528

NEW ZEALAND GAZETTE

No. 16

capacity of ECNZ, and the ring-fencing of any such additional capacity;

• implementation of the contract offer mechanism referred to in paragraph 1.6;
• the Taranaki combined cycle/gas sale;
• the sale of the small hydro-stations.

In parallel with the above, pool rules will need to be developed by the industry within the Government’s public policy objectives.

2.2 Timetable and responsibilities

A timetable setting out various tasks for implementing the measures set out in Part 1, and the allocation of responsibility and the target completion date for each task, is set out in Appendix 8.

2.3 Matters relating to implementation

Each Appendix is to be implemented in the manner which best gives effect to the objective set out at the beginning of the Appendix.

2.4 Intention to abide by this Memorandum

The Government and ECNZ intend to—

• abide by this Memorandum in accordance with its purpose, spirit, and intent; and
• take any steps reasonably necessary to give effect to this Memorandum.

2.5 Alteration of Memorandum

This Memorandum may be added to or amended by a supplemental document signed on behalf of the Government and ECNZ.

2.6 Memorandum not to create legal rights

This Memorandum is not intended to create legal rights.

SIGNED on behalf of the Government of New Zealand by William Francis Birch, Minister of Finance, and Douglas Lorimer Kidd, Minister of Energy, and Philip Ralph Burdon, Minister for State-Owned Enterprises, and Simon David Upton, Minister for the Environment.

SIGNED on behalf of Electricity Corporation of New Zealand Limited and its subsidiaries (“ECNZ”) by Selwyn John Cushing, Chairman and Victor Wu, Director.

APPENDIX 1

Establishment of New SOE

Objective

1. The new State-owned enterprise referred to in clause 1.1 is to be established in accordance with this Appendix—

• as a commercially viable entity; and
• as an effective competitor to ECNZ.

Power stations and other assets to be sold to new SOE

2. ECNZ will sell to the new SOE:

• the New Plymouth, Stratford, Whirinaki, Otahuhu, Wairakei, Ohaaki, Clyde and Roxburgh power stations; and

• all related assets, rights (including resource consents), and development sites owned by ECNZ, and especially—

  • all of the upper and lower Clutha development sites; and
  • all geothermal development sites; and

• the Tariki/Ahuroa/Waihapa/Ngaere gas contract.

Maui Gas

3. ECNZ and the SOE Development Group will, as part of the asset transfer process, negotiate contractual arrangements for the use of Maui gas in accordance with the following framework:

• ECNZ will transfer to the new SOE all of its rights and obligations under the contractual arrangements between ECNZ and the Crown relating to Maui gas (for convenience referred to below as “the Maui contract”).
• ECNZ will complete its negotiations for the sale of gas from the Maui contract under the process for selling the Taranaki combined cycle (TCC) gas referred to in Appendix 2. If that sales process has not been concluded before the formation of the SOE Development Group, the new SOE will have full access to all information and work with ECNZ on that sale, but the new SOE will not participate directly in negotiations with prospective buyers. (For convenience, the gas contract or contracts to be formed under that sales process are referred to below as the “TCC gas contract”).
• ECNZ will transfer to the new SOE all of its rights and obligations under the TCC gas contract.
• ECNZ will purchase from the new SOE on an annual take or pay basis, at the Maui contract price, any remaining gas available under the Maui contract which is in excess of the quantity required:
  • to run Stratford at its maximum technical capacity (for convenience referred to below as “the Stratford block”); and
  • to run New Plymouth at its maximum technical capacity (less that fuel supplied under the Tariki/Ahuroa/Waihapa/Ngaere contract); and
  • under the TCC gas contract.
• The new SOE and ECNZ will develop fully commercial arrangements for the use of gas from the Stratford block to provide ECNZ with access to the Stratford block, whenever Stratford is not running to cover peak or dry periods, for use at its existing Huntly plant.

4. Once the initial contractual arrangements have been established, it is expected that ECNZ and the new SOE, in conjunction with other suppliers and users of gas, will develop commercial arrangements for trading gas to reflect their short term operating requirements.

5. The Government will use its best endeavours to negotiate an agreement with the Maui joint venture partners to allow ECNZ access to information under the Maui contract (following its transfer to the new SOE) as follows:

• ECNZ to have the right to require that the new SOE exercise its rights to obtain information from the Crown as provided for under the Maui contract; and
• ECNZ to have access to any information which the new SOE obtains under the Maui contract.

Explanatory note:

The Government is seeking an economically efficient allocation of gas between ECNZ and the new SOE based on commercial processes. This requires a framework for negotiation which provides a reasonable balance of strength between the parties; in particular, the price offered by the company selling Maui gas should be disciplined by the availability to the other company of reasonably priced alternative fuels. The new SOE should therefore hold the Maui gas contract because the new