Trustpower says a strategic review of its retail business is driven by a plan to grow its generation base, but it will not sell at any price.

The Tauranga-headquartered company announced on Thursday it had retained Forsyth Barr to seek interest in its mass customer business and whether it could operate as a standalone generation business.

The NZX-listed company has about 231,000 customers across electricity, gas and broadband and generates around 5 per cent of New Zealand’s electricity.

Already, one company which is preparing to enter the New Zealand retail electricity market has said it would assess Trustpower’s retail business.

Trustpower chief executive Dr David Prentice said the company saw its retail business as a success, leading a move to selling multiple services to customers, but the pressures were increasing.

“We think the Trustpower retail business is a success story, but I think there’s been a growing appreciation from the board that we operate in a completely dynamic, highly competitive market, and we’re continually having to reinvent our business models to deliver increasing customer expectations.

“So we just felt it was time to test the market … to see whether there might be an acquirer out there who might see more strategic value in our retail business than currently we do.”

The company was prepared to retain the business if it did not get acceptable offers. “We are not selling this at all costs, not at all.”

Prentice said it “would probably be a fair assessment” that purely electricity generation businesses were more highly valued by investors than combined generator retailers. However, this was not the driver.

In the last term of Government, Prentice served as the chairman of the Interim Climate Change Commission, which advised the Government on how to achieve its goal of 100 per cent renewable electricity generation.

“There needs to be a significant increase in [generation] capacity over the next 30 years to meet electrification, so we want to focus our efforts and focus our investment on that growth.”

The generation business represented about a quarter of the company’s staff, although generation accounted for around three quarters of its earnings before interest, tax, depreciation and amortisation (EBITDA), Prentice said.

Chief financial officer Kevin Palmer said there were a pool of potential buyers for the business, from existing retailers of electricity or telecommunications services to private equity buyers or possibly overseas buyers.

One new entrant to the New Zealand market immediately showed interest.

Octopus Energy’s New Zealand head Ari Sargent, the former chief executive of Meridian subsidiary Powershop, indicated the company “will definitely evaluate” the Trustpower retail base.

“To take on a customer base of this scale we would need to be confident that we can secure wholesale supply on appropriate terms and that the investment fits within the international growth strategy and priorities of our UK parent company.”

Trustpower is majority owned by infrastructure fund Infratil, while more than a quarter of the company is owned by the Tauranga Energy Consumer Trust (TECT), which offers rebates for Trustpower customers in the Tauranga and Western Bay of Plenty districts.

“Trustees are well advanced in developing a proposal that outlines the changes to TECT’s structure needed to meet the purpose of the Trust Deed, and to ensure that the best interests of the Trust and its beneficiaries are protected,” the trust said in a statement.

Prentice indicated Trustpower expected a further update from the trust in around a week. “We don’t think there is any material risk with respect to them blocking anything.”

Infratil, which owns 51 per cent of Trustpower is the subject of takeover interest, with AustralianSuper publicly disclosing an unsolicited approach in December.

Days earlier Infratil revealed it was conducting a review of its majority stake in Tilt Renewables, the Australasian windfarm developer.

Trustpower insisted the decision to review its retail business pre-dated the interest in Infratil by AustralianSuper by “many months” and was entirely unrelated, Prentice said.

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