A new government-backed $1.2 billion bank loan scheme will help thousands of Kiwi businesses reduce their reliance on dwindling natural gas supplies, the Finance Minister says.
The Gas Transition Loan Guarantee Scheme is among the first energy initiatives announced ahead of Thursday’s budget, with the Crown underwriting 80% of each eligible loan in exchange for banks offering lower interest rates to borrowers.
Individual loans will be capped at $50 million, with the scheme operating for three years and repayments required within 10 years, subject to terms agreed with participating banks.
“This will make loans more affordable for firms wishing to switch fuel sources,” Finance Minister Nicola Willis said.
“New Zealand has seen some gas-dependent manufacturing businesses close, citing the cost of energy as a major factor.”
“By assisting others to move to alternative fuel sources, the government can help preserve jobs, improve New Zealand’s economic outlook, and leave more gas available to firms who have no viable alternative to gas.”
The loan scheme is part of a budget centred on what Prime Minister Christopher Luxon has described as four pillars of national security—international security, energy independence, social cohesion, and financial security.
For Luxon, “Energy independence must be treated as an immediate national security interest, instead of a contributing factor to a long-term climate strategy.”
He said New Zealand could not compete at the forefront of global technology without reliable and affordable energy supplies.
The government says 12 of New Zealand’s 17 active gas fields are expected to cease production within the next decade. Gas prices have consistently increased, and many new supply contracts now have a limited duration of only a few months.
To qualify for the scheme, businesses must use reticulated natural gas and consume at least 1,000 gigajoules annually. Eligible applicants may include food processors, brewers, hotels, aged-care facilities, and commercial greenhouse growers.
The scheme will apply only to new loans and will not cover refinancing arrangements.