Row grows over who pays $50m Enza debt

By PHILIPPA STEVENSON agricultural editor

Pressure is mounting for a Government inquiry to sort out the row between apple growers and their major exporter Enza over who should pay a $50 million debt that is jeopardising the industry's future.

Nelson MP Nick Smith and Act list MP Gerry Eckhoff yesterday added their support to growers' calls for the Government to clarify the status of the debt.

Agriculture Minister Jim Sutton warned that the industry was at risk, but said he was waiting on a legal opinion before deciding what to do.

However, an increasing number of growers are refusing to go along with Enza's demands that they cover the debt and say their stance is backed by legal advice.

At the centre of the dispute is the cost of failed foreign exchange hedging by Enza's predecessor, the Apple and Pear Marketing Board.

Enza, dominated since last year by corporate investors Guinness Peat Group and FR Partners, is adamant that the $50 million forex losses, and a $4.2 million debt from a defunct loading facility at the Port of Napier, are growers' responsibility.

Mr Sutton said the dispute could severely damage the industry.

"If Enza has to bear all the liability, it could go out of exporting. If growers have to bear the liability, a considerable number could go out of business."

Pipfruit Growers NZ says initial analysis by its lawyers of information supplied by Enza suggests the losses growers should bear may be as little as $8 million.

In the company's view, the only decision required is whether Enza suppliers should pay all the $54 million debt this year - by a $4.50 a carton charge which it is already deducting from suppliers' returns - or spread the cost over all pipfruit exporters at the rate of 80c a carton over the next five years.

Enza chairman Tony Gibbs, of GPG, said yesterday that the company did not believe shareholders should assume some of the cost. GPG and FR have 36 per cent of Enza, with the rest held by mainly small growers.

"Losses arising from foreign exchange cover taken out some time ago to protect grower returns are clearly a grower loss," he said.

The hedging contracts, put in place in the early 1990s, extend until next year. Because the pipfruit industry is to be deregulated on October 1, Enza has said it must charge all the forex costs, including those of 2002, this year so as not to "severely constrain" its capacity to pay grower advances next season.

Mr Gibbs said that while keeping $4.50 a carton from suppliers' returns, the company was promoting the five-year levy because "so far it is the only constructive idea on the table."

He said an Enza poll of 659 growers at the weekend showed 69 per cent in favour of the levy.

Pipfruit Growers NZ argued, however, that while growers might favour a levy if they had to pay the debt, the important issue was whether the costs rightly belonged to them.

"There is a popular misconception that there is some account within Enza that is a legal responsibility of growers," said president Phil Alison.

There was no "grower account" of expenses for which growers were responsible. "All costs incurred by Enza, including all foreign exchange losses or gains, are Enza's responsibility," the group told members.

The company could pass some costs to suppliers, but these were determined by supplier contracts.

"In fact, the losses it is entitled to pass may be as little as $8 million (approximately 67c per tray)," Mr Alison said, adding that it was also far from certain the Government would introduce a levy.

Two weeks ago, the Government said it would consider a compulsory levy if it had widespread support, but Mr Sutton now says it is obvious that growers doubt the forex losses are entirely their responsibility.

He said yesterday that a draft legal opinion suggested Enza was breaching its contract with suppliers by bringing forward next year's forex losses into this year. Those losses could be around $19 million.

He said the regulatory Apple and Pear Board was also investigating if Enza's currency dealings breached regulations.