- TECT is asking its beneficiaries their views on a proposed restructure of the Trust.
- This follows Trustpower’s announcement that it is undertaking a strategic review, including a potential sale of its retail business.
- A sale of Trustpower’s retail business would change the status of TECT’s beneficiaries and eligibility to receive rebates.
- The TECT rebate is protected for existing beneficiaries under the proposed new structure for approximately 30 years.
Following Trustpower’s recent announcement that it has initiated a strategic review, including a potential sale of its retail business, TECT has today begun a consultation process with its beneficiaries on changes required to the structure of the Trust.
TECT Trustees say the potential Trustpower sale means TECT must change its structure, but their proposal they are presenting will protect the TECT rebate for all existing beneficiaries for approximately 30 years.
“A sale of Trustpower’s retail business to a third party would mean that our beneficiaries would no longer be Trustpower’s 53,000 Tauranga local retail customers. Instead, iIf we don’t act now, TECT’s beneficiaries would only be a small number of larger commercial electricity users that will remain customers of the Trustpower Generation business.”.
“We need to update the structure of TECT to ensure that we meet our obligations under the Trust Deed and that TECT is meeting the purpose it was established for.
“Our proposal balances protecting the annual TECT rebate for existing beneficiaries, and the purpose TECT was established for; to provide long-term benefit for all the residents and communities of Tauranga and Western Bay.
“Even if the current strategic review by Trustpower does not lead to a sale in the short term, it demonstrates the ongoing uncertainty of the ownership of the Retail Business and the Trustees believe that the structure of TECT needs to change to future-proof the Trust and the rebate.
“This proposal ensures existing beneficiaries of TECT will continue to receive the TECT rebate, if they remain as customers of Trustpower or a buyer of Trustpower’s retail business. Nothing will change for beneficiaries and the rebate will be protected.
“Under the proposal TECT will retain sufficient funds to pay the rebate to existing beneficiaries for approximately 30 years.
“The remaining funds will be transferred to a new long-term community trust, focused on grants for major transformational projects and important services for our region such as our local rescue helicopter service.
“The Western Bay’s growing needs in terms of infrastructure, both physically and socially, are only going to increase, which is where TECT can play an increasingly critical role with this new structure in place.
“The transition to a community trust will also resolve several other issues with the existing structure that have developed in recent years and pose ongoing risks to TECT.
“We now look forward to engaging with beneficiaries in coming weeks on the proposed new structure for TECT and ensuring that their views are heard before any final decision is made,” concluded Trustees.
Proposed restructure
Step 1:
TECT would retain funds which are sufficient to pay a yearly rebate to all existing beneficiaries (as of Thursday 28 January 2021) for approximately 30 years (i.e., the intention is to retain enough funds to pay, based on current financial projections, rebates until 31 December 2050).
An existing beneficiary is essentially a customer of Trustpower in the defined Tauranga and Western Bay of Plenty District who currently is eligible to receive a rebate.
- The rebate will be $500 a year for the first ten years, will increase to $600 in 2030 and increase further to $700 in 2040, to take account of inflation. $500 was the averaged median rebate payment over the five previous years.
- Rebates will be paid on the usual six monthly TECT cycle.
- To receive a rebate a beneficiary must remain a customer of Trustpower or the buyer of the Retail Business (or a subsequent buyer), in the district - subject to limited exceptions. If you leave, the rebate stops.
- New customers and the current customers of the new business do not become beneficiaries.
- On 31 December 2050, TECT must be wound up (if it has not been wound up earlier for example, due to the trust fund all having been paid out as rebates), and its remaining assets will go to the new TECT Community Trust described below.
Step 2:
The balance of TECT’s funds (including its shareholding in Trustpower) would be transferred to a new long-term community trust focused on grants for local community projects.
Consultation detail
Trustees have opened a consultation period today on the proposal over a 4-week period and are seeking the views of TECT beneficiaries until 22 March.
A Notice of Proposal outlining the proposal and rationale behind it, as well as a submission form and return envelope, will be posted to all 53,000 existing beneficiaries this week. These documents have also been emailed to beneficiaries today. [Link to NOP].
A full Consumer Information Memorandum is also available online [here].
TECT Trustees will be holding three consumer information sessions to outline the proposal and answer any questions:
