Opposition grows to Enza levy

By PHILIPPA STEVENSON agricultural editor

Legal and expert financial opinion is stacking up against apple exporter Enza's move to bill growers for a claimed $50 million foreign exchange loss.

Agriculture Minister Jim Sutton said last night that Crown Law Office opinion on the issue reinforced views already expressed by Ministry of Agriculture and Forestry officials.

"It indicates that, on the face of it, the terms of growers' contracts do not allow year 2002 foreign exchange losses to be brought to account and deducted from year 2001 returns," he said.

Earlier, he said 2002 forex losses could amount to $19 million.

The orchardist representative Pipfruit Growers NZ, which has also sought legal opinions, said growers' liability could be as little as $8 million.

And yesterday, Nelson MP Nick Smith, who has been holding a series of nationwide grower meetings, released a valuation report on Enza by merchant banker Grant Samuel which raised further questions about liability for the debt.

The report, dated August last year, was commissioned by the then Enza board after corporate investors Guinness Peat Group and FR Partners announced their ultimately successful bid for 36 per cent of the company.

The report, intended to inform grower shareholders of the value of the company when considering offers from GPG and FR, never made it into their hands.

The companies gained a controlling interest in Enza before it was completed.

According to Grant Samuel, Enza had substantial foreign exchange exposure from forward cover put in place often up to five years in advance.

"The majority of this exposure has been converted into option contracts with exercise dates in June 2001 and June 2002," the advisers said.

"If these contracts were marked to market today [August 2000] a loss of approximately $12 million would be realised.

"The actual outcome will not be known until the exercise dates."

In a statement that appears to support growers' contention that Enza's forex losses are the company's, not theirs, the report states that "any losses from these option contracts, for the purpose of valuation, have been treated as an expense of Enza.

"This is consistent with exchange losses of $14.3 million crystallised in the current financial year which arose from the foreign exchange contracts established in prior years."

Enza has suggested growers could either pay the $50 million forex costs, and $4 million debt for a failed port loading facility, by either an 80c a carton levy over five years, or by a $4.50 a carton deduction on this year's returns.

It has already started deducting the $4.50 from growers' early returns.

The Waikato growers followed the lead of their Hawkes Bay counterparts in unanimously passing resolutions which have called on Enza chairman Tony Gibbs to answer key questions by today, or resign.

Mr Gibbs was unavailable for comment and an Enza spokesman said the company was "looking at the way in which we can respond to the issue over the next few days."