China's $785m Wellington power play

Asia's richest man pays big for capital's electricity network

Wellington's electricity network has been sold to a company controlled by Hong Kong's richest man, Li Ka-shing, in a deal the Government is expected to approve.

Cheung Kong Infrastructure, an international infrastructure investor listed on the Hong Kong Stock Exchange, will pay Vector $785 million for the network.

Mr Ka-shing has been a director of Chinese state-owned companies and is thought to be close to the government.

The NZX-listed Vector, which is 75 per cent owned by the Auckland Energy Consumer Trust, said it would make a $195 million profit from the sale.

The Greens, NZ First and UnitedFuture are against the deal but observers say it is unlikely the Government will oppose the sale, though it recently blocked a Canadian pension fund from buying 40 per cent of Auckland International Airport.

The sale is subject to Overseas Investment Office approval and it is likely that Finance Minister Michael Cullen will have the final say. A spokesman from his office said the Wellington network was not on land deemed sensitive, so the test for foreign ownership would be less rigorous than for the airport.

Dr Cullen has said the Government does not consider the network to be as strategic an asset as the airport.

Prime Minister Helen Clark echoed that view, saying last night that because the network was not on sensitive land it would not trigger the same criteria for consideration.

Legal sources say other reasons the sale is not likely to be blocked include that the network has been owned by foreigners twice in the past, New Zealand's second-biggest electricity lines company, Powerco, is Australian-owned, and the electricity lines sector is heavily regulated.

Vector chairman Michael Stiassny said that "these assets have been owned twice previously by foreign owners so we do not envisage major problems".

Independent energy analyst Molly Melhuish said she did not expect the sale to lead to higher electricity prices, "given that the lines sector is heavily regulated". But Cheung Kong might spend less on maintenance, which could affect security of supply. When Canadian company TransAlta bought the network in the 1990s it reduced staff, maintenance and services, she said.

Electricity Networks Association chief executive Alan Jenkins said the regulatory regime had toughened in the past decade. "The Commerce Commission has robust powers to penalise anyone who comes in and skimps on maintenance," he said.

Vector employs only 16 people in Wellington. Maintenance and improvement work is contracted to three companies - Siemens, Northpower and Lineworks.

- © Fairfax NZ News