17 October 2012
Chief Reporter
Who Owns The South Island Power Grid?
Good Question. Don’t Assume It Is Transpower
The Government’s proposed partial privatisation of Mighty River Power, Meridian and Genesis Energy has focused attention on the ownership of our State-owned electricity generation companies. The majority of New Zealanders oppose the likelihood of such vital national infrastructure going into foreign ownership.
But what about the State-owned company which “owns” the South Island power grid? Does Transpower actually own that?
Members of the Campaign Against Foreign Control of Aotearoa (CAFCA) will be asking that at Transpower’s Annual Public Meeting at the George Hotel, Christchurch, at 4 p.m. Thursday October 18 th (the CAFCA banner will be displayed outside the venue from 3.30 p.m.).
Here’s what we know about the ownership of the South Island grid. Excuse us if the explanation is complex; that’s because the deal was deliberately structured to be complex.
In 2003 Transpower sold the South Island grid and leased it back.
- The buyer of the grid was the US-based Wachovia Bank;
- The leaseback of the grid runs through the Cayman Islands, a tax haven;
- The leaseback of the grid runs for about 100 years, but Transpower has the option to repurchase the grid after about 25 years;
- The deal was tax-driven. At the time, it was being arranged, an inquiry into abusive tax avoidance schemes was underway in the United States. A ban on this particular type of deal (lease to service) took effect from just days after this deal was signed;
- Transpower delayed for a year showing the one-off profit effect in its financial report because of uncertainties related to the tax inquiry.
- That meant that Transpower is the operator (not the owner) of the South Island grid.
During the early days of the current global financial crisis, Wachovia was taken over by Wells Fargo, another American bank.
Transpower’s 2012 Financial Report states that, in November 2009, Transpower partially terminated the cross-border lease over the South Island grid. However, that same Financial Report contains material which suggests that the cross-border lease is continuing.
The effect of the cross border lease was to duplicate ownership of the grid, so that ownership could be claimed in the United States as well as in New Zealand.
We call upon Transpower to explain:
- What is meant by partial termination of the lease?
- Can any US organisation still claim today that it owns the South Island grid? Yes or no?
Murray Horton
Secretary/Organiser
Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.