Tekapo assets gift Govt $521m

Lake Tekapo. Photo / Mark Mitchell

The Government will receive a $521 million special dividend from Meridian Energy thanks to Genesis Energy borrowing money from its bankers to help pay for Meridian's Tekapo assets.

State-owned Genesis borrowed $546 million from its senior bankers and is in the process of raising $275 million from investors to pay state-owned Meridian $821 million for the Tekapo A and B hydro stations.

Meridian will pay the Government a special dividend of $521 million at the completion of the sale on June 1.

That suggests the real value of the Tekapo stations is $300 million but the Government clicked the ticket along the way for $521 million by setting the price for the Tekapo assets and forcing Genesis to pay that price.

The Government had earlier announced it could not borrow to pay for KiwiSaver or continue putting money aside in the New Zealand Superannuation Fund, but it seems it could get one of its Crown companies to borrow on its behalf.

In the Genesis prospectus, the directors say recognising that the accounting requirements for fixed asset valuations did not permit potential portfolio benefits to be taken into account, the board needed to record a one-off non-cash accounting revaluation charge of $103 million against the cost of the Tekapo stations.

"This means that the accounting fair value of the Tekapo stations on acquisition is approximately $103 million lower than the purchase price for those assets."

That would mean an after-tax reduction of $74 million in shareholders' equity, the directors said.

If Genesis raises more money in the market, part of that cash is likely to go to the reduction of debt, taking that debt liability off the Government's accounts while it still pockets the $521 million windfall.

Genesis' pro-forma consolidated statement shows its total assets at December 31 were $2.6 billion but would have been $3.3 billion with the Tekapo assets included.

Total liabilities at December 31 were $1.1 billion and $1.9 billion with Tekapo assets included. Total borrowings rose from $516 million at December 31 to $1.4 billion with Tekapo included. Total equity fell from $1.46 billion at December 31 to $1.39 billion after allowing for the revaluation of Tekapo assets.

Genesis chairwoman Dame Jenny Shiple said the bookbuild for the company's $275 million capital bond issue, which closes today, had been successful.

- OTAGO DAILY TIMES