Minister of Energy Gerry Brownlee is rejecting claims by
Meridian Energy Ltd about the implications of forcing it to
sell two Waitaki power stations to competitor Genesis Energy
Ltd.
"It is to be expected that Meridian will, for want of
direction and comfort, `fight its own corner'," Mr Brownlee
has told Minister of Finance Bill English and Minister for
State-owned Enterprises Simon Power.
Yesterday, under the Official Information Act, the Otago
Daily Times obtained a copy of a five-page report Meridian
sent to Mr English and Mr Power, at their request, outlining
the implications of selling the Tekapo A and B power stations
to Genesis.
Mr Brownlee was at an all-day caucus meeting and could not be
contacted yesterday, but his office sent a letter, addressed
to Mr English and Mr Power, in which he rejects some of
Meridian's claims, while seeking "to provide some context".
Meridian said the sale of Tekapo A and B would result in
inefficient use of water in the Waitaki system, leading to
higher electricity prices for South Island consumers.
There would be an increased risk of spill, reducing
generation, and it would have to retain more water in Lake
Pukaki to meet its resource consent obligations of a
120cumecs minimum flow in the lower Waitaki River.
Mr Brownlee does not comment directly on the claim of higher
electricity prices, but said Meridian and Genesis were
expected to enter a water management agreement so Meridian
could meet its resource consent obligations.
If an agreement could not be reached, ministers would
determine the terms and conditions to ensure security of
supply and efficiency were not compromised.
In terms of increasing the risk of dry years on Meridian's
revenue, Mr Brownlee said that, even after the reforms, the
company would still be New Zealand's largest generator and
control 50% of the country's hydro storage.
Meridian said the sale might require the approval of Rio
Tinto Alcan New Zealand, under its contract with Meridian for
electricity for its Bluff aluminium smelter.
Mr Brownlee said Rio Tinto had indicated it agreed with and
supported the reforms because it would add to competition in
the South Island.
If Meridian faced a risk of debt default in dry years as a
result of the loss of Tekapo A and B, it would have to manage
that through contacts and hedges with other generators.
One purpose of the reforms was to encourage Meridian to
retail more electricity in the North Island and Mighty River
Power and Genesis to retail more in the South Island.
He could see no significant problems with the Commerce
Commission and Commerce Act - the view of Ministry for
Economic Development officials after discussions with the
commission.
He accepted the sale would affect Meridian's value as a
company and rejected the need for the company to refinance
$US400 million ($NZ564.5 million) in debt at a potential cost
of $NZ82 million.
"If this [refinancing] is an issue, it will need to be taken
into account in the valuation of assets to be transferred to
Genesis," he said.
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