Power price rise not ruled out in compulsory asset transfer

New Zealand's two biggest electricity companies will be forced to pay hundreds of millions of dollars to compulsorily buy power stations that the Government says are being "transferred".

Energy and Resources Minister Gerry Brownlee is not ruling out power price rises as a result.

He said there would be only an outside chance of price increases from what the Government is calling an "asset transfer" of three power stations to improve competition in the sector and to try reduce prize rises.

North Island state-owned generator and retailer Genesis Energy said it was negotiating a "sale and purchase agreement" to buy fellow state power company Meridian Energy's Tekapo A and B power stations.

"We are buying the stations from Meridian. The sale price is part of the negotiations under way," a spokesman said.

Meridian is discussing with Contact Energy its purchase of the country's emergency dry-year 200MW Whirinaki diesel-powered station in Hawke's Bay.

Neither Genesis nor Meridian would discuss the purchase price.

Industry experts say about $4000 per kilowatt is a likely figure. Based on that, the two Tekapo stations would be sold for about $740 million and Whirinaki for about $800m.

Tekapo A and B could be worth more because of their strategic importance at the head of the Waitaki River hydro system, which generates a quarter of the country's electricity.

Genesis chief executive Albert Brantley said negotiations with Meridian were going well, with a view to taking ownership in October.

He said most of the key transition details had been resolved..

Brownlee said talk about sale-and-purchase agreements was linked to the need for formal valuations of assets.

"They have to establish a value," he said. "It is a transfer; the asset remains the property of the Crown. It's from one state-owned enterprise to another. The two balance sheets have to reflect the cost of that transfer."

- © Fairfax NZ News