Loans to help businesses transition away from gas

A new initiative will help businesses transition from gas, protecting jobs and securing New Zealand's dwindling gas supplies for other users, Finance Minister Nicola Willis, Energy Minister Simeon Brown and Associate Energy Minister Shane Jones say.

"The Gas Transition Loan Guarantee Scheme is a practical, helpful Budget 2026 initiative which is expected to make up to $1.2 billion of bank loans available to businesses to eliminate or reduce their dependency on gas," Nicola Willis says.

"Under the scheme, the Crown will guarantee 80 per cent of each supported loan in return for banks passing on lower interest rates to borrowers. This will make loans more affordable for firms wishing to switch fuel sources."

Budget 2026 sets aside $48 million to cover potential losses from the scheme.

"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.

Simeon Brown says the Budget provides $5.9m for the Energy Efficiency and Conservation Authority to work with businesses exploring options to transition away from gas.

"With gas reserves rapidly declining and prices rising following the last Government's decision to ban oil and gas exploration, these loans will enable businesses to reduce their energy costs and stay competitive by helping them switch some or all of their processes to run on alternative fuel sources, such as electricity or bio energy, and to invest in other energy efficiency measures.

"Businesses meeting the threshold for inclusion in the scheme may be using gas for things like water heating, eg food processors and brewers, or heating interiors eg hotels and aged care facilities, or commercial growers using greenhouses. Thousands of businesses use more than 1000 GJ of gas a year which is the threshold for eligibility for the loan scheme.

"To access this finance, businesses must achieve genuine gas savings of at least 15 per cent while maintaining or increasing production, ensuring the focus is on growing the economy and protecting jobs, not shrinking output."

Twelve of the 17 currently operational gas fields in New Zealand are expected to stop producing within 10 years.

Gas is becoming more expensive, and many new contracts are short term - lasting just a few months.

"That's why this Government is working hard to shore up domestic gas supply and fast-track clean energy generation projects, while undertaking a procurement process for an LNG importation facility. New Zealand needs more energy choices with secure, affordable energy that keeps the lights on, supports jobs, and underpins the economic growth our country needs.

"EECA estimates that if the full $1.2 billion of lending goes ahead, up to 10 PJ of gas use could be reduced per year."

Shane Jones says that as part of improving transparency in the gas market, the Government will also pass legislation requiring industry participants to disclose to regulators and others, critical information on gas supply and demand.

"The most recent figures show a 23 per cent decline in New Zealand's gas reserves in the past year and production this year is now expected to be 15 per cent lower than expected at the beginning of the year.

"Fragmented and incomplete information on supply and demand is weakening market confidence and contributing to upward pressure on prices," Shane Jones says.

"Good information supports good policymaking. Improved transparency will support the Government and market participants to consider their options and make smart investments.

"There is no time to waste. A small change to the Gas Act, to require improved information disclosure, will be passed as part of Budget measures."

Notes to editors:

• To be eligible for the Gas Transition Loan Guarantee Scheme, a business must be a current user of reticulated New Zealand natural gas with annual gas consumption of at least 1000 GJ. (For comparison, an average household with gas for cooking and heating uses about 25 GJ a year, while New Zealand's 14 largest gas users use more than 300,000 GJ each per year.)
• A PJ is 1,000,000 GJs
• The maximum value of a supported loan under the scheme will be $50m of new lending
• The Crown indemnity would cover 80 per cent of each supported loan
• The scheme would be available for three years with loans expected to be repayable within 10 years, subject to terms agreed between banks and borrowers
• The scheme will be limited to new loans, not re-financing
• MBIE will consult on the new information requirements in the Gas Act once the Gas Transparency Bill has been passed. Regulations could be in place by the end of the year.