Trustpower in $125m move for KCE

Trustpower chief executive Vince Hawksworth says King Country Energy would be an asset. Photo / File

Bay of Plenty-based power company Trustpower announced a $125 million takeover bid for King Country Energy (KCE) this week .

Trustpower, majority owned by Infratil, will pay $5 a share in cash in a full takeover offer, provided it gets at least 70.2 per cent of the company, or a lower price of $4.78 a share if it falls short of its target.

The company has entered into a lock-up arrangement with Todd Corp's Nova Energy for 54 per cent of the central North Island electricity generator and retailer. The other key shareholder in KCE is King Country Electric Power Trust, which owns 20 per cent.

KCE owns and operates four small hydro generation stations in the King Country and the Mangahao hydro generation station near Palmerston North. Together these stations have a combined installed capacity of 53.7MW and produce on average 191GWh per annum. KCE also has about 17,500 electricity customer connections with close to 70 per cent located in its local network.

Trustpower chief executive Vince Hawksworth said the company had always felt those sorts of Central North Island assets would work well in its overall portfolio.

"It was an opportunity that fits in terms of assets we understand - smallish hydro - and a regional type of customer base that we also understand really well," he said. "It all logically fits together."

The company will fund the acquisition of KCE from committed bank facilities.

Trustpower has to confirm its formal offer between 14 days and 30 days after the takeover notice was sent to KCE. There will then be a 90-day acceptance period.

"We've locked up Nova which takes us to 54 per cent," said Mr Hawksworth.

"Beyond that we have to see how the process plays out. In the structure of our offer, we would like to get as much of the base as possible, but we can't preempt the other shareholders' decisions."

Andrew Harvey Green, a senior equity analyst at Forsyth Barr, said the final outcome would depend on the smaller shareholders and the King Country Electric Power Trust.

"In the past the trust has been quoted as saying they're not particularly interested in selling. But they used to own the lines company, a chunk of which they sold, then redeployed into KCE, so I wouldn't completely rule out them selling."

Mr Harvey-Green said Trustpower was always the logical buyer for KCE in terms of the nature of the assets and the customer base.

"It fits quite nicely into the Trustpower portfolio. So the announcement is not a huge surprise."

King Country Energy results for nine months to December 31, 2014

EBITDAF*: $11.2 million

Net Profit After Tax: $3.8 million.

Employees: Approximately 46 mostly located in Taumarunui.

*EBITDAF = Earnings before interest, tax, depreciation, amortisation, change in fair value of financial instruments, impairments and equity accounted earnings.