Vector announces $350m capital bonds offer

VECTOR ANNOUNCES $350m CAPITAL BONDS OFFER

Urban utility network manager VECTOR Limited announced today that it intends to issue up to $350 million of capital bonds to provide a source of funding for its takeover offer to UnitedNetworks Limited shareholders.

The minimum interest rate on the capital bonds will be 8.25 per cent.

"This is the first opportunity for the public to invest with VECTOR and it is centred on a transaction which will bring together under one ownership the two largest energy distribution businesses in New Zealand," said VECTOR chairman Michael Stiassny today.

"The capital bonds will partially finance the UnitedNetworks acquisition."

ABN AMRO Rothschild is Lead Manager to the offer and has also underwritten $300 million worth of the bonds. ABN AMRO Craigs is the Co-Lead Manager. The Offer Document, comprising a combined investment statement and prospectus, was registered today and the offer will open on Tuesday 1 October.

ABN AMRO Rothschild director John Moore said that bids from brokers and institutions for firm allocations during the pre-marketing process had been strong.

"Demand from retail brokers was higher than we had available for allocation and institutions also bid strongly. On this basis, nearly all of the $300 million which we underwrote has been allocated firm to a large number of retail brokers and institutions," he said.

VECTOR also reserves the right to allocate a further $50 million of capital bonds as oversubscriptions. As part of the issue, current customers of VECTOR will be given a preference, with a priority pool of $25 million worth of capital bonds (with a maximum allocation of $5,000 per customer) being reserved for them on a first-come, first-served basis.

The minimum subscription will be for capital bonds to a value of $5,000. Interest will be paid half-yearly and the capital bonds have an initial term of four years.

The capital bonds are unsecured debt obligations of VECTOR and none of VECTOR's subsidiaries nor its shareholder, Auckland Energy Consumer Trust, guarantees the capital bonds.

Investors in the capital bonds will also receive an entitlement to an allocation of ordinary shares in the event of a public offering by VECTOR and quotation on the New Zealand Stock Exchange.

"However, no absolute assurance can be given that the equity raising and quotation will proceed, and any final decision to proceed will be made by the board at a future date," said Mr Stiassny.

VECTOR has agreed to make a full takeover offer for UnitedNetworks Limited and the major shareholder, Aquila, has agreed to sell its 70.2 per cent stake to VECTOR subject to the consent of Aquila's banks. The takeover offer and the capital bonds offer will only proceed should the Aquila banks approve the transaction. The takeover offer, which the independent directors of UnitedNetworks have recommended to shareholders, is expected to be in the hands of all shareholders by the end of the week.

Upon UnitedNetworks shareholder approval of the proposed divestment of some UnitedNetworks assets to Powerco and Hawke's Bay Network, VECTOR and UnitedNetworks will own the electricity distribution networks in Auckland and Wellington regions, and the Auckland gas distribution system.

The companies will distribute electricity to approximately 615,000 customers, or more than one third of the New Zealand market.

Full details about the offer of capital bonds are contained in the Offer Document prepared, and dated as at, 25 September 2003.

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