q-a - mept2
1. WHAT IS THE DIFFERENCE BETWEEN THE TRUST DISTRIBUTION AND THE NETWORK DISCOUNT?

“The Trust Distribution and the Network Discount are two separate payments which will appear directly on your electricity account - the distribution will appear around February and the discount around March.

The Trust distribution is paid to each beneficiary. It is the derived from the dividend the Trust receives from Marlborough Lines as shareholder of the company on behalf of beneficiaries.

The Network Discount is a payment from Marlborough Lines to its customers as a part of its trading and operating a successful business.

2. NETWORK DISCOUNT

It is calculated as a portion of the revenue that Marlborough Lines receives from an Installation Connection Point (ICP) during the year from 1 February until 31 January. For an average residential consumer this amount will currently be around $225.

Currently around mid March each year. The ICP must be actively connected and not vacant at the qualification date. The discount is not paid to those ICPs located in remote areas as they are uneconomic to supply.

It is paid as a credit to your electricity account that your retailer provides. The amount would typically show up in your April invoice.

The discount payment is not apportioned in the event the property changes hands. It is paid to the user of the ICP as at the qualification date. If you are selling your house you may want to consider making some form of arrangement to recognise an apportionment of the anticipated distribution in your sale and purchase....

3. TRUST DISTRIBUTION

Marlborough Lines pays a dividend to the Marlborough Electric Power Trust (MEPT) and the MEPT then determines an amount to be paid to each of its beneficiaries (the ICPs connected to the Marlborough Lines network).

Currently around mid-January each year. The ICP must be actively connected and not vacant at the qualification date. The distribution is paid to all ICPs, including those in remote areas.

It is paid to your electricity account. The amount is expected to show up.....around your February invoice.

The discount payment is not apportioned in the event the property changes hands. It is paid to the user of the ICP as at the qualification date. 

If you are selling your house you may want to consider making some form of arrangement to recognise an apportionment of the anticipated distribution in your sale and purchase if you are selling your house you may want to consider making some form of arrangement in your sale and purchase agreement. However note that the amount is not confirmed until January.

͚Most recently the annual Trust distribution was $50 per ICP. The increased cash flows provided by Marlborough Lines investment in Yealands saw the distribution made to each beneficiary increase to $150 and the timing of the payment change from December to February. 

Marlborough Lines is bound by regulation to operate as a successful business, as such part of operating as a successful business is that it must make profit. In turn Marlborough Lines either re-invests the profit back into the company or distributes it to the beneficiaries by way of taxable dividend to the Trust as shareholders. It is from this dividend the Trust makes distributions to its beneficiaries. The availability of any distribution is dependent on the profitability of the company and its prudent business decisions regarding what it does with its profits.

4. WHO DO THE MEPT TRUSTEES REPRESENT?

Marlborough Electric Power Trust is made up of six trustees, each trustee holds for the time being a proportion of shares “in trust” on behalf of the beneficiaries. The beneficiaries are those for the time being have a connection to the Marlborough Lines network known as an “ICP” or installation control point. It is important to note that the trustees not only serve for the betterment of the current beneficiaries but also for the future beneficiaries. 

5. WHAT IS THE ELECTION PROCESS?

‘The Trust is made up of six trustees whom are elected by the beneficiaries. Every second year three trustees resign by rotation and an election is held. Existing trustees are entitled to stand again.’

6. I LIVE IN THE SOUNDS, WHY DON'T I GET A DISCOUNT?

The Marlborough Lines Network takes in some of the most stunning but difficult terrain in NZ for the egress of electrical lines. The remote nature and maintenance costs of these lines is high, particularly in the Marlborough Sounds and some areas on the east coast. This means that beneficiaries in high density areas subsides those with connections in the remote or “uneconomic zones”. Given this is unfair on beneficiaries in high density areas the discounts are distributed to those areas only.

7. MARLBOROUGH LINES INVESTMENT IN YEALANDS WINE GROUP

Our role is to encourage and facilitate the Company to be a successful business for the benefit of the electricity consumers connected to the Marlborough network.
We have an oversight role on behalf of our consumers to monitor the performance of the Company. We do not have an operational governance role.
We also act much like any company shareholder, appointing Directors, approving the company’s annual Statement of Intent and receiving Marlborough Lines’ dividends and returning those dividends to consumers.

The decision to invest in Yealands Wine was made by Marlborough Lines’ Board of Directors which is responsible for the operational governance of the company. The Board consulted the Trustees about the decision and demonstrated a robust procurement process for reaching that decision. The Trustees were satisfied that the proper processes were followed in reaching that decision and agreed with the purchase.

The Trust does not have a role in the operational business of the company. Under the Trust Deed within which we operate our role is to encourage and facilitate Marlborough Lines in meeting its objective of being a successful business as required under the Energy Companies Act, and to require it to be operated in a commercial for-profit basis. This decision was aligned with that responsibility.

Our role is to ensure that correct processes are followed and that Marlborough Lines is being operated in a commercial for-profit basis to provide the Trust with dividends to return to its consumers.
The Marlborough Lines Directors shared information about the purchase and the robust procurement process they undertook. The Trustees also undertook their own due diligence before giving their support to this transaction.  

We are satisfied it was. Marlborough Lines has no debt and has a proven track record of investing and getting returns back to the community through sponsorship, discounts and dividends which are paid to the Trust.
The Yealands Wine Group purchase was only possible because of the good work done by Marlborough Lines in realising a net gain of $91million from the sale of its shares in Otago/Net, allowing funds to be available for further investment.
Yealands is the country’s sixth largest wine exporter and a major player in the Marlborough wine industry. The total internal rate of return, including dividends and the appreciation in the value of equity in three years of Marlborough Lines ownership equates to 25.6 per cent. The profits from the investment has enabled the Trust to pass on a return to our customers with a payout in February this year. 

Marlborough Lines core business is well-managed and its electricity distribution network assets are well-maintained. The funds available for investment were surplus to the funds needed to deliver electricity in our region.
Marlborough Lines informed us that they had done due diligence in exploring investing in other electricity networks but in the interests of generating a strong investment portfolio a decision was made to diversify its investments away from the electricity industry.
We supported this investment in a local and successful enterprise, putting money back into the region and a company that employs local people and engages a diverse range of local businesses.

Yealands Wine Group is an independent company run by an experienced management team. Marlborough Lines has oversight over its operations and has several seats on its Board.

This is an operational matter for the company. The Trustees were as concerned as any consumer to learn of the back-pay amount. The Trustees satisfied themselves that the company worked through a process with the Managing Director to reach the decision to make the payment.
The Trustees can not comment further on this matter because of private employment and company confidentiality concerns.

The Trust maintains a professional working relationship with the Board of Directors and engages with the Board around operational matters of interest to the Trust.

8. WHY CAN'T YOU CONTROL POWER PRICES?

Marlborough Lines sets the electricity distribution prices (line charges), they have no influence over the price of electricity which is set by electricity retailers. Electricity distribution is very highly regulated, and this covers the pricing structure for lines charges. Whilst we can question the rationale behind the pricing decisions, we have no authority to dictate the electricity distribution charges set by Marlborough Lines.