NGC farewells South Island customers

By Phil Boeyen, ShareChat Business News Editor

Friday 13th July 2001

Natural Gas (NZSE: NCH) has finalised the sale of its South Island electricity customers to state-owned Meridian but still doesn't know how much it will get from the deal.

The energy company has divested the customers as a way of reducing its exposure the current high wholesale electricity prices, caused by a drier and colder than normal winter.

NGC boss, John Barton, says it is still not possible at this time to determine the final value of the transaction as this depended on a number of adjustments to be made in the period to October 2001.

"The transaction was one of the elements taken into account in the expected abnormal losses announced by the company last month and the sale was one of the measures NGC had taken to reduce its exposure to abnormally high wholesale electricity prices."

Mr Barton says although the sale confirms a significant reduction in the company's wholesale market exposure, it remains very concerned about the basis for the current high wholesale electricity prices.

Meanwhile the company says it has finished restructuring finance arrangements, which include an $850 million cash advance facility from a syndicate of lending institutions.

NGC also has a short-term funding arrangement of up to $100 million with its majority shareholder, The Australian Gas Light Company. AGL has also agreed that this arrangement can be increased by up to a further $35 million if necessary.

Mr Barton says together, the restructured financing arrangements give the company a firm foundation for its future business.

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