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Thursday, August 5, 2021
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Trustpower sells retail sector to Mercury for $441m

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Power generator and retailer Mercury NZ plans to buy the retail business of Tauranga stalwart Trustpower once it gets various permissions sorted, including Commerce Commission approval.

The businesses have entered into a binding agreement conditional on the restructure of Tauranga Energy Consumer Trust (TECT) and Trustpower shareholder approval.

Trustpower’s retail business sells electricity, gas, fixed and wireless broadband and mobile phone services to about 231,000 customers nationwide. Combined, the businesses would have about 780,000 connections across both energy and telco services.

Mercury chief executive Vince Hawksworth – formerly a longtime ceo of Trustpower – said the acquisition would accelerate Mercury’s retail strategy, which is centred on delivering the right product mix and value for customers.

Mercury and Trustpower are two highly complementary organisations, and this agreement would see the best of both being brought together for our customers,” he said.

“We know customers value the convenience and ease of bundled services in their home and Trustpower has deep expertise in bundling products in a way that people clearly appreciate. We see this adding material value to our customers and Mercury.

“Bringing together the retail businesses of Mercury and Trustpower will also give us the scale to make meaningful investment in the underlying IT systems, driving greater innovation for our customers.”

Skilled and motivated staff

Hawksworth said the strength of Trustpower’s retail offering was underpinned by a skilled and motivated team, with about 500 staff focused on retail, based in Tauranga and Ōamaru.

“We see a huge amount of talent and capability across both organisations, each with a strong focus on delivering the best possible outcomes for customers. We’re excited for how we can continue to build on this

“Customers will continue to enjoy all the great services and support they have today with Trustpower and with Mercury and we’re looking forward to unlocking even more benefits and products for them over time.”

Trustpower is 51 percent owned by infrastructure investor Infratil, which has said it is in supportive of the sale and will vote in favour of the deal at the Trustpower annual shareholder meeting in September.

The two businesses won’t be fully integrated until their IT systems allow for an improved customer experience.

New banking facility

Mercury has secured a commitment for a new bank facility sufficient to finance the acquisition.

The transaction is conditional on Mercury obtaining Commerce Commission clearance for the purchase of Trustpower’s retail business and Mercury will be working with the Commerce Commission to progress the application.

The transaction is also conditional on the proposed TECT restructure being completed and shareholder approval. Local retail customers will remain beneficiaries of the trust following any sale.

The timing for regulatory approvals depends on several factors, including the current workload of the regulator. Mercury anticipates these conditions will be fulfilled and the transaction will be complete by the end of the year.

The confirmation of a conditional sale of Trustpower’s retail business reaffirms how crucial it was for Trustees to act when we did to ensure that the rebate was protected for our existing beneficiaries under a change of ownership. – Bill Holland

Need for TECT changes

Chairman of TECT, which has a significant share in Trustpower, Bill Holland said the confirmation of the sale underscored the need for the changes to TECT and the importance of trustees acting when they did.

“The confirmation of a conditional sale of Trustpower’s retail business reaffirms how crucial it was for Trustees to act when we did to ensure that the rebate was protected for our existing beneficiaries under a change of ownership.

The proposed acquisition comes after the company announced earlier this year that it was undertaking a strategic review to test market interest in its retail business while exploring the merits and business case to establish a standalone generation business.

Trustpower Chairman Paul Ridley-Smith says there were several interested parties in the acquisition of the retail business, validating the opportunity that exists to continue to grow the successful offering of electricity, gas, broadband, mobile and wireless connection services.

“We are pleased that our business will stay in local hands, with a future owner committed to retaining Trustpower’s Tauranga and Oamaru offices for the foreseeable future.

“Mercury clearly understands the business and the strategic value of a proven multi product offering, quality customer base and opportunities for future growth,” said Ridley-Smith.

“Until the sale goes unconditional and then completes, it is business as usual for Trustpower. We will continue to do our best for our customers until the business joins with Mercury.”

Trustpower Chief Executive David Prentice said the opportunities for employees has been an important consideration in this process.

“The capability and performance of our people is what makes the difference for our customers, communities, and shareholders,” said Prentice.

“The majority of employees will get the opportunity to transfer to Mercury and of the rest of the employees most will remain with the generation business.”

Equally, Trustpower is confident once Mercury completes the purchase it will maintain and enhance the value and quality of Trustpower’s customer service.

Read: Trustpower to explore potential retail business sale

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