Infratil favoured to control TrustPower

Investors are betting infrastructure investor Infratil will shortly take control of power generator TrustPower by acquiring a 23.8 per cent stake put on the block by its US parent Alliant.

Shares in TrustPower - which yesterday disclosed a rise in first-half pretax profits from $78.72 million to $85.7 million - have remained strong, up around 10c since Alliant revealed its sale plans. They closed last night unchanged at $6.80.

If the share parcel - worth $509 million last night - was to be placed with professional investors they would likely be sold at a discount to the market price.

But a sale to Infratil, which already holds 35 per cent, is more likely at the market price or even at a premium.

"The market is pretty smart," said AMP Capital Investors head of New Zealand equities Guy Eliffe. "The shares have not joined the [recent sharemarket] rally, but they have held up well."

Alliant asked First New Zealand Capital in September to find a buyer for its New Zealand holding company, which has a 23.8 per cent stake in TrustPower and 5.07 per cent of Infratil.

It also asked ABN Amro to canvass professional investor interest in the assets, with an eye to breaking the holding company apart and selling its investments piecemeal.

But Infratil is in a strong position whatever way the deal falls. In the case of a breakup of Alliant's New Zealand holding company it holds pre-emptive rights over the shares. In the case of a sale of the business whole, no trade buyer is likely to buy the stake without a clear idea about Infratil's intentions for the business.

If Infratil does buy the shares, takeover rules force it to either launch a full takeover for the company or seek a Takeovers Panel waiver.

Infratil and Alliant did not comment, but it is understood Alliant is seeking final bids for the assets by the end of this week.

TrustPower is New Zealand's fifth-largest power retailer, selling electricity from dams and wind farms to about one in every five households.

TrustPower chairman Harold Titter said the first-half result was pleasing and a "good financial outcome" for the full year was achievable.

TrustPower's generation assets produced 1082 GWh during the first half versus 999 GWh in the six months before.

Its hydro generation storage and power purchase contracts gave it the capacity to meet the demand of its 220,000 customers.

The directors declared a rise in the interim dividend from 11c a share to 13c.