$80m bill may be dumped on taxpayers

Taxpayers face a possible $80 million-plus bill as a result of the Government's plans to shake up the electricity industry.

The warning from state-owned generator and retailer Meridian Energy has been sent to Finance Minister Bill English, State-owned Enterprises Minister Simon Power and Associate Finance Minister Steven Joyce.

Energy Minister Gerry Brownlee's review recommends transferring two of Meridian's Waitaki River power stations to North Island state-owned enterprise Genesis Energy.

The Tekapo A and B stations generate 185 megawatts of power between them and are strategically important, lying at the head of the Waitaki hydro chain, which produces about a quarter of New Zealand's electricity.

In a letter to English, Power and Joyce, but not Brownlee, that has been released under the Official Information Act, Meridian chairman Wayne Boyd says "the implications for the cost of funding Meridian's activities do not appear to have been taken into account".

Meridian was investigating whether the "one-sided nature" of the transfer would trigger a requirement to have to pay back a US$400m (NZ$563m) loan before its maturity date. The likely penalty cost of early repayment was NZ$69m, and a refinancing cost of NZ$13m.

In response to Boyd's letter, Brownlee wrote to English and Power, saying many of the issues raised had been "extensively canvassed".

If the penalty payments were triggered, that would need to be taken into account in valuing the power stations being transferred to Genesis, he said.

"It is expected that Meridian will, for want of direction and comfort, `fight their corner'."

Institution of Professional Engineers chief executive Andrew Cleland said swapping ownership to Genesis would compromise the crucial Waitaki scheme and be a "lose-lose outcome" for the Government, consumers and taxpayers.

"In our view, this will fail, resulting in unnecessary spills of water that would be better used to generate power, and will not achieve the hoped-for increase in retail competition in the South Island," he said.

"Genesis has a much larger component of relatively cheap thermal generation, and if they take over Tekapo A and B they are likely to manage Tekapo to best meet their own commercial needs."

Genesis has stayed quiet on the proposed reforms but is understood to support them.

- © Fairfax NZ News