Anchor: deep pockets spurred attack

By Philippa Stevenson

New Zealand Dairy Group's bill to settle a dispute with Contact Energy over its Te Rapa factory power plant is expected to near $4 million.

Yesterday, Anchor Products group general manager Gary Romano said Contact and its contractor Alstom made the most of the dairy company's vulnerability at the height of the milk season.

"We had far more at stake than any of the other two litigants. I had the deepest pockets and they knew it, and went for me. I had no choice, and it comes straight out of farmers' payout."

Mr Romano said the company's cost would be between $3 million and $4 million, including re-opening the mothballed Morrinsville plant.

It was confident it had good legal grounds for recovering some of the bill from Contact, but would weigh more court action against the further expense.

The dispute has festered since July when Alstom, the builders of the gas-fired cogeneration plant, failed to meet the commissioning deadline. Contact owns the plant which is designed to supply steam to run the giant dairy factory, north of Hamilton, and supply electricity to the national grid.

Mr Romano said it came to a head last week when Alstom, under pressure by Contact to fully commission the plant by October 14, "went into a tailspin and did almost irrational quantities of commissioning" which halted milk processing for up to 15 hours a day.

Dairy Group and Contact cut a deal on Friday to ensure a steady steam supply to the factory until January 20. The dairy company is funding the cost of running the plant, including any expenses resulting from it not being fully operational.

It has reserved the right to litigate to recover those costs as well as sue over the commissioning delay.

Contact says construction of the power plant was held up while Dairy Group fought through the Environment Court for resource consents.

"Late start, late finish," a Contact spokesman said yesterday.

However, Mr Romano said Dairy Group took a gamble on successfully gaining the consents and never denied Contact access to the site. The company offered to cover Contact's risk of starting construction before the consents were obtained.

Mr Romano condemned Contact's shortsighted approach to Dairy Group as a customer.

"I've got the cash, and they've got gas. All I want to do is swap," he said.

"From a commercial point, I am just absolutely flabbergasted by the way they deal with their customers."

Contact spokesman Bruce Thompson declined to comment on the way the issue had been handled, nor on possible court action against or by Contact.

"He is not only a customer, he is also a partner but clearly there was a major area of disagreement and we believe now we can move forward."

Last week, the dispute forced the dairy company to send 1.5 million litres a day to Taranaki and Northland factories, and warn its farmers that they may have to dump milk as booming supply outgrew the emergency measures.

It estimated it would have to spill 2.5 million litres daily at a cost of $1 million a day in lost revenue.

Mr Romano said that would have involved about 500 farmers spilling their milk daily and while there were control measures there was an environmental risk that some farmers would pollute waterways.