Transpower eyes $200m bond issue in early 2010

Transpower is considering raising $200 million early next year through a domestic bond issue, as it prepares to spend $5 billion on upgrading the national power grid. Photo / Mark Mitchell.

Transpower is contemplating a domestic bond issue of around $200 million early in the New Year as it gears up for $5 billion of capital expenditure on national grid upgrades over the next decade.

At a financial briefing in Wellington this morning, Transpower's Treasurer John Bishop said the company was assessing its options for debt-raising and that a domestic bond issue was a possibility after Christmas, and that "$200 million would be a reasonable size".

Transpower expects new borrowings of around $300 million this financial year, and around $600 million a year "for the next few years", said Transpower's general manager, corporate services, Howard Cattermole.

The monopoly national grid operator expects its debt to double from around $1.2 billion at present to around $2.5 billion in four to five years' time, with the debt/equity ratio peaking at around 54 per cent towards the middle of the next decade.

The company is holding some $175 million in short term commercial paper which it would also be seeking to lengthen out, said Bishop.

Meanwhile, Transpower is projecting double digit annual increases in transmission charges as upgraded capacity comes on line, particularly the upgraded HVDC link across Cook Strait, the new line through the Waikato to Auckland, and the North Auckland and Northland link which will be built on a special access corridor through Auckland.

Transmission costs comprised only around 8 per cent of the domestic electricity tariff, so that the impact of higher Transpower charges on consumers' power bills would be relatively low, and total transmission costs are assumed to remain at less than 10 per cent of the total power bill, once the upgrades are complete.

However, Transpower is unable to increase its charges relating to upgrades until they are completed, so this year's transmission charge increases would be very low, at around 1 per cent, when notified in the near future.

Cattermole said last week's outage north of Auckland, caused by a forklift hitting lines that traverse the Metroport site in south Auckland, meant Transpower would again miss its system reliability targets this financial year.

Transpower's 2010 Statement of Corporate Intend says the company is targeting less than nine system minutes lost during the year, and last week's outage alone was the equivalent eight system minutes - a measure of the impact had the outage been across the whole national grid.

Transpower's chief executive, Patrick Strange was meeting with Commerce Commission officials today to discuss under-performance on reliability this year and the best way to structure performance targets for the future.