24 NOVEMBER NEW ZEALAND GAZETTE 4445

Electricity Corporation of New Zealand Limited

Notes to the Financial Statements

(d) ECNZ has entered into a heads of agreement with Fletcher Challenge Energy Limited which makes provision for the purchase of specified annual gas quantities from 1 October 2000 to 30 September 2017. The terms and conditions of supply have yet to be finalised.

24. Memorandum of Understanding (MoU)

Pursuant to the MoU that was signed by ECNZ and the Crown on 8 June 1995, ECNZ has:

(a) sold eight power stations to Contact. These stations accounted for 29% of ECNZ generating capacity as at the MoU date.

(b) revalued its assets as at 1 February 1996;

(c) agreed to sell eight small hydro stations subject to appropriate consultation by the Crown with Maori as to any Treaty of Waitangi issues. The stations involved (Cobb, Coleridge, Highbank, Matahina, Mangahao, Tuai, Piripaua and Kaitawa) accounted for 4.5% of ECNZ’s generating capacity at the MoU date. Mangahao power station was sold on 22 December 1997. Subsequent to balance date ECNZ sold Coleridge power station to The Alpine Consortium for approximately $90 million.

ECNZ and the Crown agreed on four additional constraints on ECNZ. These constraints cease to apply in the event that ECNZ’s total New Zealand generating capacity (measured in MW) falls below 45%. The constraints are:

(a) Cap on ECNZ providing additional generating capacity

Ecnz can only provide up to 50% of additional generating capacity. This constraint excludes:

i) refurbishments and modifications to existing hydro stations, provided that the additional energy is created from existing catchment areas;

ii) new plant using cogeneration or non-traditional renewable resources.

This constraint includes any increase in Huntly thermal power station’s capacity above 1,000MW.

(b) Ring-fencing of additional generating capacity

Additional generating capacity provided by ECNZ in New Zealand will be ring-fenced where:

i) the additional capacity is more than 10MW; and

ii) ECNZ would have control over the development and sale of the additional capacity.

(c) Contract offer mechanism

ECNZ will offer on at least an annual basis, sufficient contracts to ensure that customers have the opportunity to contract ECNZ up to at least the level specified in the following table:

(d) Acquiring energy companies

ECNZ will not acquire distribution assets of any energy company, as defined by section 2 of the Energy Companies Act 1992, or any significant share in an energy company.

25. Industry Review

The Government has announced its intention to split ECNZ into three separate state owned enterprises (SOEs) by 1 April 1999. SOE 1 comprises the Waikato catchment hydro power stations. SOE 2 comprises Huntly thermal power station and the Tongariro catchment hydro power stations. SOE 3 comprises the Waitaki catchment and Manapouri hydro power stations.

The assets and liabilities will be transferred to the new entities on a book value basis. Any assets, liabilities or contingent liabilities not transferred to the new entities will remain with ECNZ on a basis as yet to be determined. The company will retain sufficient assets and/or shareholder guarantees to enable it to meet all future obligations.

The shareholder has appointed a reform unit to advise them on the best means of achieving the Crown’s industry restructuring objectives.

The restructure will also have an impact on some of the matters covered in note 24.