23 FEBRUARY NEW ZEALAND GAZETTE 529

SOE’s thermal plants have a more limited choice of fuels. The new SOE and ECNZ will have strong commercial incentives to establish efficient arrangements for trading gas which is not used by the new SOE in normal hydro and non-peak periods.

Transfer of staff

6. It is intended that ECNZ staff associated with the power stations referred to in paragraph 2 above, will be transferred to the new SOE.

If any redundancies or severances occur after the date of transfer of the power station staff, the employer in each case shall bear the costs.

7. ECNZ and the SOE Development Group will agree an appropriate process to allow a proportion of the Clyde Group, Wellington and Marketing staff to transfer to the new SOE. ECNZ and the new SOE will endeavour to avoid redundancies or severances arising from this process. If any such redundancies or severances do occur, the costs will be shared between ECNZ and the new SOE in the proportion of 70% to ECNZ and 30% to the new SOE. The new SOE will pay its share of any such costs to ECNZ after the separation is completed.

Explanatory note:

The approach outlined above is intended to avoid redundancies and severances in the separation process. The agreed cost-sharing arrangement will create strong incentives for ECNZ and the new SOE to put in place a process that ensures a smooth staff transition.

Intellectual property

8. During the period between the date of this Memorandum and the transfer of assets to the new SOE, ECNZ will provide to the new SOE access to all intellectual property required to achieve the objective set out in paragraph 1 above.

9. On transfer of the assets to the new SOE, ECNZ will provide the new SOE with duplicates of all intellectual property required to achieve the objective set out in paragraph 1 above, and the new SOE will pay for any reasonable duplication costs.

10. For the avoidance of doubt, a duplicate copy of the strategic models Spectra and Prism and all intellectual property held by ECNZ relating to the Maui contract will be provided by ECNZ to the new SOE.

Treaty of Waitangi

11. The Government will consult with Maori on matters set out in this Appendix which may give rise to Treaty of Waitangi issues.

Implementation objectives

12. Implementation of this Appendix should be achieved in a manner that meets the objective in paragraph 1 and also the following objectives:

• the implementation should be undertaken in a manner which

  • minimises any adverse impacts on the financial statements of the Government and ECNZ; and
  • is consistent with the State-Owned Enterprises Act 1986 and the duties of the ECNZ directors under that and other legislation.

• ECNZ and the new SOE should be fully independent as soon as possible;

• the costs of implementation should be minimised.

Implementation process

13. Implementation of this Appendix will be carried out by the ECNZ Board and the SOE Development Group, in consultation with the Government to allow monitoring of outcomes against public policy objectives.

14. The SOE Development Group will be required to certify to the shareholding Ministers whether, in the Group’s opinion, the objective set out in paragraph 1, and other objectives determined by the Government, are likely to be achieved; and the Government will have regard to this certificate in making decisions on the establishment of the new SOE.

Financial parameters

Valuation and financial structure

15. Issues relating to the valuation of assets, and any liabilities, to be transferred from ECNZ to the new SOE are to be agreed by ECNZ, the SOE Development Group and the shareholding Ministers.

16. The financial structures of ECNZ, and of the new SOE, are to be agreed by ECNZ and the SOE Development Group respectively with their shareholding Ministers.

17. To facilitate the separation process the objective of both the Government and ECNZ is to transfer assets to the new SOE at book value. This approach will be followed provided that the shareholding Ministers are satisfied that it is consistent with the overall objective set out in paragraph 1 of this Appendix.

18. ECNZ and the new SOE will undertake to review their asset valuations and capital structures within 12 months of the separation date (or such other date as agreed between each company and its shareholding Ministers).

19. The purpose of such reviews is to provide an opportunity to adjust the financial structure of either or both companies to reflect the establishment of long term contracts, and to ensure both companies have asset values suitable for their future operation.

Transfer of individual assets or of a subsidiary company

20. The issue of whether the separation will be achieved by the transfer of assets or shares in a subsidiary company will be negotiated between ECNZ and the SOE Development Group, with the final plan requiring the approval of shareholding Ministers.

Procedure for ECNZ to repay equity capital to the Crown

21. Following the transfer of assets to the new SOE, ECNZ will have surplus equity capital.

22. Subject to the approval of shareholding Ministers, ECNZ will re-register under the Companies Act 1993 prior to separation. This would enable ECNZ to pay the Crown, as provided by that Act, the surplus shareholders funds arising from the transfer of assets to the new SOE.

23. If re-registration does not proceed prior to separation, the alternative course will be for ECNZ to seek High Court approval under the Companies Act 1955 for a capital reduction.

Details of financial flows

24. The timing and amounts of financial flows will be determined by shareholding Ministers on the advice of ECNZ and the SOE Development Group. Provided the shareholding Ministers are satisfied that the proposed flows are consistent with the objectives set out in paragraph 1 above, the expected set of transactions to occur on settlement date is as follows:

    (a) the Crown supplies appropriate capital to the new SOE on the basis of a proposal from the SOE Development Group;

    (b) the new SOE uses these funds for working capital