Trustpower buys Oz power

Tauranga-based Trustpower is expanding into the Australian market buying five New South Wales state-owned renewable energy generators for $A72.2 million.

Trustpower is buying Hume hydro power station on the Murray River, the Burrinjuck hydro power station in southwest NSW and the Keepit hydro power station, northwest of Tamworth.

Hume Dam on the Murray River. Picture Wikipedia

It's also purchasing Blayney wind farm, west of Bathurst, and 80 per cent of the Crookwell wind farm in the southern tablelands.

Trustpower is making the purchase from the NSW government's Green State Power corporation, and the sale is expected to be completed in July.

Trustpower is buying into Australia because of commercial and political issues in the New Zealand market.

The supply-demand balance has gone the wrong way, says Trustpower community relations manager Graeme Purches. Apart from peak hour there is more supply than demand.

And there is 'regulatory risk” around the Labour-Greens energy policy, which means nobody is investing in electricity generation in New Zealand at the moment.

'Labour-Greens have a policy of having a central buyer for electricity . The problem with it is they haven't released any detail about how it would work. It's all broad brush stuff,” says Graeme.

'A cynic would say they released the policy to try and upset the partial sale of the SOEs and that generally is the accepted view in financial and business circles in New Zealand.

'But the net effect was it wiped something like $2-3 billion dollars off the New Zealand economy. The Price the government got for the 49 per cent they sold was significantly less than it would have been if there had not been this regulatory risk.”

Listed power companies like Trustpower and Contact Energy had huge amounts of money wiped off their balance sheets as a result, and Trustpower's 30 per cent owner the Tauranga Energy Consumers' Trust lost about 100 million off its balance sheet, says Graeme.

Trustpower has two fully resourced and consented hydro schemes on its books in New Zealand. It's got two entirely new wind farms on its books in New Zealand fully resource consented and it's got significant expansion capacity at one of its other wind farms in New Zealand.

'We are not doing anything with any of it, because you just can't take the risk around the investment when you have got all this regulatory uncertainty,” says Graeme.

'In Australia there really good investment opportunities we are currently spending $440 million expanding the Snowtown Windfarm. That project is going come in under budget and ahead of schedule.”

When completed the windfarm will produce 10 per cent of South Australia's electricity, and provide Trustpower with annual revenue of about $90 million.

'I think there are a lot of people in Tauranga who don't understand that Trustpower is now importing wealth to this region,” says Graeme.

'Sixty per cent of our customers are in the South Island, and a third of the profit from that, everything we do comes straight back to the Tauranga Energy Consumers Trust.

'Our head office is here. We are employing about 400 people in Tauranga. We buy a whole lot of stuff in Tauranga. So the impact on the local community is simply huge.”

Investing in Australia spreads the risk so if the market goes awry in New Zealand the Australian market is always going to be different.

'We've got a range of projects under consideration over there, another half a dozen wind farm projects on the books. Some have resource consent, some are going through process.”

The Trustpower board signed off on the Snowtown Windfarm expansion on the proviso the company sold the output.

'We sold the output for the next 15 years with a five year right of renewal,” says Graeme. 'We have got a guaranteed profitable income from that windfarm for the next 15 years.”

The Australian windfarms are very similar to the Tararua windfarm says Graeme.

'They are smaller turbines than we are using these days. We've got 15-16 years' experience with those turbines.”

Trustpower also has a depth of experience and expertise with hydro power. It owns 38 hydro schemes round the country, two of them one hundred years old and another turning 100 years old this year.

Trustpower's developed skill is refitting and tuning hydro plants to get more power out of them for the same amount of water.

'Coleridge (turning 100 this year) we bought it off the government for $90-95 million,” says Graeme.

'For five million, we increased its output by 50 percent without using any more water. For six percent of what we paid for it we increased its output by nearly half as much again.

'We have got a reputation in New Zealand for being able to do that. We have a bunch of smart engineers that work for us and the technology they use is really smart.

'We are working through all the existing projects so rather than building new stuff in New Zealand we are just making the stuff we have got work better.

'We are pretty rapt. Given the Tauranga community owns 32 per cent and a whole lot have still got their shares, I think the Western Bay can be pretty proud of what we are achieving.”

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3 comments

Hey But

Posted on 25-06-2014 20:45 | By Capt_Kaveman

where do trustpower get the profits to buy in oz? i never will use this company and even then the one i am with is cheaper and yet in 5yrs my power cost has gone up by 328%


Trustpower

Posted on 26-06-2014 11:21 | By Jimmy

Can afford all this because their power prices are 10x higher than any other company.....suck people in with a promise of a $400 rough cheque at the end of the year..... id much rather save $200 a month on power than get a meager $400 chq at end of year


Trustpower

Posted on 26-06-2014 11:21 | By Jimmy

Can afford all this because their power prices are 10x higher than any other company.....suck people in with a promise of a $400 rough cheque at the end of the year..... id much rather save $200 a month on power than get a meager $400 chq at end of year


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