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Trustpower Demerger

trustpower logo 2015Trustpower Limited (TPW) have approved the demerger into two NZ incorporated listed companies.

The two companies will be Bay Energy Limited (to be renamed Trustpower Limited, New Trustpower), which will own TPW's NZ and Australian hydro power generation and NZ multi-product retailing businesses, and Tilt Renewables Limited, which will own TPW's Australian and NZ wind farm assets and wind and solar development projects.

Eligible shareholders are to receive one share in each of Tilt Renewables and New Trustpower for every share held in Trustpower. Shareholders don't need to do anything further to receive the new shares

Consequently, TPW intends to redeem all four series of its existing bonds on 13 October 2016 prior to its demerger, at the greater of par plus accrued interest or market value. An exchange offer has been provided to holders of TPW100, TPW110 and TPW120 Bonds who may elect to exchange their TPW Bonds for new bonds to be issued by New Trustpower that have the same interest rate, maturity date and ranking as the TPW Bonds they currently hold.

The New Trustpower will issue up to $165 million of new 15 December 2022 unsecured, unsubordinated, fixed rate bonds (TPW150). The indicative margin has been set at 1.75-1.80%pa over the swap interest rate which implies an indicative interest rate of 4.11-4.16%pa if it were set today.

If you might be interested in investing in these bonds please give us a call on 07 578 3863, we may be able to source some for you.

Once the demerger is complete, New Trustpower will be New Zealand’s fifth largest electricity generator with approximately 8% of NZ’s installed hydro capacity and the fourth largest energy retailer by market share, with approximately 13% retail electricity market share.

We expect that after the demerger the two companies will be worth more to investors than before. Read the Port of Tauranga Share Split article for the reasons.

New Trustpower’s management have a stated strategy of retaining profit to pay down debt, which in time should result in improving debt ratios. At this time we don’t have any financial forecast for New Trustpower. Hence, we have based our analysis on current pro-forma financial data. While New Trustpower has better financial ratios than Trustpower, as a greater proportion of the debt is taken on by Tilt Renewables, its financial ratios are not as good as those of the other NZ electricity generators.

We expect most investors will take up the offer of swapping their existing Trustpower Bonds for the
New Trustpower bonds.


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