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 interest.co.nz 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.
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.