Tuesday, May 24, 2005

Cross-leasing Timeline

I'm going to try and build up a little timeline of some of the key points in the cross-leasing deals that have gone on.

  • 1996 - Transpower signs deal (LILO?) for Cook Strait cable and convertor stations
  • 1999 - US Government bans Lease-In Lease-Out (LILO) deals
  • 2002 Cullen writes to US Ambassador in Wellington to seek approval of deal
  • 2002 Dec - Transpower raises mystery $733 million loan, and loans $533 million to a mystery organisation
  • 2003 Jul-Dec - Airways Corporation signs SILO deal
  • 2003 Dec - Transpower completes Sale-In Lease-Out (SILO) agreement
  • 2004 Jan - US Government bans Sale-In Lease-Out (SILO) deals

And if anyone wonders why I keep linking this issue back to the New Zealand Government...

"They are in our view sensible business decisions which allow us to use our assets to generate additional revenue for our shareholder." -
Transpower spokesman Wayne Eagleson

And here's another goodie about Cullen's involvement in the affair.

Kies was puzzled why Finance Minister Dr Michael Cullen had written to the US ambassador in Wellington seeking assurances that the US Government was comfortable with the Transpower deal. "It's an interesting place to go for approval for sure."

Winston Marsh is the legal advisor to the property owners in the Waikato that are currently 'neogitiating with Transpower for easements for the transmission network upgrade. He wrote an editorial for the Herald which links the issue of cross-leasing deals to the transmission network upgrade.

I think these two paragraphs nicely link the cross-leasing deal to some of the problems faced in Waikato with the North Island transmission network upgrade.

However, it is one thing for a state entity, in fulfilling obligations of electricity supply, to acquire rights by compulsion over private property in the public interest. It is another to, even temporarily, assign or lease to an investor (foreign, to boot), rights that were expected to be a solely dedicated state asset.
Transpower has threatened to use its compulsory powers under the Public Works Act to acquire the right to convey its transmission lines through private land. Now, however, lease-in, lease-out deals, whether ethically correct or not, will be brought into the contest.

I think that puts the cross-leasing deal in a fascinating context - and I agree with Winston. I could understand the difficulties faced by land-owners having Transpower utilise the Public Works Act to acquire land for a state-owned asset. Difficult, but mostly acceptable. It is not however acceptable to utilise public law to purchase land for assets that are going to become foreign owned. That is plain wrong and not in the best interest of New Zealand. Not for critical infrastructure.

I get the feeling that whilst this is mostly legal and above board, it is not ethical for State Owned Enterprises to be actively involved in the grey area between tax minimisation and tax avoidance.

More links

3 Comments:

Blogger Antarctic Lemur said...

Will make another post on SH about this tomorrow.

5/24/2005 11:32:00 PM  
Anonymous Rufus Redbeard said...

Most of the Telecom telephone exchange network has been cross border leased for years, (since the early 1990s). In fact some of the older leases began expiring a few years ago.

5/25/2005 12:05:00 AM  
Blogger Bernard Woolley said...

Thanks Rufus, I'll look into that when I've got some time.

5/25/2005 08:33:00 AM  

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