Meridian's $70m victory

By RICHARD BRADDELL utilities writer

State-owned power company Meridian Energy yesterday won a $70.6 million High Court battle against national grid operator Transpower - and announced it would pay the Government a special dividend of $100 million.

In a long-awaited decision, which goes back to the breakup of ECNZ in 1999, the court ruled that Meridian did not have to pay disputed transmission fees to Transpower.

Coincidentally, the ruling came just before Meridian announced that it would pay a special $100 million to the Government, raising its balance sheet debt-to-assets ratio to 27 per cent from 21 per cent.

Chief executive Keith Turner said Meridian was keeping cash in reserve for future opportunities, including a planned $1 billion hydro project on the Waitaki River. It was aiming for a longer-term debt ratio of 35 per cent.

But the dispute over what Meridian should pay Transpower for getting its power to the North Island over the Cook Strait cable may not be over.

While Dr Turner said the judgment made it clear that Transpower could not impose terms and conditions at will, Transpower chairman Sir Colin Maiden said it suggested there might be an alternative basis for restitution of the value of services provided and it might appeal.

Dr Turner said that while Meridian was willing to negotiate, it was unwilling to pay more than its equivalent competitor, Contact Energy, which Meridian had calculated was being charged about $20 million annually.

In his judgment, Justice Fisher emphasised that there was no contractual basis for Transpower to claim the $70.6 million withheld by Meridian because the terms of the price purported in the contract had never been agreed to by Meridian.

He also concluded that there was no regulatory basis for Transpower to enforce payment.

But he was puzzled that Transpower itself rejected that it might have a valid claim under a third legal heading of "quantum meruit," which holds that if a contract fails to prescribe the price, the provider normally has a claim for reasonable value.

" In my view quantum meruit would have been available in the present proceedings had it been sought," Justice Fisher said, adding that the court could have established value.

The dispute is one of two between the two state-owned enterprises, the second relating to Transpower's refusal to upgrade transmission lines between Taupo and Auckland so that Meridian can sell more of its power into the upper North Island.

The dispute arises from Transpower's decision to put all Cook Strait cable costs on to South Island generators and its attempt to rewrite heads of agreement between itself and the transition unit preceding the establishment of the three SOE generators, created in the breakup of ECNZ at the start of 1999.

While the heads of agreement initially set out that Meridian would pay at an annual rate of $51 million in the event of a dispute, revised terms rejected by Meridian in March 1999 lifted that maximum to $73.9 million.