Powerco's line upsets Tasmania

By CHRIS DANIELS energy writer

Powerco, New Zealand's second largest power and gas network company, has found itself in a political storm over plans to lay gas pipelines in Tasmania.

The New Plymouth company is listed on the New Zealand Stock Exchange, and nearly half its shares are owned by the New Plymouth District Council and the Taranaki Electricity Trust.

It has just signed a memorandum of understanding with the Tasmanian state Government to start laying a gas pipeline network throughout the state.

But exactly what it will deliver is causing some controversy.

Opponents say Powerco has not committed to do much of anything.

Its selection over a local state-owned company, Aurora, has also been criticised.

A main gas transmission line already links Tasmanian gas-fired power stations to Victoria.

Powerco chief executive Steve Boulton said the Tasmanian Government was looking for a partner to pipe gas to key centres of the state and connect other major industrial and commercial gas users.

Boulton has played down the size of the deal, saying it would require small amounts of capital expenditure, over a period of five to seven years.

"It's not that big in terms of dollars - we won't need to go to the marketplace to raise any more equity," he said.

Tasmania's Acting Premier, Paul Lennon, was forced to defend the Government's choice of Powerco after local criticism of the process that selected an overseas company.

He said the project was "one of the last remaining significant greenfields distribution opportunities in Australia" and "a great opportunity for Powerco to expand its gas network ownership and management business and to diversify its geographic ownership base".

Boulton said the Tasmanian deal was nothing new for the company. "It's the same stuff we do in our normal business, there's nothing new and exciting here, there's never anything too exciting about digging holes and putting gas pipes in the ground."

Powerco would not be selling gas, just owning the pipes along which it travelled, as it did in New Zealand.

Whether Powerco will get paid by the Tasmanian Government for laying pipes to houses is not known.

Asked if there would be Tasmanian taxpayer support, Boulton said: "This is just part of the development agreement negotiations.

"As we've got to work out all the economics of the project, obviously from a Powerco perspective, the outcome of that will have to be commercial for us."

Subsidies were possible, he said, but it had yet to be worked out exactly how uneconomic parts of any network "might be supported by the Government".

Tasmania had a very progressive Government which appreciated the value of promoting infrastructure investment.

A $30 million infrastructure fund is being touted as a possible way of helping get gas pipelines to the state's smaller businesses and homes.

A report in Tasmania's Examiner newspaper quoted an insider from one of the unsuccessful parties tendering for the job as saying Powerco had committed itself to nothing, least of all distributing a gas network to residential and small commercial customers.

Boulton said growth opportunities in New Zealand remain limited and the company had been considering this type of "incremental greenfield opportunity in the past few years".

"We are not considering any large-scale acquisitions in Australia because they are simply out of our reach.

"However the Tasmanian opportunity is on a different scale as Tasmania is very similar to New Zealand in customer base, geography and energy consumption."