WESCT June 2021 Newsletter Learn more

2021 Customer Poll

2021 Customer Poll: The Lines Company (TLC) proposed sale of hydro generation stations

Waitomo Energy Services Customer Trust (WESCT) customers are being encouraged to vote in support of selling three small electricity generation assets owned by The Lines Company (TLC).

WESCT Trustees believe a ‘yes’ vote in selling the hydro assets is in the best interests of WESCT’s beneficiary customers as the lines business looks to invest in assets that generate better returns.

Voting papers were posted to all WESCT Customers on 8 March, and voting closed at midday on Tuesday, 30 March.

For further information, please click the links below:

FAQs

What is the recommendation of the WESCT Trustees?

The Trustees believe the sale of these TLC generation assets will be good for the Company, ultimately benefiting the WESCT Customers.

The Trustees believe the Company is performing well. The sale is one action taken by the Board that will result in longer-term benefits to the WESCT Customers. Please be assured this sale will not be a precursor to the sale of other assets or the Company.

Why do we need a vote?

Simply because the Trust Deed requires a poll. The Trust Deed was formed in the early 1990s when the Trust’s Company had several large hydro generation plants, including Wairere and Mokauiti. The plants were key legacy assets at the formation time of WESCT, and the community wanted to protect their ownership. However, government regulation changes during the 1990s meant the Company owned by WESCT could not continue to hold those assets.

TLC subsequently purchased the existing and small run-of-river hydro plants at Mangapēhi, Te Anga and Matawai in the early 2000s.

The Trust Deed was never updated to reflect this change; therefore, these are not the original generation assets the community wanted to protect ownership of, and a poll regarding their potential sale is still required.

If the vote is against the sale, what happens?

TLC will retain the hydro plants and not be able to redeploy that investment into better-performing assets

Who is the potential buyer(s) and how much is it worth?

They are New Zealand community-owned businesses operating in the electricity generation/distribution sector.  We are unable to name them or disclose the value of the offer(s) due to the nature of commercial negotiations.

Will the proceeds of the sale be passed through to WESCT Customers?

TLC will re-invest the proceeds to further improve network reliability and annual returns to WESCT Customers.

Where will the rest of the sale proceeds go?

Along with the investment in growth initiatives, the sale proceeds will help support network improvements, energy innovation, and diversification.

Why aren’t the proceeds of the sale being used to pay down debt?

It will initially lower debt, but TLC’s financial performance can sustain existing borrowing levels. The reinvestment of the sale proceeds when the opportunities present will see greater growth and profitability levels, ultimately enabling TLC to service debt even more readily.

Will the sale impact my lines charges?

No, the revenue TLC earn from the electricity network (through lines charges) is largely determined by the Commerce Commission.

Isn’t hydro generation an important part of the TLC business?

No. The Generation business represents less than 6% of TLCs assets and less than 3% of revenue (TLC 2020 Annual Report).

How is climate change affecting the stations?

Climate change is making weather patterns unpredictable.  This makes the performance of run-of-river hydro stations unpredictable and the revenue volatile.  These stations are best suited to organisations who have other generation operations as they can offset the highs and lows of production across a larger number of assets.

If it sells, what happens to staff working at the stations?

There is one permanent employee, and they will remain with TLC’s network business.