failed bidder for control of Contact Energy - may pack its bags and leave New Zealand.

The council's Powerco stake went on the block after the Business Herald reported in April that Powerco was in merger talks with NGC.

That prompted NGC to disclose it was in talks with both Powerco and Vector on "potential opportunities".

POWERCO

Headquarters: New Plymouth

Business: distributes gas and electricity in parts of Australia and New Zealand

Market capitalisation: $680 million

Share price: $2.15

[Jim]

PWC sold for$2.50. Punters expecting a $2.50 will be pissed off:D:D

[wsheridan]

People expecting 250 were delusional.
lonrg-term 215 will be seen as a bargain, so I'd exopect the offer to fail .... which is probably what the infrastructure trust wants ... after all, they will want to sell-out at some stage and keeping the listing might help that.

[Benlamnz]

quote:sell-out at some stage

I think PIF has view of acquiring stable maturing business with strong cashflow of which to distribute to unit holders, ramping up unit prices in the process. The end game is when the unit outperforms the index, the management, in this case, Bab**** & Brown, milks multi million managemtn fees, much like Macquarie Bank does with its funds.

Those who sold can consider buying in PIF instead, comparable yield of 8.5%, and surly to rise more as PWC contributes positive earnings to the group by year end. I am picking a 12c full yr dividend.


Disc: saw this one coming and swapped for PIF recently.

[k1w1]

No,no,no,no,no Benlaminz

if you "saw this one coming and swapped into PIF recently" then why didnt you post after you did the trade and before the announcement. Don't wait till you hear the announcement and then backdate telling us what you did. Cos some cynics just might not believe you.

This is like the fishing stories that grow with the telling.

[Benlamnz]

I meant I heard about PIF interested in PWC, and after some consideration, decided to buy PIF and make a mental note to sell PWC if and when a deal between the 2 happen. It happened this morning, thats all. Of course if I really know for sure the exact detail of the deal, I would've sold PWC on Friday for a few more cents, and wait till today to buy PIF, at a cent or two lower. So I accept the criticism partially.

[truedragon]

The price has drop below 2.15???? I will expect it to be back there soon[:o)]

[k1w1]

quote:Originally posted by Benlamnz

I meant I heard about PIF interested in PWC, and after some consideration, decided to buy PIF and make a mental note to sell PWC if and when a deal between the 2 happen. It happened this morning, thats all. Of course if I really know for sure the exact detail of the deal, I would've sold PWC on Friday for a few more cents, and wait till today to buy PIF, at a cent or two lower. So I accept the criticism partially.

when you use the word "swapped" most will take that to mean you sold your PWC and purchased PIF instead. When exactly did you "swap"?

[Jim]

Stop crying at spilled milk, Brats

[duncan macgregor]

Old macdunk was going to sell first thing this morning and buy PGG.
Got held up and by the time I got back they had dropped 10c. Hope the gods know what they are doing I stuffed up. Will now have to sit It out bugger. cheers macdunk

[k1w1]

Tight stops as always MacDunk !;)

[truedragon]

The offer of 2.15 apply to all shareholder that want to accept, am I righ?

If that's the case ab 2.08, there is 7 cent arbitrage money to be made or like 3%.

Any comment??

[truedragon]

http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3583279&thesection=business&thesubsection=energy&thesecondsubsection=general&thetickercode=PWC

All other shareholders will now be offered the same deal, although some can elect to sell all their shares to Prime for cash, or take all the money in the new debt securities.

I guess all shareholder will get the same offer.... I am in for some arbitrage play[8D]

[KJ]

TD-I have decided to sell and move on to other things-I guess one would have to wait several mths before being paid $2.15.

I prefer to take $2.08 now and invest elsewhere.

[willy_wonker]

Must we let the Aussies steal everything off us at a discount rate? All the banks are gone, except Kiwibank and now the power stations. Ummmm.... $2.15 is too cheap !

[airedale]

Now I wonder if we could get a similar situation to the sale of the railways TRH to Toll Holdings. If the buyer Prime Infrastructure does not get up to 90% then PWC will remain listed on the NZX. And I see that the TRH price kept rising after Toll did not get 90% of the railway.
So I am not in a hurry to sell yet.

[willy_wonker]

I agree airdale. I see PWC still listed and a possible merger coming. All good news in the long term.

WW Babc*ck and Brown will want to get there money working and if everbody else rejects the takeover offer which I think is likely. they should have a plan "B" So a good longterm hold in the meantime IMO.

[airedale]

Here is another scenario, what about taking the offer @$2.15 and then buying in to the new owners, Prime Infrastructure on the ASX.
Prime are trading at about Aus$1.20 and there is a non-renouncable rights issue in the pipeline,to pay for PWC. So there may be a drop in the Prime price before the rights issue,possibly a buying opportunity.

Airdale a possible scenario but I think more upside from rejecting it as it was with TRH and Toll Holdings

[foodee]

Market reaction suggests an air of resignation to Prime.
Difficult to compare it to Toll which is actually hands on in the industry, whereas Prime's agenda is less clear.

disc: nil

[willy_wonker]

Powerco waits for NGC nod

11.08.2004

WELLINGTON - Listed energy firm Powerco is waiting for its new Australian controlling shareholder to signal if potential merger talks with NGC Holdings should resume.

The talks on "business opportunities" that might have led to a merger were put on hold in May when Powerco's three big shareholders said they were selling their combined 53.6 per cent stake.

Prime Infrastructure of Australia said on Monday that it had "a lock-in agreement" to buy the shareholding.

It would make a $2.15-a-share takeover offer to minority shareholders in the next six weeks.

Powerco chairman Barry Upson said yesterday that Prime effectively had a majority shareholding and could signal its intentions towards NGC now.

"It would certainly be good to start that off again, but that is going to be dependent on the new majority shareholder."

Prime chief executive Chris Chapman said it was "far too early" to comment on the stalled discussions with NGC.

Meanwhile, Upson yesterday warned that any move by the Government to block the sale to Prime would result in a foreign investor backlash.

Finance Minister Michael Cullen warned that he had yet to approve the $364.7 million takeover because of "sensitive lands" owned by Powerco.

Upson said if Cullen blocked the deal, it could lead to a "real problem" in attracting other foreign investors.

"Just about every major company in the country has land which could be described as sensitive. This is politics at its worst."

The land in question - which Cullen did not identify in Parliament yesterday - was sensitive to treaty rights.

"We've got four pieces of land - little bits of dirt, quite frankly - that are used for substation transformers," Upson said.

"One is in Tauranga. There is another right next door to Moutoa Gardens in Wanganui."

Cullen was responding to concerns from New Zealand First leader Winston Peters that an important infrastructural asset was going into overseas ownership when New Zealand was facing the prospect of energy shortages.

The deal has yet to gain approval from the Overseas Investment Commission.

- NZPA

[Benlamnz]

For your collective pleasure, i announce my master plan of dumping PWC and picking up PIF went horribly wrong. The dumping was well executed, but the buying is a disaster. down 7% and counting, plus the imminent new shares issue. Potentially a double whammy from the Queensland Governement over DBCT and the Commerce Commission over PWC, and the inevitable whipping if PWC and NGC merged.

[Lawso]

Willy Wonker said:

quote: Must we let the Aussies steal everything off us at a discount rate? All the banks are gone, except Kiwibank and now the power stations. Ummmm.... $2.15 is too cheap !

I agree it's a shame to see another good Kiwi coy sold to Oz. Why couldn't the geniuses who run the so-called Cullen Fund have bought the councils' shares, or perhaps bought half of them and let the other half be offered to Kiwi instos and individuals?
Instead nearly all the super money is going offshore with no reason to believe they will do as well as our market has done in recent years.

[trendy]

OK you bright spark FA's what is on with the 9cent price diff between market and offer? Seems to me you buy now at 2.06 and sell at 2.15 later?

Unless PIF or someone else is building up a key stake as 330k of shares have already traded today.

[KJ]

I guess one could sell and lose 4%-could you make more than 4% elsewhere?
Also broker fee to buy in now.How long before one gets paid out-maybe 3 mths-will it all be paid in cash if you want it that way.
What is the interest/opportunity cost for that period?

I chose to sell at $2.08-better opportunities elsewhere IMO.

[weasel]

From the stuff website
"Prime's takeover offer for Powerco is $2.15 a share - $1.34 in cash and 81 cents in Prime securities, which will have an interest rate of 8.5 per cent that is reset every five years."
Can someone clarify this for me?

[Paper Tiger]

from the NZHerald

quote:
All shareholders in the powerlines and gas transmission company will be offered the same deal, but can choose to be paid in cash, converting securities or a mixture of both (62.5 per cent cash, 37.5 per cent securities).

If everyone asks for cash, there will be some scaling.

[wsheridan]

quote:Originally posted by weasel

From the stuff website
"Prime's takeover offer for Powerco is $2.15 a share - $1.34 in cash and 81 cents in Prime securities, which will have an interest rate of 8.5 per cent that is reset every five years."
Can someone clarify this for me?


It means the company is stretched to make the takeover so hang onto some of the shares and you will benefit from high dividend payouts over the next few years.:D

[Farouk]

Home » News » Financial fairydust coats Powerco share sale




Financial fairydust coats Powerco share sale
Shoeshine

Fishy fairydust?




In war, the old cliché goes, truth is the first casualty. And few ideological battlegrounds are as blood-soaked as the one on which public ownership diehards slug it out with free marketeers.

So it was only to be expected a few public relations atrocities would be committed in the fight to get Powerco's effective privatisation past the Taranaki populace. Observers have not been disappointed.

Fishy aromas arise from a whole swag of arguments the sellers * New Plymouth District Council, Taranaki Electricity Trust, and Powerco Wanganui Trust * deployed to mute opposition.

First up, and Shoeshine's personal favourite, is the price.

The council, advised by PricewaterhouseCoopers, softened up voters by telling them they could expect a 25%-plus premium on "the share price prior to the takeover announcement."

Exactly what date that indicates in Powerco's case is open to debate, but suggesting, as the sellers have sought to do, that they got anywhere near a premium of that size is simply preposterous.

The $2.15 paid by Prime Infrastructure Group was, the press releases assured, a 21.5% premium over the dividend-adjusted average market price over the 12 months preceding the sale announcement and a 27.2% premium over the price on August 1 last year.

So what? Those figures are utterly irrelevant. Who cares what the price was a year ago? Prime is buying now.

The real question is: what would Powerco shares have been worth now if the selling trio hadn't put their stakes up for sale?

On April 29, six days before the shares went on the block, Powerco closed at $2.12, just 3c below the price the trio have taken.

The NZSX50 index has since risen 4.35%. If Powerco had risen by the same amount the price would be $2.21.

Prime's price is 10% above First New Zealand Capital's Powerco valuation of $1.96 and 2% above the broker's 12-month target of $2.10.

ABN Amro's discounted cash flow valuation is $1.93.

A hefty handful of financial fairydust has also been sprinkled over the matter of part payment in "debt securities."

The council and the trusts are each taking only 62.5% of the sale proceeds in cash and 37.5% in unsecured, subordinated debt securities (Sparcs) issued by Prime.

In effect the sale has been expedited by vendor finance * that is, lending somebody the money to buy your assets * rarely an indicator that the sale was closely contested by well-heeled rival buyers.

The line here is that the council and the trusts asked Prime to create and make part-payment in these securities.

Really? How odd.

One of the council's principal justifications for selling was that it ought to have its ratepayers' investment in a prudently diversified portfolio, not just in one company's shares.

Its investment options are almost endless. For example, it could buy risk-free, highly liquid government stock * admittedly at a much lower yield than Prime is offering.

But no. It opts instead to put more than a third of its capital, some $97 million, in a single, probably highly illiquid junk instrument.

What sane financial adviser would recommend that?



More fishy fragrances emanate from the council's insistence it had to sell because of Powerco's tax position.

The council doesn't pay tax on investment income, and Powerco doesn't pay company tax at present .

The council received $19.3 million in Powerco dividends last year. If Powerco moves to tax-paying status * as PWC advised it will * then a third of its payments, or $6.4 million of last year's payout, will in future be made in the form of imputation credits that are valueless to a non-taxpayer.

The council's use of this argument as a rationale for selling obliged Powerco this week to repeat statements made at the July 27 annual meeting. It said then it would not become a cash taxpayer until the 2010 financial year * six years away.

That date

[Lawso]

Great piece by Shoeshine. The cow****ies have been screwed by Pricewaterhouse (professional advisers - Yeah, right!) and the brokers who will make a killing reinvesting the funds.
We minority holders will be worse off as well.
Think I'll just take the cash and exit with a modest profit but not as good as it might have been :(

[mikescott]

What cash, Lawso? You can sell on the market now or sellto Prime in which case they will give you some junk bonds as part consideration.

Keep your shares - there will be more value to be added yet by Powerco's management.

[Lawso]

As a lines company only, not a generator, I think PWC is less a less attractive proposition than CEN, for example. But I note your comment. Meanwhile, I sits and thinks.

[Benlamnz]

The thing is, PWC is regulated. That makes it less attractive than CEN who milk the spot price as they like. But Prime has heaps of experience in dealing with regulated assets, as they already own DBCT, which is a regulated coal terminal and port in Queensland. So I suppose they done their due diligence and decided 2.15 is a good price for regulated but very stable cash flow. As with all regulated utilities, go with the discount cash flow price as the guideline, since there cannot be any bluesky growth element injected into such assets. I reckon both side got a reasonable deal, though the price is pretty full. The junk bonds issued by Prime is at 8.5% yield, which is roughly the same as their shares's current yield. I suppose they are expecting their shares to match that yield similarly over the FY05 & 06. But they already flagged a possible div increase as they stated increased cashflow from PWC will exceed the current distributions, so that implies a share price catch up to the soon to be increased dividend prehaps?


Disc: hold some. bad timing though.

[airedale]

Out of all the press releases this past week I get the impression that the present PWC management will be left to get on with it.that is positive as they seem capable of adding value,e.g. moving in to Tasmania and Queensland. Presumably an Australian company like Prime should facilitate that.