The non-cash before and after-tax charge of approximately $US130 million will be taken in this last 2003 quarter, Vancouver-headquartered Methanex says. Annual depreciation for all plants used to be $US30 million.
"The write-down of these assets reflects the changed economics for natural gas in both New Zealand and North America," Methanex president Bruce Aitken said.
"Despite the write-downs, we continue to work to secure enough gas to produce from 0.5 to 1.0 million tonnes of methanol in New Zealand during 2004. Prospects beyond 2004 are uncertain."
Kiwi commentators wonder where on earth Aitken continues to get his optimism from, given that Methanex NZ will essentially have no Maui gas from next year, with all other gas contracts coming up for renewal.
Rumours are that Methanex will be prepared to pay more than double its $NZ2.50 per Gigajoule Maui price to ensure at least one of three trains can continue operating at least until both the 1.7 million tonne Atlas project is finished at Trinidad in 2004 and the 840,000 tonne Chilean expansion is completed by early 2005.
The Medicine Hat facility has been idled since 2001 and the write-down of the plant reflects the company's view on long-term North American natural gas prices and its reduced reliance on North American production as it continues to implement its low-cost strategy of expanding methanol capacity in regions with low feedstock costs.
"We continue to view Medicine Hat as valuable swing capacity to supplement our low-cost methanol production hubs in Chile and Trinidad," Aitken added.
Meanwhile, gas-strapped New Zealand is also seeing the ever-tightening gas market spill over into dearer domestic gas.
Today Genesis Energy announced it would be increasing gas prices, from January, for its 97,000 residential customers, with an average hike of about 12.7% (or $NZ71 per year) for customers with average consumption of 7000kWh per year.
Chief executive Murray Jackson said the hikes were the result of increases in gas supply costs, with both the wholesale cost of gas and operational costs rising.
Last March Genesis standardised its residential gas pricing plans and its 10% prompt payment discount - bringing its pricing structure into line with other gas retailers. Genesis will continue to offer two pricing plans to suit different customer needs.
