Council bid wins control of OtagoNet
The Invercargill City Council has been involved in a multimillion-dollar takeover bid of OtagoNet.
The council's holding company Holdco, in conjunction with the Power Company Ltd, outbid Marlborough Lines Ltd to secure OtagoNet yesterday.
The three companies were part of a consortium that bought Otago Power in 2002 for $109 million, which became OtagoNet.
Holdco subsidiary company, Electricity Invercargill chairman, Neil Boniface said the lines company was worth almost three times that now and it had been a successful investment.
But cracks in the "marriage" between the companies had begun to show and the companies had struggled over management of the network, Boniface said. "There was a dispute over safety and managing the network."
The consortium had an agreement in its contract that if the parties could not resolve a disagreement a "shoot out" would be held and the highest bidder would win, Boniface said.
That process took place yesterday and the southern companies were the ultimate winners, he said. Neither he nor Holdco chairman Graham Sycamore would disclose the bid but said the company was worth about $300m.
Councillors were briefed on the purchase yesterday.
Sycamore said their response was "thoughtful" but they wanted more information.
"It's a pretty red-letter day for Electricity Invercargill's future."
He conceded the purchase could put financial pressure on Holdco, with the airport upgrade under way but said it was about long-term investments and improving the asset.
However, the huge investment was not a done deal with city councillors still able to stop Holdco from increasing its quarter share at the full council meeting, he said. If that was the case, the Power Company would own the remaining share, he said.
Marlborough Lines chairman David Dew said the company was happy with the sale, which had made a good return.
"It's still a major transaction when we talk about the amount of money."
The Marlborough company had been involved in the bidding to ensure a good price was paid by the southern companies and was not disappointed about missing out. Discussions about the purchase of the shares had been going on for a month, he said.
"We just had different views about how a network such as that should be run and we had very high standards and they [Electricity Invercargill] didn't have the same standards as us."
Invercargill City Council director of finance and corporate services Dean Johnston said both southern companies would have to borrow money for the purchase.
The Southland Times