Contact eyes TrustPower stake

Contact Energy would be interested in Australian Gas Light's 20 per cent stake in Tauranga-based TrustPower.

"We would look at it. We look at any acquisition," said Contact chief executive Paul Anthony yesterday.

His comments come after TrustPower chief executive Jeff Williams said that he expected Australian Gas Light (AGL) to sell its stake now it had secured control of TransAlta New Zealand.

Mr Anthony believed other electricity companies would be interested as well.

"I think maybe one of the state-owned generators might look as well. I think there would be a reasonable amount of interest generated in the stake provided you had some control over it."

The 20 per cent stake was not big enough for control so a buyer would have to "take out another party" as well.

"But it's not on our radar screen at the moment."

The prize with TrustPower is a retail electricity customer base of 220,000.

Mr Anthony said Contact was not uncomfortable with the size of its present base of more than 500,000 electricity and gas customers.

Contact was in no hurry to buy other retail businesses.

It said on Monday that it had bought Auckland-based retailer Empower for $23 million. Empower has 25,000 residential and business customers.

Contact was not prepared to pay top dollar just to increase the customer base.

"We were very keen on the TransAlta deal but unfortunately we couldn't get anywhere near that price and guarantee that we were going to add wealth to shareholders," Mr Anthony said.

He pointed out that AGL and its New Zealand subsidiary, Natural Gas Corporation, paid $900 a customer for the TransAlta customers.

Contact's average had been less than $400 a customer to build a customer base of almost 400,000 electricity customers.

He believed the best ratio for a generator was to have 60 to 65 per cent of production covered by their own retail customer demand.

In that way the company could take advantage of the highs of the wholesale electricity market price.

If it had secured TransAlta it would have had 85 per cent of its production covered by a retail base and that would have been higher than its optimum of 65 per cent.

"But that would have been a short-lived experience because as the demand base grows we do intend to grow our generation portfolio," Mr Anthony said.

Contact had about 50 per cent of its generation production covered and with the purchase of Empower's customers the company would move to 55 per cent.

He said some generators with small retail bases would be better off concentrating on generation but it might take a while for them to see that it would make sense to divest the customer base and concentrate on wholesale. Those generators were Meridian Energy and Genesis Power.

"Certain generators are more able to compete at the wholesale end and might be better off just selling wholesale product to independent retailers."

- NZPA