New Zealanders could be helping to pay for the future costs of their retirement by pumping petrol under a deal signed by Infratil and the New Zealand Superannuation fund to buy the downstream assets of Shell New Zealand.
The listed infrastructure investor and the taxpayer-funded investment scheme yesterday confirmed they had reached an agreement to purchase the business for $696.5 million through a new jointly owned company called Greenstone Energy.
The deal is conditional on the finalising of bank funding and certain third party consents but is expected to go through on April 1.
Infratil, whose share price yesterday rose 3c to close at $1.68 on the news, will put $210 million into the new company funded through its own banking lines while NZ Super is putting up a further $212.5 million.
Greenstone Energy will borrow $276.5 million to fund the acquisition and will also have access to a $250 million funding line to use as working capital in the business.
The acquisition, which was first talked about in October last year, includes Shell's 229 service stations, 25 per cent of loyalty scheme Fly Buys and a 17.1 per cent stake in New Zealand Refining - a listing company which owns New Zealand's only processing plant the Marsden Point Refinery.
Infratil chief executive Marko Bogoievski, who will chair the new joint venture, said the goal of the new company was to continue to provide fuel at a competitive price but also to leverage the benefits of a New Zealand owned and managed business.
But he was coy on how soon the company would drop the Shell name. "We have a contract to use it for up to five years and then a right of renewal."
Bogoievski said initially it saw itself operating as an entity similar to Fletcher Building which used Placemakers as its retail brand but it intended to consult with staff and the public on a potential change.
"We don't think an asset like this you can make assumptions around what works and what doesn't. That is what we have to think carefully about, what the options are and listen to what staff and customers have to say."
Bogoievski said it would spend the next six months on setting the future direction of the business and up to a year managing through the handover.
But one analyst said he would be surprised if the business kept hold of the Shell name beyond two years.
"I think they would want to go sooner rather than later," said Forsyth Barr head of research Rob Mercer.
Mercer said if the company continued to use the Shell brand it would have to pay expensive royalties. He said the petrol stations needed refurbishment and if the company planned to do that it made sense to rebrand the business at the same time.
"It would make sense to get a reasonably involved plan together over the next six to 12 months and implement it rapidly. I would expect it to happen by 2011-12," he said.
Bogoievski said it hoped to grow the business by convincing the company's customers to spend an extra dollar with the business by coming to Shell three out of four times they wanted to buy fuel rather than 50 per cent of the time.
He believed it could improve the performance of the business by localising some contracts in areas such as the cleaning of service stations.
The company also planned to bring its call centre back from Manila to Wellington, which would create an extra 15 jobs on top of the 220 people the company presently employs.
First NZ Capital head of research Rob Bode said it appeared to be a good investment.
"We think they have bought a high quality asset at an attractive price at a low point in the refining cycle."
Bode said there hadn't been an obvious buyer for the downstream assets of Shell which was probably why they had managed to get it at such a good price.
Retirement policy experts were divided over the deal.
Michael Littlewood, co-director of the Retirement Policy and Research Centre, who has been a critic of the Super fund, said it did not make sense for taxpayers to be owning service stations when the money could be used to reduce the Government's debt.
"It's not a thing that governments should be owning. They are borrowing the full price - the New Zealand Super fund is 100 per cent leveraged. I just don't think it is appropriate for the taxpayer to be a part owner of a service station."
But Jonathan Eriksen, an actuary who has previously analysed the super fund, said any deal where a New Zealand company bought local assets back off a foreign owner was good for the country.
"Let's get runs on the board and keep New Zealand Inc."