Power utilities outlook to stay negative

Global ratings agency Fitch says its negative outlook on New Zealand energy utilities is firmly in place, as political and regulatory pressure, falling gas supplies and delays in improving transmission weigh on the sector.

Carolyn Martin, head of Fitch's utilities team, said the agency had placed the sector on negative outlook last year and the situation had only worsened in 2006.

"We see no reason at this time to change our outlook from negative," she said from Sydney.

Martin said the early part of the year was a crunch time for the industry, with the Commerce Commission poised to rule on its intention to declare control of Transpower, Unison and Vector.

The industry was also facing delays in approving an upgrade of the national grid; an uncertain environmental outlook - in light of the Government's decision to scrap carbon taxes; and gas supply shortages.

Martin described the situation as a "balancing act" between security of supply, price and the environment.

She said that while uncertainty over how New Zealand would meet its Kyoto Protocol requirements cast doubt on the future of coal-fired power stations, high electricity prices were making new forms of generation - like wind energy - financially feasible for the first time.

Fellow ratings agency Standard & Poor's last week downgraded its outlook on national grid operator Transpower from stable to negative, after the commission's threat to regulate its pricing.

S&P warned that other electricity and gas lines businesses could face a similar fate, as the competition watchdog flexed its regulatory muscle.

The commission is expected to announce on March 3 whether it will impose price controls on Transpower.

- NZPA