Tasmanian taxpayers join Powerco's party

By CHRIS DANIELS energy writer

Gas and power lines company Powerco is being helped out by Tasmanian taxpayers to the tune of nearly $40 million as it prepares to install the next stage of a natural gas network in the Australian state.

Powerco, based in New Plymouth, is New Zealand's largest gas distributor and second-largest electricity lines company, after Vector. It won the Australian gas contract this year after an earlier contract round organised by the Tasmanian Government collapsed.

Powerco chief executive Steve Boulton said it was standard practice for "funding contributions" to be made to enable infrastructure developments to proceed.

"The state contribution was determined by a financial assessment based on a commercial outcome for Powerco that the company proposed during the selection process, reflecting the risk profile of a greenfields investment such as this."

He said Powerco was confident the project funding would not be taxed, but if it was, the Tasmanian Government could contribute more money to cover the tax.

Boulton said the conclusion of talks for the second stage of the Tasmanian project was good news for Powerco shareholders.

Additional growth would come with only "incremental capital outlays over a period of years".

The cost of installing the new network would be funded from existing debt facilities.

Powerco last week announced it had raised US$175 million ($292.8 million) in debt from US institutional investors. Boulton said at the time that this did not increase the amount of debt owed by Powerco, but moved it to more prudent medium-term and long-term borrowings.

Powerco's neighbour, gas retailer Wanganui Gas, was also involved in pursuing new business in Tasmania but its directors decided in June not to proceed with the scheme.