The new Trust Power building on Durham St. Photo/file
Trustpower has threatened legal action to stop TECT from becoming a trust that was no longer accountable to Trustpower customers living in the Western Bay.
The warning was delivered by Trustpower chief executive Vince Hawksworth who saw the value of Trustpower's shares fall 50c after the Tauranga Energy Consumer Trust (TECT) announced it wanted to phase out the TECT cheques.
Hawksworth said the announcement wiped $42 million off the value of TECT's investments and $200 million off the value of Trustpower.
''The market does not like uncertainty, and at the moment there is no clarity on the why or the outcome,'' Hawksworth said.
He was commenting on TECT's proposal to switch from being a consumer trust representing Trustpower's 58,000 customers in the Western Bay to a charitable trust that distributed all its income to community groups.
In exchange, TECT would compensate each Trustpower consumer by a one-off compensation cheque of $2500 and a further five years of cheques worth $360 a year. TECT held 26 per cent of Trustpower's shares.
Hawksworth argued TECT could divest Trustpower shares within its current structure and not ''go through this values destruction''.
He said the trust was formed to benefit Trustpower consumers.
Hawksworth added it would be a sad day if Trustpower had to go down the legal route.
He said TECT was offering the equivalent of eight to nine years of cheques when the consumer trust had another 55 years left to run.
Was it right that out of the trust's $790m of investments, $250m would be distributed as cheques to consumers and $540m would go into the charitable trust, he asked.
Hawksworth acknowledged the TECT cheques were part of the loyalty that customers felt toward Trustpower and that there was a symbiotic relationship between Trustpower and TECT where each mutually benefited.
However he said it was untrue Trustpower priced the TECT cheque into its pricing structure. ''We absolutely don't.''
If TECT had been wound up, each consumer would receive about $14,500 whereas the trustees were offering $4300 to change to a charitable trust, he said.
Hawksworth disagreed with the speed with which the restructuring was taking place.
TECT was currently consulting with consumers and if, after consultation, trustees decided to press ahead, the proposal would be decided by a binding referendum.
Tauranga Energy Consumer Trust chairman Bill Holland said a referendum yes vote would see trustees seek validation from the High Court.
"We already said we would go to the High Court if the people say that is what they want. If the people vote the status quo there is no need to go down that route," Holland said.
Holland disagreed Trustpower's shares had fallen and instead said they had increased.
"The current price of Trustpower's shares is $5.40 and on March 31, 2017, which was our financial year, they were only $4.60. So it is worth more than it was then," Holland said.
"We didn't panic when the price was down to $4.60 last year because we had every confidence in Trustpower that the shares would rise again."
Holland said there were no plans to sell any of its Trustpower shares. "They are missing the point," he said. "We are confident in them."
He agreed the one-off compensation cheque of $2500 and a further five years of cheques worth $360 a year was the equivalent of eight-to-nine years of cheques, but said the consumer trust had another 100 years left to run.
"Our responsibility is to look after the consumer of today and tomorrow and for the next 100 years," Holland said.
"If we put that money into the community then they will benefit and whatever is left goes to the charitable trust and the payment from that will be three times more than what we have been putting in the past."
Holland said some people thought the one-off cheque was too low and some thought it was too high, but that was what was going to consultation.
Value of TECT investments prior to restructuring announcement
Trustpower shares: $492 million
Tilt Renewables shares: $165m*
TECT managed funds: $170m
*Wind farms division split off from Trustpower