POWER BOARD MONEY

Wanganui Chronicle, Volume 76, Issue 164, 14 July 1933, Page 4

POWER BOARD MONEY

| CONVERSION OF LOANS application to loans board SECRETARY’S REPORT ADOPTED. Particulars of the scheme for the proposed conversion of the WanganuiRangitikei Electric-power Board loans, in accordance with recent legislation, were laid before the board by the secretary, Mr G. A. Ammundsen, at its monthly meeting yesterday morning. ■Mr Ammundsen said that th© scheme 'had been presented for the approval of I the Loans Board but owing to the large number of applications before it at its last meeting th© Power Board’s application had not been dealt with. It was expected that it would be considered at the end of this month. Application has been mad© for permission to convert the local loans of £50,000, £14,000, £20,000, and £26,000 into two loans, “reported Mr Ammundsen. “It has been asked that they be converted as follows: “A loan of £22,600, to be held by Wanganui City Council Sinking Fund Commissioners to be ’converted into a table loan to be repaid over a period of 26 years by annual instalments of £1452 15s lid. Payments under this table will suit th© council’s arrangements, and will provide for repayment of this portion of the board’s loan within a definite period, with interest at a low rate. “A second loan of £87,500, being a consolidation of the balance of the four existing issues, to be issued to present debenture holders for five years. The short term is not favoured by the Loans Board and may not be approved. There is, however, a moral obligation to our lenders who provided this money for a short term, and a consolidated issue, short-dated, will meet this obligation and at the same time provide one loan only for renewal preferably on a table basis, on the expiry of the term. “With regard to the Public Trustee’s loan of £50,000, maturing 1944, application has been made for a conversion to a table loan spread over 26 years. The whole of the other of the board’s loans except £BOOO, part of Waverley Town Board’s loans for which this board is responsible, are already on a repayment table, and there are no advantages in conversion especially as costs of conversion as at present provided for would be just as high as for issue of the original loans. The only point to be considered is that with variation in the apportionment of interest and principal, a reduction in interest only will not give a fixed annual charge; actually the charge will increase a littl~ each year. “This difficulty can be overcome by aggregating the annual payments stiil to be made, and charging revenue with an equal amount each year. In the early years, the amount so debited but not paid out could be set aside and used to meet the cash obligation which in later years will exceed the debit to revenue. This procedure, while not very complicated, is a little unusual ( and I have written the Auditor-General enquiring whether it would have any objection from the audit’s point of I view. ’ ’ | Mr Ammundsen also reported that I the board’s liability under the original loai arrangements each year was £38,697 4s 5d whereas if th© conversion was

carried out as suggested tho board’s liability would amount to £36,329 ys 9(1, a (Icereaso of £2367 14s 8d annually. He said there would also be a further

saving if any change occurred in tho [payments to tho A.M.P. Society at preslent quoted at the original rate. I Tho report was adopted.