Overseas investment decision for case 200810023 - Follies Limited

The application has been approved as it met the criteria.

The Overseas Investment Office is satisfied that the individuals with control of the Applicant collectively have business experience and acumen relevant to the overseas investment, and that the Applicant has demonstrated financial commitment towards the overseas investment. The Overseas Investment Office is further satisfied that each individual that exercises control over the Applicant is of good character and is not an individual of the kind referred to in section 7(1) of the Immigration Act 1987.

Background to the Investment:
Follies Limited is a wholly-owned subsidiary of TrustPower Limited (TrustPower). Infratil Limited (through a number of its subsidiaries) holds 50.5326 percent of the shares of TrustPower Limited. Infratil Limited (under its former name, Infrastructure and Utilities NZ Limited), is an overseas person but is New Zealand controlled, and is listed on Schedule 4 of the Overseas Investment Regulations 2005.

Approximately 4 percent of TrustPower's minority shareholders are overseas persons. In addition, one of the Infratil subsidiaries has a 23.7469% holding in TrustPower Limited (Infratil Energy New Zealand Limited) and is an overseas person. This is because Arawata Finance Limited holds a class of shares in Infratil Energy New Zealand Limited. Arawata Finance Limited is an overseas person, as it is a wholly owned subsidiary of the ANZ National Bank Limited. The combined 28.7469% Infratil Energy New Zealand Limited/other minority overseas shareholder ownership makes TrustPower an overseas person under section 12(b)(iii) of the Act.

TrustPower proposes to develop a hydroelectric power scheme in the Wairau Valley in the Marlborough region. The proposed scheme is an extension of the Branch hydroelectric scheme owned by TrustPower. Under the project, part of the Wairau River flow would be diverted into the existing Branch scheme and the water conveyed through interconnecting canals and penstocks to five new generating stations.

TrustPower advises that the Wairau Valley scheme will cover approximately 350 hectares of land, of which approximately 300 hectares will be secured by way of easement (canals and small ponds) and the remaining 50 hectares, occupied by power stations and other large structures, will be owned by TrustPower.

Outline of the Investment:
TrustPower proposes to acquire the relevant land to enable it to convey water flow by means of an open canal.

Rationale for the Investment:
TrustPower's core business is to generate and sell electricity. TrustPower currently has a gap between the electricity it generates and the electricity it sells to consumers meaning it is required to purchase electricity to sell to consumers leaving it vulnerable to price movements when hedges are not available, particularly during periods of electricity shortages. The proposed acquisition will reduce the Applicant's potential exposure to electricity price rises.

The proposed overseas investment is or is likely to benefit New Zealand (or any part of it or group of New Zealanders) having regard to the following factors:

Overseas Investment Act 2005:
s17(2)(a)(i) - Creation/retention of jobs;
s17(2)(a)(iv) - Added market competition, greater efficiency or productivity, or enhanced domestic services;
s17(2)(a)(v) - Additional investment for development purposes;

Overseas Investment Regulations 2005
r28(a) - Consequential benefits;
r28(c) - Adversely affect image, trade, or international relations;
r28(e) - Previous investments; and
r28(f) - Advance significant Government policy/strategy.