South Canterbury Power Trust
CHAIRMAN'S REPORT YEAR ENDED 31 AUGUST, 2001
I have much pleasure in presenting the South
Canterbury Power Trust’s eighth annual report and my third report as chairman.
The Trust’s year commenced with the
Trustee’s tri-annual election. All
trustees are required to retire and were eligible to stand for re-election.
The trust is represented in three wards that encompass the three local
authority areas in South Canterbury. Mr
Allan Andrews was not challenged in the Waimate District and I was not
challenged in the Mackenzie District and consequently we were both re-elected
unopposed. The Timaru area saw Howard Smith being re-elected together
with Mr Lawrie Blakemore QSM and Janya Lobb.
I welcome the two new Trustees and appreciate the different perspectives
they have bought to the Trust.
The Trust has been pleased the way Alpine
Energy Ltd has performed this past year. Network
South, the joint subsidiary with Network Waitaki, is performing very
satisfactorily. AEL was rated
number 3 on the Ernst & Young 2000 league table; a very credible
performance.
The company’s operating surplus was $3.2
million greater than the previous year and as a result the directors decided to
reduce their holding in the Opuha Dam by almost $2.5 million.
This has impacted significantly on the final result.
The Trustees are in agreement with this action as the Opuha dam has been
of enormous benefit to the South Canterbury community albeit the project has had
a less than favourable financial performance.
Compared to other lines companies in New
Zealand, Alpine Energy Ltd again proved to be one of the more efficient
operators with low interruption frequencies and durations.
Our network achieved 74 minutes average interruption duration compared to
the New Zealand average of 118 minutes. While
it is important the Trust achieves an “optimum” financial return on its
investment, it is equally important to the Trustees that consumers enjoy high a
quality service from the company.
Some months ago the company reduced its line
charges by 6%. This was primarily
as a result of a change in Transpower’s pricing structure. South Canterbury consumers are still waiting for the
electricity retailers to pass on the reduction.
This past year saw Mr Ollie Turner, Mr John Dobson and Mr John Stubbs
acting as Trust appointed directors on the Board of Alpine Energy Ltd.
In agreement with the other shareholders of Alpine Energy Ltd, the
number of directors on the company’s board has recently been reduced from
seven to five directors. Waimate
and Mackenzie District Councils now appoint one director jointly, two directors
are appointed by the Timaru District Council and two directors are now appointed
by the SC Power Trust.
Messrs John Dobson and John Stubbs retired by rotation in July of this
year. The Trustees reappointed Mr
Dobson while Mr Stubbs did not reapply. I
sincerely thank John Stubbs for the valuable contribution he made on behalf of
the Trust to the governance of Alpine Energy for the past seven years.
Mr Stubbs was a very valuable member of the team and his inputs were
always highly regarded.
I also thank John Dobson and Ollie Turner for their continuing work on
the Alpine Board of Directors.
This past year the Trustees distributed
$1,619,068 to the consumer beneficiaries being 90% of its income after expenses.
Normal domestic consumers received a credit on their electricity accounts
of $37.00. The Trustees rely
heavily upon the energy retailers to distribute the Trust’s annual profit. With significant numbers of electricity consumers choosing to
swap their accounts to different retailers, the distribution is becoming
increasingly more difficult. This
year’s distribution process commenced in February and is only now at it’s
conclusion.
In May this year, the Trustees conducted a
poll of the Trust’s beneficiaries to seek their opinion on the future of the
Trust. The poll result has not only
given the Trustees a clear mandate to resettle the Trust deed in July 2002, but
also a mandate to seek consent from the Court to extend the life of the Trust
Deed beyond the 15 years that is presently allowed.
Seventy four percent of those who voted
favoured a continuation of the Trust and over 52% of the beneficiaries favoured
the Trust’s life being extended.
The Trustees have now commenced the process of
designing a new Deed of Trust by seeking the opinions of consumers on its
content. Consultation with legal
advisors is concurrently taking place to find a solution to extending the life
of the Deed. Advice to date
indicates that success achieving a long term Trust may be difficult.
The electricity industry has just suffered another crisis, mainly
attributed to the lack of water storage for hydro electric generation.
Many commentators and consumers are blaming the changes to the industry
that have taken place over the years, especially the splitting of the generator
ECNZ and the inability of the present generating companies to comprehensively
manage the water storage of the country as a whole.
There appears little enthusiasm from the present Government to reverse
the failed policies of the previous administration. I suspect the reason for that is the huge tax take Government
is now enjoying from the electricity industry.
Once upon a time the industry was a liability to Government when it was
responsible for the construction and maintenance of all New Zealand’s
generation installations. The
industry is now an enormous financial asset to Government. It collects revenue from the profits of the SOE generators
and TransPower, it also taxes those businesses together with taxing our network
companies and energy retailers and then finally collects GST revenue from the
end user consumers.
Although the continued life of the Trust is
not yet assured, I am pleased with the confidence the Trust’s beneficiaries
have expressed in the role and the work the Trust does in the South Canterbury
community. I am satisfied with the
Trust’s working relationship with the other shareholders of Alpine Energy
Limited. We each have a healthy
respect for the other’s differing objectives and the shareholder mix makes for
a robust governance of the network company.
Thank you fellow Trustees for your support and
my appreciation is again extended to Tom Simpson of McFarlane Hornsey Simpson
for his secretarial services.
Alister
France
Chairman