Refinery funds

Press, 14 May 1985, Page 20

Refinery funds

Sir,—ln his “open letter to shareholders,” printed on May 1, the chairman of the New Zealand Refining Company, Ltd, assured us that under the formula for pricesetting on its products the company’s borrowed funds represented in the new expansion assets will not qualify for remuneration. This requires clarification. Does he mean that as long as the assets are offset by the liability of the loans they make no contribution to shareholders’ funds? (Until the motorists pay the loans off for them, that is.) Or is he saying that the acquired assets, although owned by the company, will never be valued and appear on the company’s balance sheet, thus contributing to shareholders’ funds and earning the 12% per cent “profit element” as do other assets more normally acquired? I fear that the ambiguity of his statement may be hiding an arrangement whereby we not only make them a gift of the plant but also remunerate them for their largesse in accepting it. — Yours, etc., HOWARD PILGRIM. May 5, 1985.

[The company secretary of the New Zealand Refinery Company Ltd, Mr J. R. Thompson, comments: “Your correspondent suggests that the company’s statement lacks clarity in respect of the profit-earning abilities. If it does, we must apologise and restate our position. The expansion assets will

appear in the company balance sheet, but because of the accelerated depreciation mechanism for fee purposes to enable loan repayment over a seven-year period, the assets will never qualify for profit reward. Our recently-published annual report gives some details of these arrangements, and copies are available for any person caring to write to the company secretary requesting a copy. We are this year, also holding our annual general meeting at the Town Hall in Christchurch on May 30 at 2.30 p.m. for those shareholders living in this area.”]