23 Apr 2010

NZ electricity reforms seen as risky for big companies

8:45 pm on 23 April 2010

Standard & Poor's says proposed reforms to New Zealand's electricity sector could endanger the finances of big companies involved in the industry.

Dramatic reforms are going through Parliament at present which involve enforced asset swaps between companies along with compulsory cooperation between firms known as mandatory hedging.

Standard & Poor's, which assesses the credit worthiness of companies, says it is tough to gauge what effect the reforms will have on credit ratings.

But the agency says it fears that electricity generators and retailers might not have what it calls enough financial headroom to withstand the risks of adopting the new rules.

The changes are seen as among the most dramatic in the electricity industry for a decade.