Proposed Government reforms to New Zealand's electricity sector are likely to have significant business and financial implications for generation-retailers, rating agency Standard and Poor's says.
In a report released yesterday, S&P said the implications for credit quality remained tough to gauge.
"There is still limited transparency on how the asset swap and recapitalisation will be addressed," S&P credit analyst Parvathy Iyer said.
One of the rating agency's biggest concerns was that without appropriate support to the balance sheets, the generation-retailers did not have the financial headroom to withstand the risks of moving to the new environment.
Also, the desire to pursue offshore growth could heighten the business risks for some rated generation-retailers, he said.
Labour Party energy spokesman Charles Chauvel said the S&P report focused on the proposals to take some hydro-power lakes and stations from one state-owned enterprise (Meridian) and hand them to another (Genesis).
S&P believed the proposal was likely to result in the Government having to provide appropriate support to the balance sheets of the SOEs.
"In other words, the taxpayer will need to underwrite the cost of the transfers, and the effect they will have on the financial viability of Meridian, in particular."
The warning from S&P made a mockery of Energy Minister Gerry Brownlee's attempts to play down the impact of his plans, Mr Chauvel said. S&P's concerns echoed those of the Treasury and others that it would be a costly and disruptive process without any obvious benefits.
"Taking assets from one SOE and giving them to another will simply result in Meridian losing a large number of customers, and their moving to Genesis and others. This won't result in better energy security or in lower power prices. Today's indications are that it will also require substantial taxpayer support," he said.
