Good Question. Don’t Assume It Is Transpower
Transpower’s Annual Public Meeting
George Hotel, Christchurch,
Thursday October 18th
(the CAFCA banner will be displayed outside the venue from 3.30 p.m.)
Here’s what we know about the ownership of the South Island grid. Excuse us if the explanation is complex; that’s because the deal was deliberately structured to be complex.
In 2003 Transpower sold the South Island grid and leased it back.
- The buyer of the grid was the US-based Wachovia Bank;
- The leaseback of the grid runs through the Cayman Islands, a tax haven;
- The leaseback of the grid runs for about 100 years, but Transpower has the option to repurchase the grid after about 25 years;
- The deal was tax-driven. At the time, it was being arranged, an inquiry into abusive tax avoidance schemes was underway in the United States. A ban on this particular type of deal (lease to service) took effect from just days after this deal was signed;
- Transpower delayed for a year showing the one-off profit effect in its financial report because of uncertainties related to the tax inquiry.
That meant that Transpower is the operator (not the owner) of the South Island grid.
During the early days of the current global financial crisis, Wachovia was taken over by Wells Fargo, another American bank.
Transpower’s 2012 Financial Report states that, in November 2009, Transpower partially terminated the cross-border lease over the South Island grid. However, that same Financial Report contains material which suggests that the cross-border lease is continuing.
The effect of the cross border lease was to duplicate ownership of the grid, so that ownership could be claimed in the United States as well as in New Zealand.