XLIII

D.—l

ARAPUNI POWER SCHEME : FINANCIAL POSITION. The Hon. the Minister op Public Works, — The water-power schemes erected by the Government for generation of electricity are operated under the provisions of the State Supply of Electrical Energy Act, 1917, which provided that the revenue, after paying working-expenses, is to be disposed of in the following order : — (1) In payment of the interest charges on the operating capital invested in the undertaking : (2) In providing for a Depreciation (Renewal) Fund of not less than 2 per cent, of the value of the assets in operation, exclusive of the sums appearing for interest during construction and for loose stocks of material: (3) In providing, when sufficient profits are available, a sinking fund of 1 per cent, per annum on the capital invested in the undertaking : (4) Any surplus after meeting the charges already enumerated is to be carried to a general reserve. The present average rate for interest borrowed for hydro-electric development is 5-18 per cent. It is urged by some authorities that a renewal provision of 2 per cent, and a sinking fund of 1 per cent, particularly where, as at Arapuni, the heavier portion of the expenditure is in permanent works such as dams with long expectation of life, is too severe. Nevertheless, in the computations that follow, those rates have been adopted. The output from Arapuni commenced in May, 1929, from which time electricity was supplied to the system from both the Arapuni and Horahora Stations, so that for the year ending 31st March last the accounts for those stations had necessarily to be amalgamated. After deducting £23,712 for the cost of electricity supplied from steam and oil generating sets,' the revenue earned was £201,971, and the maximum station output was 41,520 kw. The net result was that, after paying all working-expenses and £135,622 for interest at 5-18 per cent, per annum on the operating capital, there remained £27,490 for the Renewal Fund, or only £32,768 short of actual requirements. Although these results were so eminently satisfactory, they could not be taken as any true indication of the very favourable financial prospects of the system before the mishap occurred, because, as already stated, the machines at Arapuni were on load for a portion of the year only, and, in any case, even at the end of the year only three machines, representing a capacity of 45,000 kw. had been installed. Moreover, the very heavy expenditure involved in the dams and waterworks, sufficient to provide for eight machines with a total capacity of 120,000 kw., had already been incurred, and it was merely necessary to extend the power-house and machinery to reach that capacity at Arapuni. The powerhouse capacity of the Horahora Station is 10,300 kw. (nominal full load). At the time the trouble at Arapuni occurred, in June this year, the total capital expenditure for the whole system, including Horahora and all the distribution and transmission works, but excluding £56,739 for the value of movable stocks and similar items, was £3,670,107. After making an apportionment of the charges for supervision, interest during construction, loan charges, and similar overhead expenses, this capital sum can be allocated as below : —

Various contracts and other commitments, principally in connection with the supply of the fourth unit, have been entered into, and it is estimated that these will amount to £200,000, which, added to the sum of £2,080,061 above, brings the total investment in the headworks at Arapuni to £2,280,000. Other charges incidental to the actual erection of the fourth unit, bringing the capacity of Arapuni alone to 60,000 kw., would make the then total cost of the headworks £2,380,000, and the total cost of both Arapuni and Horahora, with all distribution and transmission, £3,970,000. It will thus be seen that the total capital involved in any investigation of the future of Arapuni alone is approximately £2,280,000, and that the installation of 60,000 kw. there would cost for headworks £2,380,000, or nearly £40 per kilowatt. The installation of a further 60,000 kw., for which the dam and other waterworks have been designed and constructed, would cost approximately £600,000, bringing the capacity at Arapuni to 120,000 kw., at a capital cost of about £25 per kilowatt. In order

Horahora. Arapuni. Total. Dams, power-house, and other headworks Interest during construction Engineering expenses, loan charges, &c. £ 315,094 19,014 32,624 £ 1,658,804 257,121 164,136 £ 1,973,898 276,135 196,760 366,732 2,080,061 2,446,793 Distribution and transmission system . . Interest during construction Engineering charges, loan charges, &c. 214,189 13,000 22,103 827,938 64,164 81,920 1,042,127 77,164 104,025 249,292 974,022 1,223,314 Totals 616,024 3,054,083 3,670,107