Tuesday, May 24, 2005

More on Transpower Grid Sale

I've turned up a few more articles of interest in Silogate. Firstly there are some vague memories of anything like this occurring.

The National Government's finance minister at the time, Bill (now Sir William) Birch, told BusinessDay he did not recall seeing or signing documents relating to either lease. "I'm not sure that they put it my way. We just became aware of it."

And then we have Winston...

New Zealand First leader Winston Peters became treasurer late in 1996 and said he had never handled papers on Transpower's cross-border leases. "I didn't see them. They were certainly never brought to me."

At the same time, Transpower has taken out a significant loan, and has accepted a $100 million risk if the as-yet-anonymous party defaults on the loan.

A second massive deal in which Transpower lent more than $500m of money it had borrowed itself to an unnamed organisation, risking a $100m penalty payment if that organisation fails to meet loan requirements.

But here is a nice little kicker - PWC which has been providing tax advice to Airways Corporation, is also providing auditing services.

"PWC is subcontracted to fulfil a constitutional role in reporting to Parliament on what's going on and yet it's helping to arrange what's going on," Sue Newberry said.
"How can the Auditor-General regard PWC as independent? The Auditor-General would never be a party to tax-avoidance schemes. These are very, very serious issues."

Hmm, that sounds a little like Enron, which had audit and other services provided by Arthur Anderson, including its deals with tax haven companies very similar to Transpower and Airways Corporation. So there is definitely a precident of these deals going bad.

And it would appear that cross-leasing is quite common - Natural Gas Corporation was involved in cross-leasing a couple of its power plants in the late 90's, the Taranaki Combined Cycle and Cobb Hydro Power Stations - NGC Press Release 1, NGC Press Release 2.

I get the impression that if the deal runs as planned, there are no issues. However, if things turn pear-shaped, there could be very real ownership issues at stack with regards to the South Island grid, and the Cook Strait cable. This could include a loss of control of these critical infrastructural assets.

So, at this stage we have had the following assets quietly sold off from under our noses - and there could be even more that we don't know about because of the secrecy that surrounds these deals. Assets 'leased' to date include: -

  • South Island electricity tranmission network
  • Cook Strait DC electricity transmission cable and both convertor stations either side of the strait (USD$125million by Skadden)
  • Our air traffic control system, which covers 34 million square kilometres - one of the largest coverages in the world.

More references - apologies for using Stuff as these links will soon disappear.