Trashing family silver

The opposition harps on about selling the family silver when criticising the partial sale of a few state assets.

They’re wrong these energy companies are not national treasures.

They are however, investments for the state and individuals and Matthew Hooton points out that Labour and the Green Party are damaging them:

. . . No doubt as intended by Green/Labour, there has been vast destruction of value in these four companies and it is likely only to get worse if the polls continue to trend towards Green/Labour. Ironically for parties who tell us they want to save the family silver, the main loser from the destruction of wealth has been the state. All the wealth destruction so far in Meridian and Genesis has been suffered by the Crown and at least half of it in the case of MRP. Even with Contact, both ACC and the Cullen Fund are among the top 20. . . .

Labour and Greens regard SOEs as family silver but they’re not only trashing them they’re devaluing public and private savings.

It would also damage other companies:

If Labour and the Greens imposed their proposed power policy Contact Energy would be forced into a complete restructure, chief executive Dennis Barnes says.

Earlier this year, the parties announced plans to set up a single buyer, NZ Power, to buy all electricity generation at a fair price, promising to cut the average New Zealander’s power bill by up to $330 a year.

Speaking to The Press after the company’s annual meeting in Christchurch today, Barnes said the policy would require a structural change for Contact’s business and the electricity industry.

It would “change the face of Contact from a risk manager and a retailer to a business which has got the Government as its customer”, he said.

“It’s likely that a lot of the people we have working in the risk aspects of our business wouldn’t be needed anymore. I believe that innovation would stop and the Government would have to fund that.

“The biggest change is that the Government then becomes responsible for security of supply development of the industry rather than the market; that’s a whole different dynamic.”

Barnes indicated that power price increases in the last couple of years did not come from generators and retailers such as Contact Energy.

“A lot of the prices increases that you experience as a whole are transmission and distribution and charges that the generators and the retailers are not responsible for.” . . .

 

The threat of the policy is already doing damage, it would do even more damage should they try to implement it.

7 Responses to Trashing family silver

  1. Gravedodger says:

    How often do the unintended consequences of the idealogical driven idiotic socialist actions, benefit those they seek to malign and denigrate.
    Thankyou David Shearer and Noddy Norman I have added shares in NZ power generators to my Portfolio at considerably reduced costs.

    Opportunities to invest in solid NZ companies are not great so in line with my philosophical aversion to the state trying to run commercial operations better run by the private sector, the generators provide a very attractive opportunity, and the almost treacherous pontifications from the dopey has made the investments so much more attractive.

    Of course the best bit is the thwarting of sticky fingered Politicians groping in the tills for cash to advance their nefarious causes as they will be delivering a similar windfalls to me and the other investors in the generators.

  2. robertguyton says:

    The Meridian sale is a woeful failure.
    How much was promised?
    How much, delivered?
    Hugely different figures.
    5 times the height of the Sky Tower – woeful!

  3. robertguyton says:

    Oh dear!
    Others have it pinned:
    “What a disaster. Meridian has attracted only a quarter of a the so-called ‘mum and dad’ investors expected (and these ‘ordinary Kiwis’ put in $18,000 each on average). The sale raised a $1.2 billion less than National thought it would. And the cost, which was meant to be $100-$120m for the entire sales process, is now over quarter of a billion after just two sales. You’ve got to tell National to stop.

    National’s trying to blame it on Labour and the Greens because they did the right thing and informed the public of their plans for cheaper power before the asset sales started. But let’s just get this straight: the decision to sell was National’s. If they don’t think they’re getting the price that they should for the sales, then they should stop them.

    NZ Power has been public for six months (and the public love it), blaming it and other market conditions for the terrible result of the Meridian sale is illogical. If things are that bad, don’t sell the bloody thing and save the taxpayer a pile of cash.

    Speaking of cost, the Greens’ Costwatch puts the total cost of the sales process before Meridian at $173m. The ‘buy now, pay later’ scheme will add another $50m in what is basically an interest-free loan to the rich and institutions. On top of that, the middlemen will gobble up another $40m. That takes the total cost so far to over quarter of a billion dollars. The sales were meant to cost 2% of revenue – it’s 7%. And it will just get worse and worse as dividends get paid out that should have gone into the public coffers. Already, we’ve lost $49m on Mighty River’s first dividend.”

  4. Viv K says:

    The electricity generation infrastructure is physically unharmed by the Labour Green power policy announcement, the ‘family silver’ has not been trashed, but 49% of 2 electricity companies has been sold. The responsibility for the low returns to the government lays squarely at the feet of those who chose to continue with the sale of Meridian, for idealogical reasons and/or sheer bloody mindedness, when it was very likely that it was not going to return anything like the money they had hoped for.

  5. Armchair Critic says:

    National could not even meet the standard they set – the sales must make economic sense. An enormous failure. With the approach the National Party, reputedly the party of business, have to all things financial, it’s no wonder NZers prefer to put their money into housing over investing in local businesses.

  6. Dave Kennedy says:

    The power companies should never have been formed in the first place. Electricity supply is important infrastructure that supports businesses and contributes to quality of life. With just over 4 million people and an abundance of cheap to produce and sustainable energy, New Zealand was well placed to be very competitive economically.

    Instead our power supply has been captured by companies that are driven by profit and the Government has a source of revenue (indirect taxation) and by cashing them up, scoring a quick financial fix.

    Something is wrong when a business informs me that it is cheaper to be powered by coal than electricity in New Zealand and our largest dairy factory (Edendale) is powered by lignite.

    Unlike Australia or the UK, there is no incentive for people in NZ to convert their homes to solar then feed excess into the national grid. We actually have enough supply and companies maintain profits.

    Muldoon actually invested a lot of taxpayer money to ensure that we were self sufficient in energy and had control over our supply. We have lost control and we are paying dearly for it in more ways than one.

    To top it all The Government sold off the Meridian shares at a time when Treasury advised them that the market was saturated and getting a fraction of the interest an price was nothing to do with the Greens and everything about the desperation of the this Government to balance the books at any cost. Appalling and irresponsible!

  7. robertguyton says:

    But Steven Joyce was braying in the House that the sale of Meridian is a SUCCESS!
    Surely he is right, Ele???
    These detractors here on your blog must be economic saboteurs, terrorists even!
    For the love of God could someone please belittle them and call them names! If you can’t think of anything, watch Joyce for two minutes – you’ll come away with plenty.

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