Hutt trust holds key to TransAlta swoop

By Brian Fallow

WELLINGTON - TransAlta's Canadian parent has launched a $245 million offer to buy out the electricity generator and retailer's minority shareholders.

The offer is pitched at $2.50 a share, a 22 per cent premium to the average price the stock has traded at over the past month.

But it is conditional on 90 per cent acceptance, so the response of the Hutt Mana Energy Trust, a consumer trust holding 12.5 per cent of the shares, is crucial.

The trust's stance, reaffirmed in its annual plan released this week, has been that it wants to continue as an owner of shares in TransAlta. In fact, it would like to increase its holding.

All the trust would say yesterday was that it would take independent advice on the proposal, which is on the table until November 4.

That deadline would give the trust sufficient time to consult the people of the Hutt, Mana and Porirua regions, said Mark Manderson, general manager of TEC Investments, the company through which TransAlta Canada holds its 67.4 per cent of TransAlta New Zealand.

But he denied that the offer, equivalent to $1600 for every household in the trust's area, was an attempt to go over the head of the trustees to the current beneficiaries. "It just gives the people of the Hutt an opportunity to have their say."

The Canadians are also offering $106 for every 100 capital notes held.

Mr Manderson said analysts' valuation of the shares ranged from $1.60 to $2.60 with the average around $2.10 or $2.20.

About 9 per cent of the shares are held by institutions, and the other 11.1 per cent by smaller shareholders, many of whom date back to 1993 when they received free shares in EnergyDirect, one of the first of the listed power companies.

Mr Manderson said the Government's electricity reforms, which forced local power companies to choose between being line networks or being in the business of retailing and in some cases generating electricity, had forced TransAlta NZ to make radical changes to its business which altered its risk profile.

TransAlta opted to sell its lines (to UnitedNetworks, the former Power New Zealand), but acquired PNZ's retail customer base in Auckland and the Thames Valley, later adding that of SouthPower in Christchurch.

Taking the company private would also increase its freedom of action in the event of further acquisition opportunities. When the cornerstone shareholding in Contact Energy was up for grabs, the delays involved in getting minority shareholder approval meant the Canadian parent had to make the offer, not TransAlta New Zealand.

Mr Manderson dismissed suggestions taking out the minority shareholders might be part of an exit strategy. The company was interested in increasing its New Zealand investment, and would look at any generation assets which came on the market.