In short, 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 $820,996,030 for the Tekapo A and B hydro stations.
Meridian will pay the Government a special dividend of $520,996,030 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 (Cullen 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.
The Government is likely to announce in tomorrow's Budget more details about the partial privatisation of electricity companies Genesis, Meridian and Mighty River Power and coal producer Solid Energy.
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 of its financial position shows that 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.
The sale is part of a package of Government reforms aimed at improving the electricity sector.
In December 2009, the Government announced its decisions from the Ministerial Review that included a series of changes that supported the overall Government objectives to improve retail competition in the industry, promote the reliability of electricity supply and improve governance in the sector through the establishment of the Electricity Authority.
Genesis chairwoman Dame Jenny Shipley said the bookbuild for the company's capital bond issue had been successful and confirmed that $275 million would be reserved for clients of participants who had received firm allocations. There would be no public pool.
The minimum interest rate of 8.5% a year until the first reset date on July 16, 2016 and the margin was 3.87%.
The offer closed today, she said.
