Wanganui District Council has sold the retail arm of its gas business for more than $13 million.
Electricity supply company TrustPower has paid $13.65 million and the deal was signed yesterday morning after being ratified on Tuesday afternoon at a secret session of the council.
It means EnergyDirect (EDNZ) will become part of TrustPower on July 1 and will add about 10,000 gas and 15,000 electricity clients to its existing 206,000 customer base.
Wanganui mayor Annette Main said the council was more than satisfied with the price and she believed the community would look upon the sale "favourably".
"There's a lot of loyalty to Wanganui Gas and it's important to reiterate we're only selling EnergyDirect. We're retaining GasNet and that is still a profitable company," she said.
GasNet, the infrastructure side of the business, was never considered in the sale discussions.
"Long term this is in the best interest of Wanganui,"Ms Main said. But she said the sale should not signal $13 million would go towards helping pay for the unbudgeted costs of upgrading the city's ailing wastewater treatment plant, estimated to be about $24 million.
"We need to remember we already have significant debt and the strong recommendation from (WDC) Holdings directors is that this money goes to repay debt.
"The council considered it but deferred it for more discussion because yesterday's meeting wasn't the time to decide. But certainly clearing debt is a priority for me," she said.
Ms Main said the council had to consider whether it was appropriate to continue owning an energy trading company within changes signalled in the Local Government Act.
"We also considered the risks that are involved in the energy market and possible changes ahead."
She said while private enterprise may find such risk acceptable, it was not necessarily in the best long-term interests of the Wanganui community.
Less than 40 per cent of EnergyDirect customers are Wanganui users; the rest are outside the region.
Matthew Doyle, chairman of WDC Holdings, said offers had been made for EnergyDirect in the past but none had reflected the value of the business.
Mr Doyle said TrustPower had expressed its interest four years ago and council received an unsolicited approach from the power company mid-2012.
WDC Holdings had worked with PricewaterhouseCoopers to establish whether this approach represented value before working with council's solicitors to offer an agreement.
Key aspects of the agreement are that TrustPower commits to "business as usual" for the next two years at least and that the staff are offered re-employment under their existing terms and conditions.
Ms Main said the council decision was unanimous and there was a lot of discussion around the retention of staff and infrastructure.
Mr Doyle and fellow director Harvey Green met with EnergyDirect staff yesterday morning to take them through the sale agreement and what it would mean for them.
He said TrustPower was a "good fit" because it has a long history of serving provincial New Zealand and a strong focus on supporting local communities.
Ms Main said the Wanganui Gas directors had done "an absolutely fabulous job" turning the business around in the past couple of years.
In that time the company had returned dividends totalling $2.5 million, the second ($1 million) announced just days ago.
Chris O'Hara, TrustPower's commercial operations general manager, told the Chronicle customers would notice very little change with the buyout.
Mr O'Hara said his company's customer base tended to be more provincial-based, "so we're not a metropolitan player".
"But the customers with EnergyDirect fit very well with our customer profile," he said.
It will be TrustPower's first foray into natural gas retail. Until now it has been an electricity power retailer only.
"We had looked at getting into this market before but this purchase lets us hit the ground running and that was a major attraction," Mr O'Hara said.
"And we always thought it would be a good addition to our business."