Meridian to pay govt NZ$521 mln special dividend after sale of Tekapo power stations to fellow SOE Genesis

Meridian to pay govt NZ$521 mln special dividend after sale of Tekapo power stations to fellow SOE Genesis

Meridian Energy says it will pay its government shareholder a special dividend of NZ$520.9 million after selling two Tekapo power stations to fellow state owned enterprise Genesis Energy for NZ$820.9 million.

The sale of the Tekapo hydro power stations will take effect on June 1 this year and was ordered by the government as part of its attempts to make the electricity market more competitive.

“Following detailed analysis of Meridian’s future funding requirements the Board approved the special dividend to our Shareholder of NZ$520,996,030," said Meridian chief executive Tim Lusk in a statement.

The Tekapo A and B power stations, being sold to Meridian, are on the Waitaki Power Scheme. They comprise the 25MW Tekapo A power station, the 160MW Tekapo B power station and the Tekapo canal linking the two stations.

In December 2009 the government announced decisions from a Ministerial Review designed to improve retail competition in the electricity market, promote the reliability of electricity supply and improve governance in the sector through the establishment of regulator the Electricity Authority, which succeeded the Electricity Commissionlast November.

In preparation for taking ownership of the Tekapo stations Genesis says it has signed up more than 20,000 South Island electricity and LPG customers in Christchurch, Dunedin and Queenstown since February 2010.

Genesis plans to fund the purchase, through a mixture of NZ$275 million raised through an issue of equity "junk" bonds, senior bank debt, and existing cash. The NZ$821 million acquisition price is considerably higher than Meridian's NZ$643.9 million book value for the two power stations.

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7 Comments

'Dividend money go round'

Sounds like a headline worthy of a certain failed south island finance company

Damned if I can work out the economics of this - what seems to have occurred is that one government agency (Genesis) has borrrowed 275 m at 8.5 percent so that ultimately the government can receive a 275 m cash dividend.  It seems to me that if the government needed 275 million they could have instructed the NZ Debt Management Office to issue an additional 275 million of government bonds at around 5.2 percent and saved the taxpayer around 9 million NZD of interest per annum for exactly the same Crown balance sheet structure.  Its like using your credit card to fund a car purchase when you coujld easily just extend your mortgage - foolish!

We just borrowed $821m to buy an asset we already own. Makes a lot of financial sense. Yeah Right!

It gets even better when BV is $644 mln with a dodgy canal that's leaking like a sieve. Some MacKenzie Country farmers are already getting free irrigation. 

It is just a stupid Chess Board Juggle of our Taxpayer Paid Assets that Max Bradford (National),while in Goverment Government had an aberration that he could create a compeditive/corporate/business Electricity market and so benefit the Country.

It has failed--failed ---failed miserably !!!!

We have duplication of effort and staff ---with many Electricity Retailers having staff doing similar jobs.  Yes it has increased employment ---- but  Productivity of NZ is down.

The Electricity Price has relentlessly increased (since this Deregulation of the Electricity Industry) and so made our productive business's are less compeditive because of having to sustain higher Electricity charges.

It is doubtful that the Round Table would even listen to its own Business owners over producing a higher cost component in their business. And the Round Table would have no doubt backed Bradford in this Deregulation.

The NZ Public paid for the build up of most of the Power Boards in New Zealand--not the Government ---nor the Business. They were started from the construction of small dams in most cases, until in later years the Government had to step in and build/pay the big Dams in the national Interest.

Perhaps the only good thing about the higher prices --it has made sure we dont waste it. 

This seems a very expensive transaction.

This is $4.4m / MW ($821m/ 185MW)

Project Aqua was costed at $1200m for 524MW = $2.3m/MW. This was 2005 costs but have consruction cost doubled in 6 years?

Is this just a way to rachet up the 'value' of the stations so the 'cost' are higher, which justifies higher prices for power?

 

No, isn't it just a way for the Government to make its books look better?  Getting Genesis to pay an extra $500 million for something, which is then passed to the Government by Meridian as a special dividend.  Just part of the smoke and mirrors being used to pretend that we have a zero budget, and are going to have the budget back in the black in ... whenever it says in the budget.

The costs -- higher interest costs, increased power costs.

The advantages -- delusional thinking triumphs again.