15 April 2005 Media Statement

Cullen on Transpower deal

“The cross border leases entered by Transpower and Airways Corporation increase rather than reduce the New Zealand tax base and are legitimate tax instruments under United States law,” Finance Minister Michael Cullen said today.

He said the view of the government, and of the previous National government which approved a similar deal for Transpower in 1996, was that State Owned Enterprises should be able to enter these arrangements because of the benefits they could provide and because SOEs should be able to compete on an equal footing in the market.

Cross border leasing is a common financing technique among private sector companies.

Dr Cullen said before approving the policy to allow SOE boards to enter such deals, he had to be satisfied that they were legal in all jurisdictions in which they had effect and had sign-off from the appropriate tax authorities.

He also had to be confident that ownership of the national grid was not put at risk.

“Transpower retains legal title to the asset and has protections in place to ensure that it will retain title should the US investors become financially distressed or the arrangement be terminated,” he said.

“Because of the international nature of the contract, I wrote to the US Ambassador in Wellington seeking assurances that the US government was comfortable with the transaction proceeding.

“I was advised that there were no problems as long as the parties were fully compliant with the relevant US laws and regulations and provided the lease was registered with the US Inland Revenue Service.

“Those requirements have been met,” Dr Cullen said.

ENDS

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