Copeland Gordon: Debate on Crown Entities Public Organisations and State Enterprises — In Committee Speaker Recalled In Committee 
Copeland Gordon: Debate on Crown Entities Public Organisations and State Enterprises — In Committee Speaker Recalled In Committee 
[Volume:617;Page:13269] 
GORDON COPELAND (United Future) 
: 
 Perhaps the decision by Meridian Energy a couple of months ago to pull the plug on its proposed $1.2 billion Project Aqua will be seen as the biggest call made by any State-owned enterprise in 2004. We had foreseen Project Aqua making a huge contribution to the electricity supply shortage facing New Zealand from around 2007 onwards. So Meridian’s decision not to proceed sent all the other State-owned enterprises involved in the sector such as Genesis Mighty River and Solid Energy back to the drawing board for a major rethink of their future plans. Meridian itself of course is in the same situation but in addition it has to grapple with the reality of a significant write-off in relation to the preliminary work undertaken on Project Aqua. Of the $95 million spent on the project $50 million was spent on assets such as land some of which will now be put back on the market. So the write-off will be at least $45 million and I predict it will be somewhat more than that. 
I recommend to the Government tonight that in view of those circumstances we collectively insist that a post-cancellation audit should be undertaken by the company in relation to both the costs arising and the procedures followed in relation to this abortive project. That would be in line with international best practice. 
Unless a post-cancellation audit is undertaken both the company and its shareholders—the taxpayers of New Zealand—are left with a whole range of unanswered questions. For example should Meridian have been able to foresee earlier that the project was doomed having regard to items such as the consents process under the Resource Management Act the difficulties and costs associated with the acquisition of the land the geological and technical issues arising from the design and scale of the project the accuracy or otherwise of the announced $1.2 billion price tag risk evaluations in relation to water consents river flows storage and rates of return on investment etc.? I believe that both prudence and good management dictate the necessity to undertake this work. Are there lessons that the company could learn for the future? Are there lessons that the Government itself on behalf of the people of New Zealand can learn for the future particularly in relation to matters such as water allocation and the Resource Management Act processes? 
The other item that I wish to draw to the attention of members today concerns Genesis Power and the decision of the Environment Court announced yesterday to limit the diversion of Whanganui River water into the company’s Tongariro hydro scheme to only 10 years instead of the 35 years sought by the State-owned enterprise to ensure ongoing security of supply. I urge the Government to consider and consider very carefully the ramifications of this important decision both for Genesis itself and for the wider implications that arise in relation to other existing and potential future hydro schemes within New Zealand. I ask whether this case is some kind of precedent concerning the duration of water consents; if so it is a serious matter. 
It needs to be remembered that vast sums of money are required to build hydro dams and if the cost outlay and an adequate return on investment are to be assured then the owners of the project—in this case again the taxpayers of New Zealand—must be assured of long-term water consents. Clearly a 10-year consent period would in most circumstances be totally inadequate meaning that new dam projects will be rendered uneconomic. This is hugely important given the nation’s looming electricity shortage. 
A decision such as this could quickly scare off potential new investors whether or not State-owned enterprises or privately owned or New Zealand - based or overseas-based. Coupled with the cancellation of Project Aqua which I mentioned earlier on the face of it the Environment Court decision creates further uncertainty at a time when not only electricity generation investors but also the commercial and domestic consumers of electricity seek reassurance concerning both supply and price. In these circumstances I believe that the Government must leave no stone unturned including the possibility of new legislation should it be required. 
Reports noted.