HYDRO-ELECTRIC WORKS.

Taranaki Daily News, 21 June 1921, Page 5

HYDRO-ELECTRIC WORKS.

THE DECISION TO CLOSE DOWN.

CONFIRMED BY BOROUGH COUNCIL. STEPS TO SECURE FINANCE. The action of the New Plymouth Borough Council in authorising the closing of the hydro works in view of the financial difficulties was confirmed at last night’s meeting of the council. The general manager submitted a report urging further efforts to arrange finance, the outcome of which was a resolution authorising the Mayor (Mr. F. E. Wilson), and. the general manager (Mr. F. T. Bellringer) to go to Wellington and interview the department to urge upon them the urgent necessity for financial assistance for the completion of the New Plymouth hydro works. They were also granted power to approach any financial institutions that they deemed advisable in the interests of the council. Mr. Pearless (resident engineer) reported on the necessary work to ensure the security of the hydro works before closing down. He stated that, the lining of the 340 ft. of tunnel excavated. (No. 2) should be carried out. Owing to the locality of the heading it would flood soon after being left if allowed to remain in its present position, as the timber was not intended to be permanent; this would probably do a great deal of damage. The work of erecting the shed for the locomotive expected shortly should also be proceeded with. The completion of the wall at the entrance to the water race should be effected before water was allowed to enter the race. If this were not done before the completion of No. 1 tunnel it would mean a delay of some three, months later on (to use new intake), as the water could not pass through during the progress of the work. If it were decided to leave it uncompleted and to make use of the new intake, it might seriously affect the work already done and waiting concrete only. The general manager pointed out that it would be necessary to consider the position in reference to contract No 2 (pipe line) and decide whether the excavations should be made and anchor blocks constructed to enable the contract to proceed, or whether arrangements should be made for suspension of contract No. 2 for the time being. He was in favor of the latter course, as the excavations could be made cheaper in the summer months, and if the other works were closed down there was no great urgency for this particular contract to proceed during the winter months. The report was adopted. GENERAL MANAGER’S REPORT. FURTHER EFFORTS URGED TO OBTAIN FINANCE. LOSS BY CLOSING DOWN. The following report was presented by the General Manager (Mr. E» T. Bellringer) to the New Plymouth Borough Council last evening: Since the meeting on Thursday evening 1 have given this matter very careful consideration, and feel that it is advisable that I should put my views in writing. 1 am, and for some time past have been, in favor of temporarily closing down the works until the raising of further money is definitely arranged. There appears to be absolutely no option but to do so. ' As pointed out at the meeting, however, I was opposed to the original proposal to decline the conditions imposed by the State Advances Office, and to make no further effort to raise the £60,000 loan until the money market eases. This proposal was subsequently modified, and resolutions 2 and 3 ol the General Purposes Committee were passed, with the exception that in resolution 3 I added the words “at present” in order to afford an opportunity of resuming the negotiations later in case the council desired to do so.

My view in regard to resolution 2 is that very little can be hoped for from correspondence with financial institutions. The matter seems to me so important that a deputation should have proceeded to Wellington to interview both the Secretary of the Treasury and the heads of certain financial institutions, this even though the chance of r,uccess at present may appear to be very remote. The deputation could also confer with the General Manager of the Bank of New Zealand with reference to the new regulations (if they may be so termed) adopted by the Bank in regard to the charge upon ovedraft limits, and re temporary transfer of loan moneys to general account. These new regulations will coist the council very little short of £lOOO per annum, and this matter in itself is of rsufficient importance to warrant a deputation to, Wellington. With regard to resolution 3, very careful consideration will require to be given to the State Advances terms before they are definitely turned down. The position is as follows: The £60,000 loan was made a short dated one, viz., 12 years, in view of the high rate of interest ruling at present. Twelve years gave ample margin to afiow the rate of interest to return to normal, and it was anticipated that at its expiration it would be possible to refloat the loan at somewhere about 54 per cent. Assuming that with the State guarantee the loan can be floated abroad at 7 per cent., the condition imposed by the Government means that the 7 per cent, will have to be paid foi--33 years instead of 7 per cent for 12 years and 54 per cent, for 21 years. The additional cost to the Council is £9OO per annum for 21 years, ot a total of £18,900.

This is too large a sum to pay without making a strenuous attempt to have the restriction waived or modified. If, however, later it becomes a question of these terms being accepted or the flotation of the loan held up for a matter of years until the money market eases, then it may be found that in its own interests the council may be to accept the terms, as will be seen from the following.

As pointed out. in a previous report, closing down means that, works which, when all commitments have been met. will have cost approximately £100,900, will remain unproducvive, and will not earn one penny to meet the interest and sinking fund charges. On the £100.900 referred to after the whole of it has been paid out the interest and sinking fund may, for all practical purposes, be taken as 7 per cent... making a direct cash lose to~the council on these items alone of £7OOO per annum, without allowing anything for depreciation and renewals, if, ; however, the works were cempleted the

extra 2000 horse power could be disposed of almost immediately, and would return ; at least £24,000 par annum. This extra 1 revenue would not only enable the £7OOO i loss in interest and sinking fund pay-' ments to be wiped out, but would enable ; approximately £12,000 per annum to be ' set aside for depreciation and repairs j and renewals. The actual loss entailed by shutting I down is, therefore, £19,000 per annum,! so that if the works are suspended for ' only one year the council lose more than i it would have lost by accepting the Department’s terms for the State guarantee. In addition it must be remembered that the additional cost imposed by the Department would not commence until after the expiration of twelve years, and even then is spread over a period of 21 years at £9OO per annum, and by the time the first payment became due the Department should be in a position to meet it without much difficulty. The above deals with the actual monetary position as it affects the council, but much more than this is involved. The progress of the town and whole district depends to a large extent upon ample electric power being available, and a long delay in completing the extensions will seriously retard that progress. Bearing these facts in mind it will be seen that no stone should be left unturned to raise the £60,006 loan, even if in the endeavor fruitless trips to Wellington are involved and travelling expenses incurred. The council will at least have done its best even if unsuccessful. Another point to be borne in mind is that the £72,000 loan debentures are hypothecated to the bank, and that the bank, in the event of the overdraft nat being repaid have power to sell the debentures at the best price obtainable. There is little hope of these debentures being sold at 6 per cent., but it was hoped to be able from time to time to reduce the overdraft from revenue derived' from the additional power to be provided by the extension. If. however, the works do not proceed the bank will not permit the overdraft to remain indefinitely, and to recoup themselves would evenutally sell the debentures at the best prices obtainable. This might mean a further heavy loss to the council. APPEAL TO MINISTER. TARANAKI MEMBER’S ACTION. Mr. S. G. Smith. M.P., has forwarded the following telegram to the Minister of Finance in regard to the raising of a loan to carry on the hydro works: “There is great consternation here on the lack of sympathetic treatment from the department in connection with the local borough loan for the completion of the hydro scheme to supply the town and country with electric power. A deputation waited upon the Prime Minister prior to his departure and he is undoubtedly sympathetic. We understand that the Government’s guarantee of the loan' would be arranged, but regrettable obstacles are being placed in the way. The matter is most urgent. and unless the department find* a way to help to raise the work must cease, causing disastrous loss and delay in providing power, which is much needed throughout the district, as well as causing more unemployment.' 1 would appreciate your personal attention in this matter, and feel sure you can find some way to help the district.'’

A reply has been received from the Minister to the effect that he will make enquiries and communicate with Mr. Smith later.