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Highlights
- Mercury NZ to buy Trustpower’s retail business for a consideration of NZ$441 million.
- The deal is subject to a nod from the Commerce Commission, the shareholders and TECT.
- TPW to retain generation business and to call it Manawa Energy Limited.
Trustpower Limited (NZX:TPW) is a NZ-based electricity retailing and generation company. NZ’s fifth-largest electricity generator and the fourth-largest retailer, it is owned by two major stakeholders—Infratil which owns 51% of its stake and Tauranga Energy Consumer Trust (TECT), which owns 26.8%.
In January this year, the Company announced that it was looking out to sell its retail business due to increasing competition in the utility retail market. Mercury NZ came forward and agreed to buy its retail business for a sum of NZ$441mllion.
Terms of the deal
Trustpower has some unique advantages. It has an important role to play in creating sustainable energy for the future New Zealand. NZ has set new climate change targets and Trustpower is in a unique position to help achieve those climate change targets.
Also Read: 5 Interesting NZX Dividend Stocks with at least 4% Yield
It was decided that as a part of the deal, the Company will retain its generation assets and all its corporate clients which are 14,000 in number. The majority of retail staff and clients will be passed on to Mercury NZ.
Lastly, Trustpower will enter into a hedge contract with the buyers to provide generation to 2024 at the same price.
Related article: Trustpower (NZX:TPW) shares drop as it announces retail strategic review
Do Read: Trustpower (NZX:TPW) to perform a strategic review of retail business
Advantages of the deal For Mercury NZ
The deal will be completed after it gets approval from Commerce Commission and shareholders. The shareholders will be asked to vote on this very important proposal at the Annual General Meeting to be held on 22 September 2021.
It is proposed that after necessary approvals, Mercury will take over the Trustpower name and brand, and Trustpower, in turn, will select a few names for itself.
On 11 August, Trustpower confirmed that the name for its generation business will be Manawa Energy Limited. This name has been selected after an extensive engagement with the shareholders and the name will be officially adopted once the sale is complete.
The acquisition will be funded by a new debt facility secured by its bankers.
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CEOs speak
Trustpower chairman, Paul Ridley-Smith, said that several parties had expressed interest in buying the Company. With the sale to NZ-based Company Mercury NZ, they were happy that the business would stay in local hands only.
Vince Hawksworth, CEO of Mercury NZ, said that the acquisition would help them provide bundled services to the customers, which will do value addition to the customer experience.
Right now, it is a conditional deal, and it is likely to be finalised by the end of the year after getting a nod from shareholders, Commerce Commission, and Tauranga Energy Consumer Trust.
Road Ahead: The deal with Mercury NZ to acquire the retail business will enable Trustpower to concentrate on its generation business and corporate clients. Mercury NZ will benefit a great deal it gives it new customers in the retail segment.
On 31 August 2021, the stock was trading down by almost 0.13% at NZ$7.980, at the time of writing.
