Mercury to acquire Trustpower’s retail

Mercury has entered into binding agreements with Trustpower to acquire Trustpower’s retail business for $441 million which it hopes to settle this year.

The transaction is conditional on several matters, including Commerce Commission clearance, completion of the proposed restructure of Tauranga Energy Consumer Trust (TECT) and Trustpower shareholder approval.

Trustpower’s retail business is a leading multi-product utilities retailer selling electricity, gas, fixed and wireless broadband and mobile phone services to about 231,000 customers nationwide.

The combined business will have about 780,000 connections across both energy and telco services.

Mercury chief executive Vince Hawksworth says the acquisition will accelerate Mercury’s retail strategy, 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 says.

“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,” Hawksworth adds.

“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.”

Hawksworth says Trustpower has about 500 staff focused on retail, based in Tauranga and Oamaru.

“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.”

Deeper integration of the two businesses is not planned until the underlying IT systems will enable improved customer experience. 

All Trustpower’s local retail customers (as at January 28, 2021) will remain beneficiaries of the Trust following any sale of Trustpower’s retail business. 

Trustpower says the conditional sale involves its gas, telecommunications and retail electricity supply business (excluding the supply of electricity to commercial and industrial customers) going to Mercury.

This 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.

Chairman Paul Ridley-Smith says the conditional sale of the retail business enables the board and leadership team to continue to drive operational excellence in its generation business and focus on new generation and related opportunities.

Trustpower chief executive David Prentice says opportunities for employees has been an important consideration in this process.

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

“New Zealand needs to greatly increase renewable energy generation to aid the de-carbonisation and electrification of the economy and we are in a unique position to play a role in helping the country achieve its climate change targets.”

Prentice will be the chief executive of the new generation business.

Trustpower will consider capital structure, dividend policy and opportunities for re-investment of the proceeds as settlement of the transaction approaches, with a further update provided at the annual shareholder meeting on September 22.