Lots of interest in 'top electricity retailer'

By RICHARD BRADDELL utilities writer

The foreplay in a looming battle for control of electricity retailer TrustPower continues, with Australian Gas Light yesterday indicating that it, too, may bid for a controlling stake.

AGL, which owns 21 per cent of TrustPower, had been seen as a likely seller rather than a buyer.

In that context, its move to join other major shareholders - Infratil (26.4 per cent), Alliant (17.6 per cent) and Tauranga Energy Consumers Trust (22.7 per cent) - in filing a notice of restricted transfer, could simply be a ploy to stir up interest in its pivotal stake.

At present, only the major shareholders have declared their interest in expanding their stakes. The moves are seen as positioning ahead of the new Takeovers Code, which comes into force on July 1.

In its notice, AGL cleared the way to bid for all the shares in TrustPower at between $3.30 and $3.60 a share. The stock closed yesterday at $3.50.

The AGL bid values the entire company at between $600 million and $650 million, plus a further $50 million for 15 million convertible notes it already owns.

AGL is regarded as more likely to be a seller than a buyer because of the tightly held nature of TrustPower stock, and an apparent conflict with its primary New Zealand electricity investment, On Energy.

On Energy has 500,000 customers, but little generation capacity of its own to hedge its energy trading business against. The same shortfall is also true of TrustPower, and for that reason there would seem little logic in AGL's extending its retail position by buying more of TrustPower.

But the catch is that TrustPower happens to be an excellent retailer. It is one of the few to get its billing systems into shape and would be an excellent catch for a number of On Energy's competitors.

"Without a doubt, TrustPower is the best retailer in the New Zealand market," said an analyst with ABN Amro, James Miller.

Tauranga Trust chairwoman Jan Beange says its goal in filing a notice is to ensure that the operation continues to be based in Tauranga.

Though the trust has only $7 million in funds that are not invested in TrustPower shares, it could enter into arrangements that would enable it to make a purchase, she said. It already has pre-emptive rights over AGL's convertible notes.

But TrustPower's 280,000 strong customer base would be very attractive to SOE generators such as Meridian, which, as the producer of 30 per cent of New Zealand's electricity, has an inadequate customer base to hedge against yet a balance sheet that could comfortably accommodate a significant acquisition.

Infratil, in conjunction with its investment partner Alliant, would like to increase its stake to more than 60 per cent to gain greater influence in the direction of the company, but would probably also become a seller at the right price.

But while TrustPower would fit best with the SOE generators, as well as Contact which is also thought to be interested, Mr Miller believes none will file a restricted transfer notice without first securing a purchase agreement with one of the major shareholders.