29 March 2004 Media Statement

Meridian’s Early Decision Allows Adjustment

Meridian’s announcement today that it will not proceed with its planned Project Aqua hydroelectric development will cause a major realignment of generators’ plans for new capacity, says Minister Pete Hodgson.

“Project Aqua would have added a significant 570 MW to NZ’s generation capacity at a moderate price,” Mr Hodgson said. “Its cancellation will cause all generators to revise their expectations of the opportunities they have for investment in new generation over the next decade.”

Mr Hodgson said the decision to abandon Project Aqua had come early enough for investors in generation, including Meridian, to adjust their plan for the future. New Zealanders should not be concerned that the country might run out of electricity, though the future price of electricity may well be higher without Project Aqua and some future increase in the use of fossil fuels was also likely.

“The Government’s position on Aqua has always been that if it is to proceed it should proceed on time, and if it is not to proceed the country needs to know that sooner rather than later. Meridian’s announcement today gives time for other generation options to be rescheduled and for new proposals to be developed. We can anticipate that various investors will bring forward alternative projects over the next year or so.

“Better demand management will progressively reduce the need for new generation as implementation of the National Energy Efficiency and Conservation Strategy continues. So far that strategy is on course to improve the country’s energy efficiency by 20% by 2012.

“However there will always be a need for extra generation capacity, and price will determine what generation is built first. The second main determinant will be the availability and price of gas ten years from now. The Government is reviewing current settings for gas exploration to see whether or not any adjustment is appropriate and will conclude that work within the next few months.”

Attached: MED assessment of the main generation options open to the industry, along with quantity and price.

Cost of Additional Electricity Generation Capacity Cost

SOURCE: Energy Outlook to 2025, Ministry of Economic Development, October 2003

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