A clause in its own trust deed has forced the Eastern Bay Energy Trust to abandon its attempted takeover of power lines company Horizon Energy - for now.The clause limits the trust's shareholding in Horizon to 25 percent - though, in fact, the trust alrea
A clause in its own trust deed has forced the Eastern Bay Energy Trust to abandon its attempted takeover of power lines company Horizon Energy - for now.
The clause limits the trust's shareholding in Horizon to 25 percent - though, in fact, the trust already owns 77.3 percent of Horizon.
Seeking full ownership, the trust last month polled its beneficiaries - the Eastern Bay of Plenty's electricity customers - seeking to buy the remaining 22.7 percent of shares at an initial offer of $4 a share.
The trust put the brakes on the takeover when it obtained a legal opinion that it should seek clarification in the High Court that it was entitled to buy more shares should beneficiaries support such a move.
The trust's deed provides for it to invest in energy-related purposes, one of which is "acquiring equity in [Horizon] up to a maximum of 25 percent of the issued capital of the company".
However, a schedule dealing with "specific" trustee powers provides for it to buy further shares in Horizon, provided more than 50 percent of those responding to a consumer poll approve.
Trust chairman David Bulley said trustees believed that if the beneficiaries poll supported buying more Horizon shares, the second clause would over-ride the one limiting investment to 25 percent.
The trust has exceeded the 25 percent limit since its formation in 1994, when it was granted 25.01 percent of the shares in Bay of Plenty Electricity.
Following further government restructuring of the electricity industry in 1999, that shareholding was transferred to Horizon, which became the owner and operator of the Eastern Bay's power lines.
A consumer poll in 1999 approved buying United Networks' shareholding in Horizon, taking the trust to its present 77.3 per cent shareholding.
Toni Owen, the trust chairwoman at the time, said legal advice then was that a favourable poll result was all that was required for further investment in Horizon.
Mrs Owen said she believed going to full ownership was a "very good idea".
Mr Bulley said the question of whether the trust could increase its ownership had been raised by Te Mana O Ngati Rangitihi Trust, which obtained a High Court injunction to stop the poll process on Monday.
Trust chairman Graham Pryor said energy trust beneficiaries were entitled to better financial information before being asked to approve expenditure of $22 million buying out minority shareholders.
Mr Bulley said the Rangitihi trust's injunction also raised the issue of whether the trust could increase its holding above 25 percent.
"Our lawyers had to look at it and they obtained an opinion from a Queen's Counsel.
"He said the way the deed was written, it was not 100 percent. It could be viewed in different ways and we should get a High Court ruling."
Mr Bulley said poll votes had been counted but, at the preliminary injunction hearing on Friday, the judge ordered the result to remain confidential.
Mr Bulley said if the High Court ruled the trust could move to full ownership within two or three months, it was likely the poll result would still be considered valid and another would not be necessary. Just over a quarter of poll voting forms were returned.
It was not worth speculating about the implications to the trust's stake in Horizon if the ruling was that it could not own more than 25 percent of Horizon.
