Budget 2006: Meridian's dividend pays roads shortfall

Smart deal-making by state-owned energy generator Meridian Energy will fund improvements to the nation's roads.

The Government said it had been able to make up an $862 million shortfall in the national land transport strategy only because Meridian had paid out an $800 million special dividend.

The dividend is made up of the $629 million profit on last year's sale of its Australian operation Southern Hydro, a further $170 million made up of a bonus payout and its normal dividend payout of 65 per cent of operating profits.

"The funding to enable the Government to pick up the slack and reinstate all the projects for the next five years which were previously in Transit's 10-year programme will mainly come from a special dividend," Finance Minister Michael Cullen said.

Meridian last year sold the hydro and wind generator to Australian Gas Light for A$1.42 billion ($1.5 billion) and indicated it would use the proceeds to expand its renewable energy base.

It had spent a total of $850 million acquiring and building the assets between 2001 and 2004.

Chief executive Keith Turner said the dividend made no difference to the company's spending plans. He said: "My job is to create value for my shareholders and what they do with the money is is their business."

Meridian has indicated it plans to spend up to $3 billion on renewable energy projects within the next 10 to 15 years.

They include a huge $1.5 billion wind farm in central Otago, another worth between $120 million and $130 million in Southland and a $360 million to $380 million wind farm project in Wellington.

He said these projects could be funded from cash. But the Government had given commitments to fund further development if required.

Meridian Energy may not be alone in having to cough up more cash for the Treasury. The Budget documents highlighted the Government was reviewing the capital structures of state-owned enterprises

But SOE executives were comfortable with the policy, saying it would not limit their ability to develop in any way.

Other energy initiatives in the Budget included:

* An additional $6 million to the $15 million already allocated in geotechnical research to encourage oil exploration.

* About $11.7 million to be invested over four years in energy research aimed at assisting the development of indigenous energy resources, particularly renewable energy resources.