Trustpower, the utility company controlled by Infratil, is mounting a $126.6 million takeover bid for King Country Energy, having entered into a lock-up arrangement with Todd Corp's Nova Energy for 54 percent of the central North Island electricity generator and retailer.

Tauranga-based Trustpower will pay $5 a share in cash in a full takeover offer for King Country Energy, provided it gets at least 70.2 percent of the company, or a lower price of $4.78 a share if it falls short of that mark, it said in a statement.

At the higher price, that's a 20 percent premium to what King Country Energy shares last traded at on the Unlisted platform, and at the lower price it's a 14 percent premium.

The deal has already met the minimum 50.1 percent threshold with the arrangement with Nova, which had reportedly put the stake up for sale. Trustpower won't necessarily reach the 90 percent threshold needed to enforce mop-up provisions because that would require it to win over the King Country Electric Power Trust, which owns 20 percent.

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The purchase would add King Country Energy's four hydro generation stations and the Mangahao station near Palmerston North to Trustpower's portfolio, increasing installed capacity by 53.7 megawatts and producing an average 191 gigawatt hours a year.

The deal would also add about 17,500 customer to Trustpower's 252,000 clients.

"Trustpower sees KCE's provincial North Island assets and customer base as a good strategic fit with Trustpower's New Zealand business and its core operational competencies," the company said in a statement.

If the deal goes ahead, Trustpower will seek board representation and will "undertake a thorough review" of King Country Energy to see if operations are being run efficiently. Until the review is completed, Trustpower says it can't be sure if it will make material changes to the power company's assets or capital structure.

Trustpower will fund up to $125 million of the acquisition through committed bank facilities. The company's total bank facilities were $765.2 million as at Sept. 30, of which $28.6 million was maturing in the next 12 months.

The power company will make its formal offer between 14 and 30 days from today's takeover notice.

Trustpower shares rose 0.4 percent to $7.77, and have slipped 2 percent this year, while King Country Energy shares last traded at $4.18 on the Unlisted platform, and have increased 4.5 percent this year.