NGC shareholders clear sale of power stations

By CHRIS DANIELS

NGC's transformation from the heady heights of New Zealand's largest integrated energy company to a smaller, humbler creature is almost complete.

Its shareholders, dominated by 66 per cent owner Australian Gas Light, yesterday approved the sale of its modern Taranaki combined cycle power station to Contact Energy for $500 million and the Cobb hydro station near Nelson to Trustpower for $92.5 million.

The company will now concentrate on the less ambitious, though less risky, business of natural gas transmission and the owning and leasing of energy meters.

A few short years ago, NGC had the stated aim of becoming New Zealand's largest integrated energy company.

But a cold, dry winter in the South Island combined with a lack of adequate contract protection brought the dream crashing down. NGC had a lot of customers to supply with electricity, but did not generate much of its own. It chose to buy most of its power on the spot market - normally a very cheap method.

Not so in 2001, however, as low inflows into the South Island hydro storage lakes forced generators to cut production.

Prices on the spot market soared, leaving NGC drastically exposed - it was paying big money every day of the week, yet it could not quickly increase what it earned from the thousands of residential and small commercial customers.

Other power companies were better hedged, or had enough generation to cover most of their retail commitments.

At one stage NGC was losing more than $1 million a day because of its decision not to hedge against the dry year risk.

Former managing director John Barton later resigned, citing personal reasons for his decision.

His replacement, chief executive Phil James, while announcing the financial recovery of NGC last week, said the company was now focused on having stable earnings, with attractive growth and good yields, as opposed to the high growth aims of the past.

NGC shares closed yesterday down 5c, at $1.40 each.

* Transpower, the state-owned enterprise that owns and manages the national power grid, has a new chief executive.

Australian Ralph Craven has been named as the replacement for industry veteran and chief executive of the past 15 years, Bob Thomson, who is retiring.

Chairman Sir Colin Maiden said Craven had broad experience in the electricity industry in Australia and internationally with NRG Asia Pacific, Shell Coal, the Queensland Electricity Commission, ABB in Switzerland and Ontario Hydro in Canada.

Craven will take up his position on May 1.

Transpower paid the Government a total dividend of $80.2 million last year - the exact amount of its profit after tax and before its annual asset revaluation.

It has just told the Commerce Commission, which is drawing up regulations for the power lines businesses, that there is a need for significant investment in the national grid in the medium term.

Money needed to be spent on the link between the South Island and North Island, connecting new generation to the national grid and improving security of supply to central Auckland and north of Auckland.