More dividends from partially privatised power companies

Big claims and counter claims were made about the financial benefits and threats over the National led part privatisation of power companies.

It looks like despite dropping to 50% ownership, dividends to the Crown have increased.

Stuff: Crown may be getting more in dividends now than before electricity company sales

The Government may be getting more in dividends from its 51 per cent holding in three major power companies than when it owned the companies outright, a new report claims.

On Wednesday TDB, a Wellington corporate advisory firm, published a report on the mixed ownership model, a process under which the former National-led government sold 49 per cent stakes in Mighty River Power (now known as Mercury), Meridian and Genesis to private investors.

The sales process was fraught; Opposition parties collected enough signatures to force citizens initiated referendum and a Labour/Green electricity policy was blamed for wiping hundreds of millions off the amount raised.

Critics warned of a loss of control as well as dividends going to private hands, but ultimately the sales went ahead, raising around $4.7 billion from share sales, below the original $5b-$7b target.

The TDB report, headed by former Treasury director Phil Barry, claims that, at least by one measure, the Crown is now receiving more in dividends from the electricity companies now than when it owned the companies outright.

“The exact change in Crown dividend returns from pre to post-listing depends on how special dividends are treated and whether dividends paid or dividends declared are used,” the report states.

Under any measure, the dividends did not fall in line with the lower Crown holding, the report said.

“On one measure – [that is], when special dividends are excluded – the Crown received more in dividends post listing on its 51 per cent holding than it did when it owned 100 per cent of the companies,” the report claims.

Throughout the sales process, National claimed the partial privatisation would improve the performance of the listed companies, and the report shows the returns to shareholders since the sales have been extremely strong.

I’m sure this won’t stop arguments over the benefits and pitfalls of partial privatisation, but at least for now the sky capitalist sky hasn’t fallen in.

5 Comments

  1. Ray

     /  August 23, 2018

    There was a strong push lead by the “financial wizards” at the Standard against this, with calls for compulsary re purchase with out compensation. Shades of Zimbabwe at that time and South Africa now.
    All they really did was lower the price for people like me
    Turns out we were all winners except for the afore mentioned clowns.
    Thanks!

    • Kitty Catkin

       /  August 23, 2018

      I am with Contact and save almost 25% on my online/on time bill; increased competition, of course, not generosity on their part. I don’t know how much this has to do with the selling of the powercos, but I am well pleased.

  2. Alan Wilkinson

     /  August 23, 2018

    All this has been well canvassed before by Farrar and elsewhere. The arguments against privitisation were straight ignorance by the determinedly ignorant Left.

    • Kitty Catkin

       /  August 23, 2018

      They must be spitting tacks at this news about the dividends.

  3. Blazer

     /  August 23, 2018

    the dividendes tell one story.
    These companies all have high levels of debt.
    The comparisons ignore price inflation.
    All the companies are trading on very high P.E ratios.MEL for instance is 41.89…ludicrous.