TECT asks for views on changes
Tauranga Energy Consumer Trust is today beginning a consultation process with its beneficiaries, asking for their views on changes required to the structure of the trust.
This comes on the heels of Trustpower’s recent announcement that it has initiated a strategic review, including a potential sale of its retail business.
TECT Trustees say the potential Trustpower sale means TECT must change its structure, but the proposal they are presenting will protect the TECT rebate for all existing beneficiaries for about 30 years.
“A sale of Trustpower’s retail business to a third party would mean our beneficiaries will no longer be Trustpower’s 53,000 Tauranga retail customers,” says TECT chair Bill Holland.
“If we don’t act now, TECT’s beneficiaries will be a small number of larger commercial electricity users that will remain customers of the Trustpower Generation business.”
TECT is one of the largest community-focused trusts in New Zealand at $870 million, providing support for local initiatives, facilities and events across the Western Bay of Plenty.
TECT’s current beneficiaries are Trustpower customers in the Tauranga and Western Bay of Plenty region, who receive a TECT rebate.
The provision of this rebate is a historic practice following the major reforms of the electricity sector in 1993, which resulted in the formation of TECT.
At the inception of the trust, everyone in the Western Bay of Plenty was a customer of Trustpower. While the trust had a significant shareholding in Trustpower at the time, it is now much smaller at 26.8 per cent.
Over the past 27 years, the trust has grown and diversified its investment portfolio.
Major projects in recent years have included the University of Waikato Tauranga CBD campus, TECT Rescue Helicopter sponsorship, the building of new St John Ambulance facilities, and the Bay Oval cricket ground floodlights.
Bill says TECT needs to update its structure to ensure that the trustees meet their 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,” says Bill.
“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 the structure of TECT needs to change to future-proof the Trust and the rebate.”
Bill says 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,” says Bill.
“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.”
The trustees are now looking forward to engaging with beneficiaries in coming weeks on the proposed new structure for TECT.
“We want to ensure that their views are heard before any final decision is made.”
The proposed restructure.
TECT would retain funds which are sufficient to pay a yearly rebate to all existing beneficiaries, as of Thursday January 28 2021, for approximately 30 years. The intention is to retain enough funds to pay, based on current financial projections, rebates until December 31 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 they leave, the rebate stops.
New customers and the current customers of the new business do not become beneficiaries.
On December 31 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.
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.