Wanganui Gas has $3m Council cash injection - 11/03/2010Severe trading conditions and a disastrous long-term gas contract have had a dramatic impact upon the profitability of the council-controlled energy company, Wanganui Gas.
In what Mayor Michael Laws has described as “a perfect storm of misfortune”,
Wanganui Gas will be unable to return its usual $1 million-plus dividend to the Council to subsidise rates “and instead requires council to inject further principal to carry trading losses and support the company”.
That sum for the 2009/10 financial year will be between $2.5 million to $3 million. It is not anticipated that a cash injection will be required in the 2010/11 financial year. However, there will be no dividend return.
The cash injection will increase Council debt by a similar amount.
Wanganui Gas’ trading arm, Energy Direct, is the principal cause of the loss. The other trading division, GasNet, is trading profitably.
“At the start of 2005, Wanganui Gas’ directors negotiated a long term gas contract that has turned to custard. This has happened to a number of other energy companies too. That contract expires in June of this year.
“In addition, the electricity side has become ultra competitive and Wanganui Gas is a small player. There are always risks associated with this activity.”
Last year, both the Council and the community (via ‘Referendum 09’) voted to retain ownership of Energy Direct despite being aware of the potential risks.
View referendum information and results (PDF, 18KB) | 
