CNU
02/07/2015 08:47
GENERAL
PRICE SENSITIVE
REL: 0847 HRS Chorus Limited (NS)
GENERAL: CNU: Commerce Commission releases latest draft FPP determination
STOCK EXCHANGE ANNOUNCEMENT
2 July 2015
Commerce Commission releases latest draft FPP determination
Chorus has today received the latest draft determination from the Commerce
Commission on a range of regulated products and services.
The Commission has proposed a glide path for all the monthly rental prices.
The prices indicated today are:
o A draft UCLL price of $26.74 in year one, reaching $28.56 in year five
(compared to $23.52 currently, and $28.22 from the Commission's previous
draft determination)
o A draft UBA price of $11.15 in year one, reducing to $10.52 in year five
(compared to $10.92 currently and $10.17 from the Commission's previous draft
determination)
Over the five year period the gross EBITDA impact from the revised monthly
charges is largely in line with the previous draft, with reductions in years
one and two and increases in years four and five. The new prices, if
confirmed, would be implemented upon the completion of the Commerce
Commission's process.
While the net impact on the monthly charges over the course of five years
looks to be about in line with the earlier draft, Chorus has concerns with
two new or updated aspects to the determination - transaction charges and
backdating.
Transaction charges account for approximately $40m in annualised revenue
today. For the key transactions the Commission has proposed a reduction of
30%, or around $12m annually.
"Our initial analysis suggests that the proposed reductions in one-off
transaction charges may require Chorus to provide these services at below
cost," said Mark Ratcliffe, Chorus CEO.
The Commission has also indicated, in a split decision, that it does not
propose to backdate the revised FPP charges. Backdating has been the Commerce
Commission's practice to date.
"The decision to not backdate in any form is a significant reversal on
previous Commission decisions. In our view, the right thing to do if a
previous regulatory decision has caused a distortion is to correct it, which
in this case means backdating the revised FPP charges.
"Both issues require further explanation and we will continue to work within
the Commission's process through to its completion in December, and address
these issues through our submissions.
"Chorus continues to believe that the draft pricing significantly undervalues
the true cost of network investment in New Zealand. Despite most experts
believing that the WACC used in December was artificially low, the Commission
has chosen to further reduce the WACC," he said.
"Extensive data from our network rollout experience, urban UFB pricing agreed
with the Crown and the comparable value of the Commission-regulated
electricity networks all support the view that aggregate pricing should be at
or above 2011 levels."
ENDS
For further information:
Nathan Beaumont
Media and PR Manager
Phone: +64 4 896 4352
Mobile: +64 (21) 243 8412
Email: [email protected]
Brett Jackson
Investor Relations Manager
Phone: +64 4 896 4039
Mobile: +64 (27) 488 7808
Email: [email protected]
End CA:00266515 For:CNU Type:GENERAL Time:2015-07-02 08:47:14
