DCC expects to sell Aurora for over $1 billion

Aurora Energy facilities in Dunedin. PHOTO: Gregor Richardson
Aurora Energy facilities in Dunedin. PHOTO: Gregor Richardson
The Dunedin City Council is understood to be expecting to sell Aurora Energy for more than $1 billion.

The figure comes after an announcement yesterday the council had voted near unanimously in favour of proposing to the public it sell the lines company — the seventh-largest in New Zealand — to set up an investment fund.

Dunedin Mayor Jules Radich has said a sale would enable the council to pay down the company’s $570 million forecast debt, and hundreds of millions of dollars would be left over to form the base of an investment fund.

The council has not disclosed an asking price, but a belief Aurora could sell for well over $1b has been backed by the company’s biggest critic, Richard Healey, a former Delta employee who blew the whistle on maintenance neglect.

He expected a $1b estimation would fall "on the light side" of what the company was worth.

It had a natural monopoly and the industry was regulated in a way that provided surety of income.

"It’s a licence to print money."

Aurora supplies power to more than 200,000 people across Dunedin, Central Otago, Wanaka and Queenstown, boasting total assets estimated at $805.3m, according to last year’s annual report.

Mr Healey was scratching his head about the timing of the proposed sale, suggesting it might have been more logical to have sold Aurora back in 2016 or 2017.

He acknowledged there had since been a rebuild of the company, but doubted the quality of the spending on the maintenance catch-up.

"The reliability of the network has gone down in Central Otago since 2016."

The council had not understood the intricacies of the electricity industry.

He doubted a sale would be the best thing for Dunedin, but a new operator would have "plenty of room for improvement".

Jarden equity research director Grant Swanepoel said people would have been "scrambling" to buy assets such as Aurora a few years ago, when interest rates were low.

"Right now, with high yields and high borrowing costs, long dated infrastructure plays aren’t as attractive as they were back then.

"But there’s a buyer for everything."

While he did not rule out fellow lines company Vector as a potential buyer, Mr Swanepoel said it already had a discrete operating area in Auckland.

Even another council could buy Aurora, or it could be publicly listed.

Central Otago District Mayor Tim Cadogan said he was unsure a change of ownership would make much difference for customers in the area.

There could be a risk of the buyer "seeking to recover the cost of purchase from us", but its ability to do this was to a large extent controlled by the Commerce Commission.

Dunedin City Holdings Limited (DCHL) chairman Tim Loan said the option of selling Aurora would be a win for both it and the council.

It was important for the council, which owns DCHL, to make sure its assets delivered the best possible outcome for ratepayers.

"A decision to sell Aurora Energy, pay off Aurora’s debt and invest the balance into a dividend-generating fund is a recipe for success for the city.

"This would set Dunedin up with a long-term, income-producing fund for years to come, benefiting residents and ratepayers now and into the future ."

Aurora’s network would continue to need considerable investment in the years ahead.

Aurora chairman Steve Thompson said the company would support the council’s process.

"Irrespective of the outcome of consultation, consumer rights would continue to be protected by the checks and balances imposed on the company by the sector regulators — the Commerce Commission and the Electricity Authority."