Electricity users seek power deal facts

New Zealand's biggest electricity consumers want clear answers from Transpower about its overseas dealings.

The Major Electricity Users Group (MEUG), which represents the 25 or so companies that use about a third of New Zealand's electricity, has written to Finance Minister Michael Cullen asking for documents that detail the state-owned national grid company's global financing arrangements.

MEUG's most influential member is the largest power consumer, the massive New Zealand Aluminium Smelters plant at Tiwai Point near Invercargill.

The smelter uses 15 per cent of New Zealand's electricity -- about 396 million kilowatt-hours of power a month, about 565,000 times more power than the average household.

MEUG executive director Ralph Matthes told a Wellington daily newspaper there was a lot of money involved in Transpower's deals and that he was keen "to get to the bottom" of them.

In December 2002, the state-owned enterprise signed a structured finance deal in which it borrowed $732.7 million from a United States organisation.

It kept $200 million for its own use, then lent $230 million of the remaining $532.7 million to the New Zealand bank that arranged the deal and $300 million to a subsidiary of the US organisation.

The deal, which Treasury documents confirm undermined the US tax base, guaranteed Transpower a lower interest rate on the $200 million it wanted, saving it $20 million.

A year later, Transpower effectively sold the South Island's high-voltage transmission grid to United States bank Wachovia. It then leased it back in a cross-border deal worth $701 million that gave the state-owned enterprise a one-off cash injection of $34.6 million.

Mr Matthes said MEUG had been closely following the coverage of Transpower's deals.

"The issue for us is if there has been some risk from the deal borne by the shareholders (the Government) or consumers. Who is paying the cost of that?

"If the shareholders can honestly put their hands on their heart and say, 'the management time to set up the deals was all at shareholders' expense and if there was any downside the shareholders would bear it, not the consumers', then I think it is fair enough to make the deals.

"But my guess is that consumers were bearing some of that risk," he said.

MEUG members were entitled to know whether Transpower and the Government had considered those issues.

"If they haven't ... then Transpower has got a problem," Mr Matthes said.

- nzpa