Trustpower has launched its first television commercial in a decade as it reintensifies the multi-product push into metro markets it began last year.
The Tauranga-based power utility has been dabbling in telco sales for almost a decade, but says chief executive Vince Hawksworth, began ramping up telco/internet and more recent gas sales over the past two years. "We won't be the biggest electricity, or telco or gas retailer, but we hope to be the leading multi-product retailer in the country," he said.
General manager commercial operations Chris O'Hara said Trustpower had exited the major metro markets more than a decade ago because retail power margins were too small.
"We re-entered the metro markets last year and had solid growth of our multi-product proposition, primarily in Auckland and Hamilton, but also in Wellington," he said.
Telco-related earnings now made up about $40 million of revenues after costs of around $800 million, Mr O'Hara said.
"We think we can double that in the next three years and we're on track to do that."
The new TV commercial was part of a major above-the-line advertising and marketing push.
"We're really repositioning ourselves from being the electricity company that dabbles in a bit of other stuff, particularly telco, to trying to create a new category," he said.
The aim was to win new customers and engage them on a range of products from day one, rather than just add on other products having won the electricity business. The company had acquired 30,000 new multi-product customers last year, as opposed to converting existing power-company customers.
New Zealand's power market in particular is highly competitive with about a 25 per cent annual churn rate. And while about 30 per cent of those changing suppliers did so because of relocation reasons, 70 per cent actively sought out a new supplier.
The biggest potential challenge Trustpower faced was that either telco or power company competitors might come against them hard with price cuts, Mr O'Hara said.
In reality, the likelihood of that happening was low for several reasons. Trustpower estimated it was the country's fourth-biggest telco after Spark, Vodafone, and CallPlus, which acquired Orcon last June. But it was still too small to be perceived as a major threat by the likes of Spark or Vodafone.
Mr Hawksworth said that while it was theoretically possible for any company to enter the retail power market, the major telcos were unlikely to dilute their brand by entering the energy sector, which could be perceived as "old" technology. "And from the point of view of our energy competitors, they could enter the telco space, but it's not an overnight add-on" he said.
"It's something they'd have to work through. I've no doubt some will be thinking about it, but they'll also be thinking about the brand risk if they get it wrong."
Australian ambitions receive political boost
Tony Abbott's coalition Government has begun softening its position on a number of key issues since the recent internal challenge to his leadership.
And that may be good news longer term for Trustpower's Australian ambitions, chief executive Vince Hawksworth says.
Trustpower has to date invested $659 million in its Snowtown wind farm in South Australia. The investment was the end result of almost a dozen years spent in understanding the market after it identified the opportunities presented by the renewable energy target scheme, introduced in 2001.
The company has developed a significant pipeline of options for other wind power projects in Australia. It has potential sites at Palmer in South Australia (260 MW), Dundonald in Victoria (250-320 MW), Rye Park in New South Wales (up to 300 MW), Wingeel in Victoria (400 MW), and another undisclosed location in Victoria (400 MW).
The company also has an early stage option on another potential site in New South Wales, which could be in the 500-600 MW range.
"As a business, it doesn't really matter to us who the government is, what matters in terms of long-term energy policy setting is that there is reasonable bi-partisanship," Mr Hawksworth said.
The Abbott Government commissioned a report, concluded a year ago, which is understood to have recommended lowering the energy target scheme from the original 20 per cent of total energy use in renewables by 2020, which would have been 41,000 gigawatt hours, to reflect real demand. Energy demand has dropped since the target was set and 20 per cent would now be about 26,000 gigawatt hours.
"The coalition Government has recently said they're parking that review," Mr Hawksworth said. "There's no way they will get through the recommendations of dropping to a real 20 per cent of use. What looks like happening now [is] a significant softening of the government attitude across a whole raft of things."
Industry observers were now more optimistic a solution would be found at a point between the two opposing positions, he said. "For now, we're taking the long view and retaining our existing options at the lowest costs."