8. Settlement Transaction
On the basis of ERTU's recommendations, the following payment flows will occur in relation to each SOE on settlement date, 1 April 1999:
- each new SOE will pay the purchase price as set out in the agreement for sale and purchase to ECNZ, being the book value of the assets (estimated consideration);
- the Crown will pay to each SOE the `estimated consideration' minus the amount of debt funding to be provided by ECNZ plus any stamp duty arising from the sale (shareholder's equity);
- ECNZ will lend to each SOE its percentage of ECNZ's existing debt funding (debt funding); and
- ECNZ will pay to the Crown the net consideration received from each SOE (being the price of the assets less the agreed loans) but will retain certain funds for its residual role.
Final amounts will not be able to be determined until the amount of cash held in ECNZ at settlement, the amount required to be retained in ECNZ after settlement, and the amount of stamp duty are confirmed and the settlement accounts are completed at the end of May. However for the purposes of settlement the cashflows will approximate those summarised in the following diagram:
Following settlement, ECNZ's accounts will be finalised to the end of 31 March 1999 and adjustment payments made after taking into account all outstanding balances between ECNZ and the relevant SOE.
The Crown has agreed to make an additional amount of equity funding available at the time of settlement to cover stamp duty and any other tax payable by the new SOEs known at settlement date. However it is proposed to discount the amount of such additional funding to take account of time of use (at the rate of 8.1% weighted average cost of capital). The net effect of this for the Crown is somewhat circular and is intended to give fiscal neutrality from the transaction.
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