October 2004 decisions

Prime Infrastructure of Australia buys Powerco

Centro of Australia buys Barrington Shopping Centre, Christchurch

Macquarie Goodman buys Albany office building from Neil International

More property for Britomart

Cedenco buys Gisborne District Council land in Gisborne for its factory

Tenon buys remaining shares in Tarawera Forests Ltd

Malaysian buys grazing land outside Christchurch for residential development

Land for forestry

Land for wine

Other rural land sales

Summary statistics

Prime Infrastructure of Australia buys Powerco

Prime Infrastructure Networks (New Zealand) Limited, owned in Australia has approval to acquire up to 100% of Powerco Limited for $779,900,000. According to the OIC, Powerco was owned as follows:

·        11.11% – Australia, Australian Public

·        0.17% by “Other Overseas Investors”.

·        38.16% by the New Plymouth District Council

·        11.79% by the Taranaki Electricity Trust

·        3.69% by the Powerco Wanganui Trust

·        35.08% by other shareholders in Aotearoa


However, as will be seen, the number of overseas shareholders before the takeover may have been temporarily inflated.


Powerco owns 44.6 hectares of land at 11 Main Road, SH25, Tairua; Alach Street and Sherson Street, Tauranga; 31-39 Junction Road, New Plymouth; Plantation Road, New Plymouth; and Rangitikei Line, RD3, Palmerston North.


As the OIC reports it:


The New Plymouth District Council, the Taranaki Energy Trust, and the Powerco Wanganui Trust (collectively the vendors) have announced that they are jointly offering for sale their 53.65% shareholding in Powerco Limited (Powerco). Powerco is listed on the New Zealand Stock Exchange and is New Zealand’s largest gas distribution company and second largest electricity distributor.


Prime Infrastructure Group (Prime) is an Australian investment vehicle comprising Prime Infrastructure Management Limited (PIML) and Prime Infrastructure Trust (PIT) an Australian managed investment scheme registered with the Australian Securities and Investments Commission. The shares in PIML and the units in PIT constitute stapled securities in Prime. Prime has incorporated the Applicant (Prime Networks) to acquire the vendors’ shareholding in Powerco. Prime Networks will be required to make a full takeover offer to all Powerco shareholders under the Takeovers Code. Prime Networks proposes to acquire the vendors’ shareholding in Powerco as a part of and in conjunction with, a full takeover offer for Powerco.


Prime is an investment vehicle that focuses on identifying and acquiring quality infrastructure investments in Australia and internationally. The proposed acquisition is likely to result in Prime, through Prime Networks, operating an electricity and gas distribution business in New Zealand in addition to its existing bulk terminal, gas and coal fired power and wind generation business in Australia.


Just when you thought that the shambles and takeover frenzy in our electricity industry was over, along comes Prime. The New Plymouth District Council and the community trusts were intent on neglecting their responsibilities to those they represent by selling off the local electricity supply network. This is an infrastructural asset which they held in trust, not for a maximum rate of return, but to assure consumers of a reliable and cost effective electricity supply. Prime saw some suckers and took advantage of the situation.


In a public display of frustration that demonstrated his impotence in the face of the toothless overseas investment legislation (plus advice from the spineless Overseas Investment Commission that he had no choice but to approve the application), even Minister of Finance Michael Cullen was outraged at the deal. In a rare public release on an OIC decision, he complained that he had approved it:


… primarily on the basis of precedent and advice that a judicial review would likely succeed were the application declined.


“The purchase complies with New Zealand’s regulatory framework so the government cannot credibly intervene to prevent it and Ministerial decisions under the Overseas Investment Act are subject to appeal in the courts. It is not the government’s role to interfere in lawful commercial transactions, especially when they are as far advanced as this one is and as strongly supported by shareholders,” Dr Cullen said.


“The buyers clearly meet the criteria of the Act in that they are of good character, have demonstrated the necessary financial commitment and have relevant business experience. It is, however, with great reluctance that I am letting the deal proceed as there were aspects of the process that concerned me.


“Although the Audit Office found that the New Plymouth District Council was not required under the Local Government Act to consult ratepayers before deciding to quit its shareholding in Powerco, consultation would have been desirable given the size and significance of the asset involved.


“And the decision by the Takeovers Panel to grant a waiver allowing Prime to structure its offer differently for New Zealand and overseas shareholders can only be described as unfortunate given the shambles which ensued,” Dr Cullen said. (Media Statement by Dr Michael Cullen, “Powerco sale reluctantly approved”, 21/10/04, www.beehive.govt.nz/Print/PrintDocument.aspx?DocumentID=21283.)


Not only had ratepayers not been consulted, but the deal was decidedly questionable. Prime was paying for only part of the deal in cash, the rest in bonds. Brian Gaynor described the deal as follows:


[T]he Powerco offer is a combination of 62.5% cash and 37.5% vendor debt. These debt securities, which are called SPARCS, are unsecured, subordinate and have no fixed redemption or conversion date. They make our existing junk bonds look like prime securities but have an indicative interest rate of only 8.5% per annum. This is far too low for an extremely high-risk security. (New Zealand Herald, “Getting it wrong over foreign sales”, by Brian Gaynor, 14/8/04.)


Worse, shareholders with an overseas address (other than in the U.K.) were allowed to opt for cash rather than the junk bonds. The offer was approved by the New Zealand Takeovers Panel, astonishing all but the panel itself (and perhaps Prime which probably couldn’t believe its good luck in getting its audacious request accepted). If the boot had been on the other foot – New Zealand shareholders given a better offer than those overseas – there would have been international uproar. Minority shareholders were promptly advised to shift their holdings to Australia so they could take advantage of the cash offer. Not only was cash more secure, but for each bond New Zealand shareholders received, overseas shareholders would receive $1 in cash while the bonds were being valued on the market at 90 cents. By 3 October, over 20% of Powerco’s shareholding was said to be held in Australia, compared with about 0.3% before the offer was made. This then threatened the deal for the District Council and community trusts – it became apparent that they would get far more than the planned 37.5% of their payment in junk bonds. They considered legal action. For a time it looked like the whole edifice would collapse. (Sunday Star Times, “Investors told to fly trans-Tasman”, by Lesley Springall, 3/10/04)


Then, apparently from nowhere, came Sydney broking firm Tricom Equities like a white knight to the rescue. It offered to buy from the District Council and community trusts any junk bonds above the 37.5% allotment.


Just how white the Tricom knight was remains in doubt. It had close ties to Prime, including being a Prime shareholder, and also to Prime’s management company, Babcock and Brown (including being a co-lead broker of the contemporaneous Babcock and Brown Australia Stock Exchange float). Tricom said it took the initiative, and Prime had nothing to do with it. If it had in fact been working with Prime, the deal would once again have risked falling foul of the Takeovers Code, breaking the rule that the same offer must be made to all shareholders. (NBR Personal Investor, “Tricom links to Prime come under spotlight”, by Duncan Bridgeman, 8/10/04.)


The Takeovers Panel decided that Tricom had worked independently of Prime. In a victory for credulity, the deal was saved.


Even if everything in the transaction was above reproach, Gaynor also raised questions about the nature of Prime, and its ability to finance future development of Powerco’s network:


Prime is a complex organisation with a separate management company and an extremely high fee structure. It will pay A$48 million ($52.17 million) in fees and financing costs in relation to the Powerco acquisition.


Prime’s major investment is an operating lease over the Dalrymple Bay coal terminal, a huge port facility that services the Bowen Basin coal-mining region in central Queensland. This represents 73% of total assets before the Powerco acquisition.


Its other major investments are 50% of Ecogen, a 960MW gas-fired power plant in Victoria, and 50% of Redbank, a 145MW coal tailing fired power plant in New South Wales.


Prime’s two potential problems are its dispute with mining companies over the coal terminal’s user fees and its highly leveraged balance sheet. The fee dispute has gone to arbitration and the Queensland Competition Authority is due to make an initial determination in the next few weeks. [As of 31 December, a determination had still not been made. The dispute is over the fees charged by Prime to coal companies at Dalrymple Bay.]


If the decision goes against Prime, it could have a big impact on the group’s financial position, particularly as it will have only A$594 million of shareholder funds, compared with A$2.79 billion of total assets after the Powerco acquisition.


Will Prime be able to maintain its New Zealand electricity and gas network in top-rate working order if it comes under financial pressure in Australia? Should local politicians in Taranaki be concerned about capital reinvestment in the region’s electricity network as well as the price they receive for their assets?


Prime’s game is making money out of owning infrastructure. That doesn’t necessarily mean that it is good for the infrastructure or its users, as New Zealand has found with a number of other privatisations.


In all the circumstances, just how the OIC could conclude that


The proposal is likely to result in the following benefits:

(a)                     increased market competition in the electricity distribution market in New Zealand through the entry of a new operator; and

(b)                    the introduction of additional investment for development purposes.


is a mystery closely allied to the credulity that has accompanied this whole fiasco.

[Decision number 200420046.]

Centro of Australia buys Barrington Shopping Centre, Christchurch

Centro Properties Limited of Australia has approval to acquire the Barrington Shopping Centre on 2.36 hectares at 256 Barrington Street, Spreydon, Christchurch, Canterbury for $24,409,507 from Centralo Limited of Aotearoa.


According to the OIC,


The Applicant (Centro), an Australian Stock Exchange listed company, is in the business of purchasing, actively managing, and adding value to properties for syndication to investors. Centro is the largest property syndicate in Australia, managing 29 syndicate portfolios valued at over $2.1 billion with an extensive portfolio of 127 retail shopping centres located across Australia, the United States of America and New Zealand. In New Zealand, Centro manages the Kelston Shopping Centre in Auckland and the Porirua MegaCentre in Wellington.


Centro proposes to acquire the property known as the Barrington Shopping Centre, to syndicate it for long-term investment. The proposed acquisition provides Centro with geographic and economic diversification.


Because the consideration is less than $50 million, and the unimproved land value is almost certainly under $10 million, this purchase only requires OIC approval because the land “exceeds 0.4 hectares and includes/adjoins land that exceeds 0.4 hectares which is provided as a reserve, a public park, for recreation purposes, or a private open space” – namely Barrington Park.

[Decision number 200420052.]

Macquarie Goodman buys Albany office building from Neil International

Macquarie Goodman Nominee (NZ) Limited as nominee for Macquarie Goodman Industrial Trust and Macquarie Goodman Property Trust, owned 60% in Australia and 40% in Aotearoa, has approval to acquire 0.75 hectares at Don McKinnon Drive and Corinthian Avenue, Albany, Auckland for $21,911,555 from Neil International Limited owned by the Tiong Family of Malaysia.


The OIC states:


The Applicant (co-owned by the Macquarie Goodman Industrial Trust (MGI) and the Macquarie Goodman Property Trust (MGP)), proposes to acquire the subject property which is utilised as offices. The Applicant advises that the acquisition is part of the strategy of acquiring well located, good quality assets that grow their portfolio by the addition of a commercial property that is located in an area where commercial and industrial property is in demand.


MGI is an Australian listed unit trust which invests in industrial properties in Australia and New Zealand. MGI is managed by Macquarie Goodman Funds Management Limited (MGFM), which is a subsidiary of Macquarie Goodman Management Limited (MGM). MGP is a New Zealand listed unit trust which has various property investments in New Zealand. MGP is managed by Macquarie Goodman NZ Limited (MGNZ), which is a subsidiary of Macquarie Goodman Management Limited (MGM).

[Decision number 200420053.]

More property for Britomart

Britomart Group Limited, owned 40% in Australia, 40% by Whitecloud Britomart Limited of Aotearoa and 20% by Phillimore Properties Limited of Aotearoa, has approval to acquire 0.75 hectares of leasehold at Britomart Place and Quay Street, Auckland for $13,000,000 from Oriental Limited of Aotearoa.


The OIC states:


The Applicant has previously obtained consent to acquire land in respect of the Britomart precinct (located between Britomart Place, Quay Street, Queen Street and Customs Street).


The acquisition of the subject land which is adjacent to the Britomart land is likely to be developed for use as ground floor retail and multi-level carparking. The acquisition is likely to supplement and complement the Britomart land by bringing additional scale and flexibility for the overall redevelopment.


While the OIC describes the company as 40% owned by the “Australian Public”, in fact the 40% is owned by Multiplex Britomart Ltd of Australia.


The previous consent was in June 2004. See our commentary for that month for further details.

[Decision number 200420047.]

Cedenco buys Gisborne District Council land in Gisborne for its factory

Cedenco Foods Limited, owned by Frederick Scott Salyer of the U.S.A., has approval to acquire 3.6 hectares at Innes Street, Gisborne for $466,875 from the Gisborne District Council.


The OIC states:


The subject property is directly across the road from the Applicant's existing food manufacturing operation. The Applicant has maintained the property free of charge for the Gisborne District Council (the vendor who has now declared the property surplus to its requirements) for approximately 10 years. In addition to the general maintenance the Applicant has undertaken substantial landscaping of the property including the creation of a lake.


The Applicant views the acquisition as an opportunity to further develop/enhance the “green belt” environment on the property which it claims is important to maintain its image as a high quality food manufacturer. Furthermore the acquisition will provide the Applicant with the ability to expand its current manufacturing operation in the medium term.


SK Foods International completed its take over of Cedenco Foods Ltd in 2003, having taken a controlling shareholding in 2001. See our commentary for August 2003 for further details.

[Decision number 200420043.]

Tenon buys remaining shares in Tarawera Forests Ltd

Tenon Manufacturing Limited has approval to acquire up to 100% of Tarawera Forests Limited for a suppressed amount. In fact it “proposes to acquire the 17.505% of the ordinary shares in Tarawera Forests Limited that it does not already own”. The OIC states that the shares it is proposing to purchase are owned 61.74% by shareholders in Aotearoa, and 38.26% by The Crown.


Tenon Manufacturing is owned, according to the OIC, as follows:


·        4.4391% by Xylem Fund ILP of the U.S.A.;

·        28.0413% by other shareholders in the U.S.A.;

·        12.7759% in the U.K.;

·        2.0194% in Australia;

·        0.2299% in Singapore;

·        0.1% in France;

·        1.3347% by “Other overseas shareholders in Tenon Limited”; and

·        51.0598% in Aotearoa.


Despite its name, Tarawera Forests Ltd will not own or operate forests. The OIC states:


Tarawera currently owns approximately 30,200 hectares of forested freehold land in the central North Island. In June 2004, Tarawera sold a forestry right over the current standing crop to Tiaki Plantations Company. Tarawera’s remaining interests include the freehold land, certain improvements on the land, related contractual commitments, and the net proceeds of the forestry right sale.


As Tarawera no longer owns and operates the Tarawera forest estate, the interests of the shareholders in Tarawera have diverged. The Applicant no longer wants to invest in forest estate nor land used for forestry purposes. Maori Investments Limited retains a strong interest in owning the Tarawera land.


As part of the proposed acquisition of the Tarawera shares by the Applicant, it is proposed that Maori Investments Limited will, through a wholly owned subsidiary, acquire Tarawera’s freehold land, the improvements on the land and the contractual commitments relating to the land. The sale of Tarawera’s freehold land will be completed before the acquisition by the Applicant of Maori Investments Limited’s shares in Tarawera. As a result, at the time the Applicant acquires its increased shareholding in Tarawera, Tarawera will not have any significant land holdings. The proposed transactions will facilitate the return of the Tarawera land to Maori Investments Limited’s ownership.


Māori Investments Ltd, according to its web site,


is an investment company operating under the Companies Act 1993 and was first registered in 1967.


It has an issued capital of 128,721 shares divided amongst 5,500 shareholders all of whom are Maori. The largest single shareholder holds 2,035 shares. In terms of the Company’s constitution shares may only be transferred to blood line relatives of the original shareholders. …


The company’s main asset is an 11% share in Tarawera Forests Limited which has two other shareholders: the Crown with 7% and Fletcher Challenge Forests Ltd who own the remaining shares.



Tenon is Fletcher Challenge Forests rebirthed. For more on its rebirthing, see our commentary for February 2004; for more on its shareholding, Tiaki Plantations Company, and Tarawera Forests, see our commentary for May 2004.

[Decision number 200420050.]

Malaysian buys grazing land outside Christchurch for residential development

Hee Ping Yong of Malaysia has retrospective approval to acquire up to 66.67% of Eminence Investments Limited for $20,680 from existing shareholders, who are:

·        61.11% by Kie Yik Wong,

·        16.67% by King Huo Hu,

·        5.56% by Hee Ping Yong, and

·        5.55% by King Kuoh Wong all of Malaysia; and

·        11.11% by Ting Leong Lee of Aotearoa.


The company owns 28.7 hectares at Johns Road, Belfast, Christchurch, Canterbury.


According to the OIC,


Eminence Investments Limited obtained consent to acquire the subject property on 13 July 1999. The land subject of the application has been used to provide casual grazing pending redevelopment of the land. Eminence proposed to enter into a joint venture with the vendor, Apple Fields Limited, to develop the land into a residential subdivision. The Sale & Purchase Agreement specified that Apple Fields pursue an application for rezoning of the land to permit this use. It was expected this process could take up to five years. Eminence calculated that up to 315 sections will be available for development. If the application for rezoning was unsuccessful Eminence indicated it would move to resell the land.


It is advised that progress to re-zone the land has been slow due to the lack of resources available to Apple Fields to pursue the application. Apple Fields had applied for the land to be included in the Christchurch City Plan with permission to re-zone into two hectare blocks. The Canterbury Regional Council objected to this proposal. After various hearings the application came before the Environment Court which ruled against the plan but suggested that an application could be made under the Resource Management Act to re-zone the land to a living zone which would permit more intensive urban development. The Canterbury Regional Council appealed and in June 2003 the High Court dismissed the appeal.


Earlier this year, the shares in Apple Fields were acquired by Canterbury Land Trust, which is a significant shareholder in the Clearwater resort, a development which is a short distance from the subject property. Apple Fields is currently compiling a development plan to be submitted direct to the Environment Court and is consulting with the Councils and other interested parties to formulate an integrated development plan which includes the subject land and other contiguous properties.


On 16 December 2003, the Applicant was a 10% shareholder in Eminence, acquired further shares from Kie Yik Wong and King Kuoh Wong. The Applicant’s accountant was of the view that consent was not required for these transactions and that as a result Eminence was no longer an overseas person. The accountant therefore considered that the Commission no longer needed to monitor the conditions of consent for the original application. However upon further enquiries being made by the Commission it transpired that the Applicant holds a New Zealand Returning Residents Visa but has not resided permanently in New Zealand for the past 12 months. Furthermore, the Applicant holds her shares as a nominee for her husband who is not a New Zealand resident. Accordingly consent was required, and is now sought retrospectively, for the share transfers to the Applicant.


See our commentary for July 1999 for details of the original approval, and reference to Apple Fields’ miserable record on this and other undertakings.

[Decision number 200420044.]

Land for forestry

·        Lif Kristina Rolandsdotter Marriott of the U.K. has approval to acquire 140 hectares at Flightys Road, Judgeford, Porirua, Wellington for $500,000 from Ilex Replanted Forestry Limited owned by Oliver James Digby Marriott of the U.K. According to the OIC, “Ilex Replanted Forestry Limited acquired the subject property in 1999 as a forestry investment. The Applicant and her husband are directors of Ilex. The Applicant proposes to acquire the property as part of an inter-family transfer of interests. The Applicant proposes to continue the management of the forest including harvesting and replanting of the forest.” In 1999, Ilex was jointly owned by Lif and Oliver Marriott. It bought the property for $800,000, so it appears the present purchase is at a heavily discounted rate, especially given the inflation in property prices in the five years since March 1999. See our commentary for that month for further details. It was reported then that the buyers had “an interest in four woodlands in the U.K., as well as forestry interests in Estonia” and had “over 25 years experience of farm forestry in the U.K.” They wished “to make long term investments in forestry in various parts of the world, including New Zealand”. This was their first in Aotearoa. [Decision number 200420045.]

·        Diversified International Timber Holdings, LLC, owned by the President and Fellows of Harvard College of the U.S.A., has approval to acquire 250 hectares at Glenmore, Kenepuru Road, Kenepuru Head, Marlborough for $1,293,750 from Tony Neil Godsiff and Monique Elizabeth Godsiff of Aotearoa. Harvard also owns the huge Central North Island forests (see our commentary on the October 2003 decisions). Diversified International Timber Holdings last approval for a purchase was in March 2004, to buy 784 hectares in Taneatua, Bay of Plenty for $2,407,500. See our commentary for that month for further details. In this decision, the OIC states: “The Applicant is acquiring the subject property to develop alternative softwood species to commercially and economically viable levels, for high quality end-user wood markets. The Applicant proposes to establish approximately 150 hectares of the property in cypresses to ascertain whether these species can be grown in commercially significant quantities. Cypresses produce high quality wood used in furniture, cabinetry, joinery, boat building and durable exterior uses. The remaining plantable 90 hectares of the property are currently planted in pinus radiata.” [Decision number 200420042.]

Land for wine

·      Robert Zalmon Gussin and Patricia Elizabeth Gussin of the U.S.A., have approval to acquire

·      10.4 hectares at Rapaura Road, Blenheim, Marlborough for $2,925,000 from Thornbury Vineyards Limited owned by the McCutcheon and Bird families of Aotearoa [Decision number 200420048]; and

·      9.9 hectares at Waihopai Valley Road, Marlborough for $450,000 from Alexander Phillip Henderson and Robyn Maree Henderson of Aotearoa [Decision number 200420049].

The OIC states: “The Applicants propose that a winery will be constructed on the Waihopai Valley Road property. It is proposed that both properties will be leased back to Thornbury allowing Thornbury to continue to manage and harvest the grapes and to process those grapes at the winery to be constructed. The Applicants advise that both transactions are interdependent to enable Thornbury to meet the international demand for its wine. Thornbury produces internationally acclaimed wines from Sauvignon Blanc, Chardonnay, and Pinot Noir grapes grown in the Marlborough region.” The Gussins received approval in April 2003 to acquire a 15.6 hectare vineyard at Renners Road, Lower Awatere Valley, Marlborough for $3,459,375. In that case, they proposed “to enter into a management contract and grape supply agreement with Thornbury Vineyards Limited”. See our commentary for that month for further details.

Other rural land sales

·      Johannes Hendrikus Cornelis Groffen and Eleonora Clasina Petronella Heisterkamp of the U.S.A. have approval to acquire 65 hectares at Karaka Road, Thames, Coromandel for $85,000 from John Robert Shattky and Jo-Anne Paulene Shattky of Aotearoa. The OIC states: “The subject property comprises native bush re-growth on the hilly country immediately east and overlooking the Thames township. It has minimal farming potential. The Applicants propose to construct up to three holiday houses for themselves and associates to visit for holiday purposes. The Applicants have developed a conservation plan for the property which proposes to enhance native flora and provide for pest control. The Applicants have entered into an open space covenant with the Queen Elizabeth II National Trust in regard to the preservation of the native bush on the property.” [Decision number 200420054.]

Summary statistics

All investments

The value of investment approved in the year to October 2004 is somewhat less than for the previous October year, but the net value (i.e. disregarding sales from one overseas investor to another, and discounting part New Zealand ownership of the assets) is higher than last year – for the first time for several months. By far the greatest part of the value of the approvals is for sale from one overseas investor to another.


Value of Investments approved






Year to October

Number of approvals




Gross value of consideration




Net Investment








Investments Refused under The Overseas Investment Act 1973






Year to October

Number of Refusals




Gross value of consideration ($)




Gross land area (ha)





*In addition there was one retrospective approval granted during the month. This involved a gross consideration of $20,680 (net $2,298) and gross land area of 28.7 hectares (net 2.1 hectares).


Investment involving land

As noted over the last few months, gross sales of land approved by the OIC during the years to October have increased hugely in area, though net sales have fallen to the point where more is being recorded as being transferred to New Zealand part-owners hands than passed on to new overseas owners. A large proportion of the hectares being bought and sold are between one overseas investor and another. There were no applications refused (above) this month, the first time since February. For the year to date, they have risen in number, but are still a small proportion of the total.


Freehold Land Approved for Sale






Year to October

Number of approvals




Gross land area (ha)




Net land area (ha)





Other Interests in Land Approved for Sale

(For Example, Leases & Crown Pastoral Leases)






Year to October

Number of Approvals




Gross land area (ha)




Net land area (ha)





* In addition there was one retrospective approval granted during the month – see note above.



Compiled by:

Campaign Against Foreign Control of Aotearoa,

P. O. Box 2258