Powerco is to build a new gas network that will tee-off from a transmission pipeline built by Duke Energy which stretches from Victoria, across Bass Strait and into Tasmania's main population centres.
Tasmanian State Premier Jim Bacon said the initial stages of the project would connect a number of major industrial and commercial users to the Duke pipeline and that the work would be completed over 18-months from a likely start date in July.
Negotiations with Powerco, for the second stage of construction, which will provide connections to residential consumers, will commence immediately.
Powerco chief executive Steven Boulton said he was delighted Powerco and the Tasmanian State government had successfully concluded negotiations for stage one. The State government's endorsement of its relationship with the company acknowledged Powerco's expertise in the development of energy networks in New Zealand.
"We have been able to directly leverage our experience because of the many geographical and operating similarities between New Zealand and Tasmania," Boulton said.
Powerco is New Zealand's largest gas distributor and second largest electricity distributor with approximately 400,000 consumer connections across the North Island.
The development agreement is conditional on the granting of regulatory approvals and licences and some legislative amendments.
The $NZ38 million first stage is expected to bring natural gas to approximately 17-24 major commercial and industrial customers. The second stage will connect about 100,000 residential customers. The project will see about 100km of gas pipe laid in Tasmania's urban areas and design work for the network reticulation has already commenced.
Boulton said the project represented a positive step forward in Powerco's strategy of expanding its gas network ownership and gas management business in areas where there was an abundance of long-term gas, and its focus on infrastructure investment and sustainable economic growth.
The Tasmanian government has agreed to contribute approximately $NZ9 million to Powerco to develop the backbone network and the balance will be funded by Powerco's cash retentions. Revenue flows from the investment for the 2003-04 year will be offset by one-off costs during the initial construction period and should therefore have a neutral effect on the profit forecasts for the current year.
Last week, Powerco posted a $NZ38.05 million profit for the year to March 31, up 15%on the previous year, and is forecasting an unimputed dividend for the 2003-04 financial year of 16 cents per share.
