US giant to cash in on power play

Fund managers have been told to indicate their interest by tomorrow in buying a portion of a 23.8 per cent stake in TrustPower put up for sale by US energy giant Alliant, sources familiar with the situation say.

Alliant has asked ABN Amro to find out how much it will be able to raise from a sale of the TrustPower shares to professional investors. But it has also asked First NZ Capital to canvass interest from parties that may be interested in buying Alliant's New Zealand holding company.

Both banks must submit final bids next week.

Observers say the sale of the TrustPower shares on market will produce a lower return than a sale of the holding company. This is because the buyer of the whole company is likely to be an energy company able to offset higher acquisition costs with savings obtained by combining TrustPower with its own business.

Most market observers say the TrustPower share price indicates a sale to professional investors is the most likely outcome. The shares closed last night at $6.70, up 6c but below the $6.85 close on the day Alliant disclosed its plans.

The final price will depend on interest from the two other cornerstone shareholders - Infratil with 35.2 per cent, and the Tauranga Energy Consumer Trust with 28.6 per cent. The trust could be an aggressive buyer.

Meanwhile, a sale of the shares piecemeal will trigger a shareholder agreement, giving Infratil the right of first refusal over all the shares. Infratil and the trust yesterday did not respond to calls, but both previously indicated an interest in upping their stakes.

AMP Capital Investors head of equities Guy Elliffe said that if the trust and Infratil were buyers, a sale price was likely to be not far below yesterday's close but, if they decided to sit tight, the shares would be placed at a discount.

TrustPower is New Zealand's fifth-largest power retailer, selling electricity from dams and wind farms to about one in every five households. Alliant bought into the firm in 1999.

Alliant's investment has a book value of $166 million, suggesting it could book a gain of close to $400 million.

The long-rumoured sale follows Alliant's decision to focus on its utilities in the US mid-west. This year it has already sold investments in China and Brazil. It also plans to sell two power plants in China and a partly completed tourist resort in Mexico.

Trade buyers for the business were tipped to include Meridian and Genesis, but the state-owned generators yesterday said they were not in the hunt.

Another source close to the deal said First NZ Capital continued to have active discussions with "a range of parties".

A sale to trade buyers has been complicated by uncertainty as to whether a sale of Alliant's stake would trigger the shareholder agreement with Infratil; tax liabilities that may be crystallised and the trust and Infratil's combined 64 per cent stake, preventing any buyer getting control without the co-operation of at least one of them.