sign uplog in
Want to go ad-free? Find out how, here.

Transpower sell-down claims: Credible, or bit of Winston mischief? Transpower says they met with UBS to discuss new technologies and the document was slipped in quietly - that's a common investment bank tactic

Transpower sell-down claims: Credible, or bit of Winston mischief? Transpower says they met with UBS to discuss new technologies and the document was slipped in quietly - that's a common investment bank tactic

By Alex Tarrant

A bit of mischief ahead of an election.

That’s how I’d read Winston Peters’ claims in Parliament Wednesday that the government is looking to sell down Transpower.

Waving around a report from investment bank UBS that was written in January 2017 on how attractive Transpower could be if it were fully or partially listed, Peters claimed National was making plans behind voters’ backs to make the move.

Finance Minister Steven Joyce said this was the first he’d heard of it. Later, speaking to media outside the debating chamber, he said Treasury officials had told him straight after the question was asked in Parliament that they had no idea what Peters was going on about.

A Treasury spokesman later told that it was not aware of any plans to sell or partially sell Transpower. In an update to Joyce's comment he added:

"While we advised the Minister of Finance today that we hadn’t received the UBS document, after a lot of subsequent double-checking it turns out that one of our staff was shown the report when attending a meeting in Auckland back in March. The UBS document was not referred on to Ministers."

So does Peters’ claim stack up?

The document looks like a typical sell side pitch that investment banks like UBS produce all the time, all over the world. This is something senior bankers would get new juniors to produce in half a day in efforts to garner new business.

The title gives it away a bit: “Transpower – Utilities and infrastructure sector update” does not bring to mind anything along the lines of ‘Transpower, a report commissioned by NZ govt so we can sell the thing’.

A Transpower spokesperson told me they had no knowledge of any privatisation process being run by the government. UBS are yet to provide any comment.

The company in January had met with UBS to talk about international utility perspectives and trends, the spokesperson said. But there's nothing exceptional here - they do this regularly with all types of outfits to get an idea on emerging technologies and what's going on in the sector around the world.

The specific document in question - regarding potential Transpower selldown tactics - was not requested, and had been quitely slipped into the presentation pack by UBS. Update: Another source familiar with it all has also confirmed to me it was just a sell-side pitch.

Sell-side pitches

That's not surprising. Ask any large, successful (and monopolistic!) private business owner how many unsolicited pitches they receive from investment banks to help them “realise value” by listing a portion of themselves on the market.

What's more, if Transpower or Treasury had requested this document they would have been severely disappointed in its contents.

The first page outlines how the regulated utilities sector faces challenges. A pull back in yield had reduced trading levels for listed players and dynamic technology change had raised uncertainty over the future development of electricity transmission and distribution networks.

But have we got a deal for you. “Notwithstanding these challenges, we believe Transpower will be considered a very high quality asset by both public and private markets,” UBS says.

They then spend a few pages recapping what’s happened in Australia’s NSW, where a portion of the state’s regulated electricity network had been sold off. They state how stakeholder concerns were dealt with and governance arrangements established. Then a section on how new technologies are shaking up the sector. There are “issues and also opportunities,” apparently.

A page on how you could sell down a stake in a company like Transpower reviews pretty much all the options – business split, partial sell-down, who manages the government’s stake, IPO the whole thing…some provide flexibility, some are more difficult.

Then into your typical utilities and infrastructure market overview. NZ markets are receptive to new issuance, KiwiSaver deposits continue to grow, NZX offshore interest is high, what kind of investors like these assets.

No mention at all about Transpower’s financials, enterprise value, debt commitments. No efforts to show which parts of the business should be split if that route were taken, no talk of potential cornerstone investors in an IPO process or, indeed the fact that there would be a general election in New Zealand sometime in 2017 (even in the potential stakeholder concern section…).

This was homework for a junior investment banking sell-side analyst.

Regardless, this is a great platform for Peters to stand on. It means he can raise concerns about nasty Swiss banks, he can talk about a previous Transpower transaction in 2002 which included a holding company being established in the Cayman Islands, and he can have a go at National and its crony ex-Cabinet Ministers (Tony Ryall’s the company chair) planning things behind our backs.

He doesn't have to be right. It’s exactly what we should expect.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.



In fairness, were it true, it certainly wouldn't be the first thing happening under the government that they have no idea is going on:

When it was pointed out later that month that the government was on track to spend $30 million a year on housing the homeless in motels (rather than the $2 million budgeted), she expressed surprise at the scale of the problem: “We just didn’t know!”

This month, Bennett was still expressing surprise about the homeless when it was revealed that the cost of motels and other emergency housing for the homeless was going to blow out to $50 million a year.

“We had no idea how much it was going to cost,” Bennett told Duncan Garner on The AM Show.

She also said she couldn’t give “actual numbers” on the government’s emergency housing building programme because she “didn't know we were going to talk about it this morning. I haven’t looked at it for about a year.”

More entertaining than the Muppet Show.

they know exactly what is going on after all the chairman is from the inner circle

Someone said once, you can quickly judge the substance of a nation by the calibre of its politicians, the quality of the daily newspaper, and the standard of the driving. Believe that would put us squarely in a corner wearing a hat with a big "D" on it. For heavens sake what hapless & hopeless mouthing Mr Garner had to listen to! And from an identity considered by "some," of PM potential?! You must be joking!

Don't worry Rick I'm not following you round specifically ;o)

National believe, as their voters do, that the country shouldn't be run for the benefit of the bottom 5%, the remaining 95% matter.

Whilst it is sad there are some people put up in motels more often than not they are in that situation due to their own decisions. Personal responsibility and accountability is a virtue. I'd rather we put them in a cheap motel than on a $1m quarter acre section in GI or Glendowie.

I think you're right that 5% and 95% are relevant figures...but I'm not sure you have National's priorities quite correct there.

would not be surprised if national sell 49% in the future, especially if they are in power if a recession comes

Gold Plating NZ Style with Fools Gold

Can't tell me the government havent been looking at it - and if they haven't then they are fools

Pipes and gas reticulation and distribution and power networks are prime targets for flogging off to private enterprise. They are stable businesses. In Australia most of the gas pipelines have been sold off while there has been considerable angst in NSW about selling the networks while in Victoria the networks have long been sold off.

In NSW there has been considerable controversy over the networks "gold plating" their poles and lines. Michael West has conducted a crusade about it for 9 years. That's how the networks make their money by the power regulator allowing a ROI on captial invested so the networks go around "gold-plating" their poles and wires by overinvesting.

What's going on in New Zealand. Now here we are in 2017 and with a little inclement weather the Government controlled monopoly Transpower grid fails again and again and again across whole swathes of the country. They must be using Fools Gold

mmm. I'd say it has definitely been considered.
The National Grid is a strategic resource and very much a public good. There is no justification to privatise it.
There should be an uproar if this is ever seriously mooted/pursued.

"Now here we are in 2017 and with a little inclement weather the Government controlled monopoly Transpower grid fails again and again and again across whole swathes of the country."

When did sections of the national grid go down?
Don't confuse the role of Transpower and local lines companies.

" they had no idea what Peters was going on about.", don't worry, nor does he

Like Trump Winston recognises noise as being a very effective weapon and like Trump Winston is rather good at using that weapon. Just glad Trump is over there & Winston is over here. At least Winston will go back to being quiet after the election.

He might be Foreign Minister again,with that being a slight silver lining to the cloud.
Wonder how he would get on with Trump?? probably get deported??

What, all the first class flights, Ritz Carlton suites, three banquets a day. You will never ever get those fat perks of the present incumbent.