We at the Power Panda uncovered a rather shocking article in the NZ herald yesterday. The article is from 2005, and the agreement discussed was done in 2003, but it was still something we had no idea about.
The crux of the article is that Transpower leased the South Island's national grid to an American investment company, who then leased it back to Transpower? It is confusing. It's called a cross border lease and "cross-border leasing has been criticised by Canterbury University accounting academics Alan Robb and Sue Newberry, who said it was shonky and, in the case of the Transpower deal, had put ownership of the grid at risk."
Really? Shonky? We would have used some much stronger words. It sounds a lot like a buy-back scheme.
In fact "Dr Newberry said the concept - called "lease-in, lease-out" in the US - had been subject to a big tax inquiry in that country and the authorities were now shutting such schemes down."
In fact such complicated arrangements have been deemed illegal in New Zealand, with the most high profile being the Trinity arrangement.
But getting back to the point, Transpower obtained $34 million under this arrangement. Nobody seems to know how long the arrangement is for. Michael Cullen claimed it could not open the door for foreign ownership of the national grid, but to be honest we're not sure we can believe him.
What the other party gained is some loophole tax advantage worth to them almost certainly more than $34 million.
The rest of us got higher power prices and a confused head.
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