4588

NEW ZEALAND GAZETTE

No. 140

NOTES TO THE FINANCIAL STATEMENTS

Other gas purchase contracts

ECNZ has entered into a contract with Petrocorp Exploration Ltd, whereby ECNZ is committed to purchase a minimum quantity of gas each year from 1 July 1995 to 31 March 2005. As at 30 June 1995 the minimum amounts to be purchased were as follows:

Year Ending $000
June 1996 12,090
June 1997 20,240
June 1998 20,240
June 1999 20,800
June 2000 22,490
Later years 95,580
Total 191,440

Take or pay electricity supply contracts

ECNZ has entered into a contract with Comalco Power New Zealand Limited (Comalco) whereby ECNZ is committed to supply electricity in annual contract quantities from 1 July 1995 to 31 December 2022. Under the terms of the contract ECNZ will receive payment for a minimum quantity of electricity, whether or not Comalco has taken that quantity of electricity.

As part of this electricity supply contract with Comalco, ECNZ has entered into a contract with Trans Power New Zealand Limited (Trans Power) for the transmission of the contracted quantities of electricity to Comalco at a current annual charge of $40 million. This contract with Trans Power expires on 31 December 2022. The total payable to maturity at current prices amounts to $1,100 million.

28. SPLIT OF ECNZ

On 8 June 1995, the Government announced a comprehensive set of measures aimed at establishing a competitive wholesale electricity market. These included:

(a) A proposal to split ECNZ

Subject to the successful conclusion of consultations with Maori, Government proposes to establish a new SOE which will purchase a number of generating assets from ECNZ on 1 February 1996. The principal assets involved are the New Plymouth, Stratford, Whirinaki, Otahuhu, Wairakei, Ohaaki, Clyde and Roxburgh stations, key development sites in the Clutha catchment and ECNZ’s rights under the Maui gas contract.

The transfer of assets to the new SOE will take place at book value. At 30 June 1995, the fixed assets involved had a net book value of approximately $1.6 billion. ECNZ and the new SOE are both required to revalue their fixed assets within twelve months after 1 February 1996 to reflect the establishment of long term contracts and to ensure that their value will be recovered through future operating revenues.

Certain current assets will be transferred to the new SOE which will also assume responsibility for discharging certain current liabilities. ECNZ will use the sale proceeds to make a capital repayment to its shareholder and to defease a significant portion of its long term debt. At the present stage in the sale process, it is not possible to quantify the impact on current assets, current liabilities, debt and equity.

(b) The sale of the Taranaki Combined Cycle (TCC) development to a third party.

(c) The sale of small hydro stations to third parties.

ECNZ will progressively offer eight small hydros for sale. The stations involved are Cobb, Coleridge, Highbank, Mangahao, Matahina and the Waikaremoana group of three stations.

(d) Constraints on ECNZ

The Government has also placed a number of constraints on ECNZ whilst its market share is greater than 45%. The foremost of these relates to new investment. At least 50% of additional generating capacity must be provided by independent third parties. Any additional capacity provided by ECNZ must be ring-fenced to restrict cross subsidisation.