Far North body want open forum on Top Energy plan

By Mark Reynolds

The financial performance of Top Energy's management is being put under the spotlight, as Far North residents assess their ability to develop the electricity network into a broad investment concern.

Indications are that Top Energy's returns on assets have been low relative to other power networks and that Far North consumers might get a better deal if their company was part of a larger line company, such as Auckland-based Vector (formerly part of Mercury Energy) or UnitedNetworks (formerly Power New Zealand).

According to an analysis of electricity company results by accounting firm Ernst & Young, Top Energy's return on assets are in the bottom quartile.

The analysis showed Top Energy's after-tax profit on operations other than its core line business was just 0.8 per cent of revenue in 1998 - the latest year analysed.

That compared with an average return of 6.8 per cent by the 36 companies surveyed. Power NZ and Mercury returned 9.9 per cent on non-network assets, while in the past three years their return on all operations averaged 6.8 per cent, compared with 4.9 per cent by Top Energy.

In the year ended last March, Top Energy's total pretax operating profit as a percentage of total assets was 2.09 per cent, well adrift of the 7 per cent return management had budgeted for.

A group of Far North residents, concerned about the company's plans to spread its operations, say its relatively poor level of return is one of the reasons they want any expansion to be widely debated.

Brian Thorburn, chairman of a community trust that owns Top Energy, said the company was in the middle of a strategic review that might see it invest in other areas.

But the Far North group want any move to be screened publicly.

They are also concerned about potential conflicts of interest if further investments in the Far North are proposed.

One of the group, who did not want to be identified, said that concern about possible conflicts of interest for chief executive Roger de Bray arose in his capacity as director of another Far North investment concern, the district council-owned Far North Holdings.

Mr de Bray was chairman of Far North Holdings subsidiary Far North Properties when it signed an agreement last year to buy property from the Bay of Islands Aero Club, of which he was a member.

An Audit Office review found "no evidence of any involvement of Mr Roger de Bray in this transaction."

But it said that declarations of interest should be put in writing to "avoid the potential for misunderstanding."

The Audit Office report also noted that the Aero Club had used a property valuation from Far North Valuers in setting the value of the club assets.

Far North Valuers said the market value of the assets was $140,000, but Far North Properties decided that was excessive and $100,000 was suggested.

A director of Far North Valuers was Jack Poutsma, chairman of Top Energy.