Power argument slashes dividend

By RICHARD BRADDELL

WELLINGTON - Transpower has slashed the first-half dividend it will pay the Government as a consequence of the dispute over Cook Strait transmission costs with fellow state-owned enterprise Meridian Energy.

The $40.3 million dividend, which covers the six months ended December 1999, is 75 per cent of the net surplus of $53.7 million and is down from $48.7 million in the same period of 1998, when 100 per cent of earnings was paid.

The dispute, which flared a day after the election when Transpower launched legal proceedings, revolves around Meridian's decision to withhold transmission charges, which at December 31 amounted to $32 million. Transpower's general manager of sales and marketing, Bill Heaps, yesterday revealed that the company had also taken out similar proceedings against TransAlta three weeks ago, but for a much lesser sum of under $500,000.

Parliament's commerce select committee has said that it sees no alternative to the dispute going to court, but is concerned that it exposes taxpayers to the large legal costs incurred by both companies, and to reduced dividends.

But Mr Heaps said the sums withheld by Meridian could total around $200 million over two years. If Meridian did not pay, other market participants would be forced to pick up the costs in a way that is prevented by Transpower's statement of corporate intent, which requires pricing to be economically efficient.

Meridian and TransAlta argue that they are being unfairly discriminated against by being forced to pay about four times more for transmission than rival Contact Energy.

However, Mr Heaps said Contact had a fixed-term transmission agreement that had been negotiated before a change in pricing methods required under Transpower's statement of corporate intent.

New contracts covering TransAlta and Meridian had only limited fixed-term elements, which enabled changes in pricing methods to be immediately recognised, and Contact would become part of those when its existing contract expired.