COAL CONTRACT.

Auckland Star, Volume LXIII, Issue 304, 23 December 1932, Page 4

COAL CONTRACT.

ARAPUNI SEQUEL. GLEN AFTON ARRANGEMENT. POWER BOARD EXPLANATION. Tlie Auckland Power Board has framed an explanation of its actions in entering into the contract with the Glen Afton Company for the supply of coal, and recently paying compensation for the abandonment of the contract. The amount of the compensation, which is paid by the board and the Government, is £55,000. "The Arapuni supply failed without notice of any sort to this board," says the statement. "It had then been in operation only three months, and the board was forced to take the whole responsibility of providing power for the consumers within its area. It needs no imagination to, visualise what would have happened in Auckland if this position could not have been 'met. Fruitless Negotiations. "When Arapuni failed, endeavours were made to renew the coal arrangements with the Waikato companies through the then formed Slackpool Association. This was our only source of obtaining Waikato coal, as the companies had united to deal with slack coal, and no other market was open to the board with any possibility of being able to meet its requirements. The whole of our plant is designed to burn Waikato slack coal." The statement then summarises tlie negotiations with the Slackpool Association. The board was told that for all future supplies slack coal would have to bo advanced from 7/14 to 10/ per ton at the mine. No guarantees of supplies could be given, and it was estimated that within three months little if any would bo available to the board, owing to the installation of the carbonisation plant. The next class of suitable coal was quoted at 17/6 per ton, and before this could be used it had to be treated at the board's expense. In order to carry on, the board had to purchase a considerable quantity of this coal, as well as southern and overseas coal. The position was so unsatisfactory, that the board convened a conference of local members of Parliament, and it was unanimously resolved that immediate representations be made to the Government.

Glen Afton Offer. "Following this meeting we were approached by the Glen Afton Company, who offered to supply suitable coal at considerably reduced amounts, guaranteeing to meet the whole of our requirements, provided that they could obtain the right to work the State Macdonald mine, which was adjacent to their workings. The offer made was for run-of-the mine coal crushed by the company, at 15/0 per ton ex mine, and all slack coal available after meeting their existing demands, at 8/ per ton ex mine. As previously mentioned, the matter of continuity of supply was of vital importance, and the offer appealed to the boaul as oiie worthy of serious consideration. It accordingly agreed that provided the Glen Afton Company could secure the rights desired it would be prepared to eifter into a contract embracing conditions to be agreed upon between the Government and itself, which was done. "It must be remembered that, at this period, the position in connection with the Arapuni supply generally was very uncertain. In fact, it was thought in many quarters that it would be years, if ever, before hydro-electric supply would be available. 'It was clearly and definitely stated that at least three years would expire before Arapuni could be restored. This was clearly defined in the contract entered into between the Government and the • Glen Afton Company, and it was considered that tli is was not only a reasonable period in which to expect the return of water-power, but that it was also a reasonable minimum period in the light of the capital expenditure necessary for the opening up of a new mine. In leasing the Macdonald mine to the Glen Afton Company, the Government did not do so without giving other collieries an opportunity of entering into similar negotiations. It was subsequently proved that the three years estimated was not correct. "The necessity for creating a breach of the contract is this; The Government immediately obtains a revenue from this board, approximating £200,000 per annum. The board's cost of operation is reduced by a figure definitely not less than £50,000 per annum. Immediately the station becomes a provincial standby, the board is further relieved of half the annual capital charges in connection with King's wharf, which approximates a sum of £35,000 per annum. Had the board not made these arrangements and provisions, it would have laid itself open to most serious criticism, as it would liave failed in its duty to provide for the requirements of its consumers. In the event of no such contract having been entered into by the board, the actual cost of such coal supplies as have been obtained under the contract would have cost the board £22,000 extra, or an excess annual expenditure of £18,000. This is assuming that our coal supplies could have been obtained regularly as required, but had it been necessary to augment these supplies by southern or overseas coa.l, this figure could quite easily have been substantially increased."