Contrasting asset sale dividend claims

Greg Presland did some “back of the envelope calculations” on dividends on assets part owned by the Crown in Imagine if National had not sold the shares in our companies 2015 version.

About 12 months ago I wrote this post on the loss of dividends that would otherwise have been paid to the Crown because of National’s privatisation activity.  I calculated the country had lost $360.7 million in dividends although there had been a saving in interest.  And the country had also missed out on $485 million in the increase of the value of the shares.

I did another back of the envelope calculation today based on the latest company announcements.  I am afraid that things are way worse.  It looks like we lost $471 million in dividends not to mention further capital gains in the value of the shares we sold.

My calculations may be wrong.  Back of the envelope calculations while watching Auckland v Canterbury even using Excel are not optimal.  And I have not tried to understand any changes in capital structure and what consequences they may have had.  But I think that the New Zealand nation has been royally rogered by the sale of the power company and Air New Zealand shares.

I repeated the calculations and the figures this year are worse.  Far worse …

The results are:

  • Meridian paid a total dividend of 18.23c a share compared to last year’s result of 13.01c per share.  If the shares had not been sold the dividends that would be paid to the Government would total $229 million this year not to mention $163.4 million last year.
  • Mighty River Power’s profit went down but it still paid a dividend of 19c a share.  Dividend loss to us, $128 million and last year $91.2 million.
  • Genesis Energy increased its dividend payout to 16c per share compared to last year’s payout of 13c per share.  Dividend loss to us last year was $61.9 million and this year is $78 million.
  • Air New Zealand had a bumper year and announced a total dividend of 16c per share.  The value of the shares National sold increased by $186 million and the dividend loss this year was $35 million.

My quick calculation is that since their sale the shares the Government sold have increased in value by $1.378 billion.  Over the past two years we have lost that in capital increase and $831.7 million in dividends.  We did receive $4.7 billion in sale proceeds although this is before the cost of selling the shares.

Overall in two years we have gained $4.7 billion less expenses but we have lost $1.4 billion in capital gains and $831.7 million in dividends.  That is $2.23 billion or nearly half of the sale amount.

Brian Gaynor looks at some different numbers at NZ Herald in Air NZ privatisation has paid off for taxpayers:

There is a widely held belief that the partial privatisation of state-owned assets is a complete ripoff, that taxpayers are being taken to the cleaners.

This opinion was expressed in a letter to the Weekend Herald following Air New Zealand’s recent profit announcement. The reader wrote: “Just a few years ago, the taxpayer bailed out the airline to the tune of $900 million. Wouldn’t it be lovely to run a company that when you make a profit, management takes credit and if you make a huge loss, the taxpayer bails you out. It is now time to repay its profits to the taxpayer.”

These comments are totally inaccurate, as an analysis of Air New Zealand – as well as Genesis Energy, Meridian Energy and Mighty River Power – illustrates that taxpayers have achieved fantastic returns from the Crown’s shareholdings in a number of NZX-listed companies.

That’s quite a different story. On Air New Zealand:

In September 1996, Air New Zealand acquired 50 per cent of Australia-based Ansett Holdings and in February 2000 it acquired the remaining 50 per cent.

Ansett went bust in September 2001 and Air New Zealand was in serious financial difficulty.

The company reported a loss of $1425 million for the June 2001 year, and in October 2001 the Crown agreed to put $885 million into the ailing carrier. This comprised a $300 million loan, in the form of convertible preference shares, and the purchase of new shares for $585 million. The convertible preference shares were switched into ordinary shares in 2005.

In 2004, Air New Zealand had a rights issue at $1.30 a share and the NZ Government purchased a further $150 million worth of new shares.

What has the Crown received in return for its $1035 million Air NZ investment?

• It has collected total dividends of $765 million.

• It received $365 million for the sale of 221.3 million shares in November 2013 which reduced its shareholding from 73.2 per cent to 53.1 per cent.

Thus, the Crown has received a cash return of $1130 million for its $1035 million investment. In addition, its remaining 582.9 million Air NZ shares were worth $1446 million at Thursday’s closing price of $2.48 a share.

It is inaccurate to claim that taxpayers have been shortchanged by Air New Zealand and its management team when the Crown’s total investment of $1035 million is worth $2576 million. This includes dividends received, the proceeds from shares sold and the value of its remaining shares.

The Air New Zealand investment has had an extremely positive outcome for taxpayers.

And on the more recet part asset sales:

The Air New Zealand investment has had an extremely positive outcome for taxpayers

Another issue is the partial privatisation of Genesis Energy, Meridian Energy and Mighty River Power and whether taxpayers have had a positive outcome from this strategy.

One of the major arguments against the sharemarket listing of these electricity generators was that the Crown would lose 49 per cent of its dividend income if it sold 49 per cent of these companies.

The figures in the accompanying table tell a different story.

The Crown will receive total dividends of $440 million from the three electricity generators for the year to June, when they are all 51 per cent owned by the Government, compared with $485.8 million two years ago when they were all 100 per cent tax-payer-owned.

Thus the Crown has received $4308 million from the partial sale of these companies yet its dividend income has fallen by only $45.8 million. This is a remarkably positive outcome for taxpayers.

The reason for this is that companies usually lift their performance after an IPO, mainly because they are subjected to far more scrutiny. It is somewhat similar to a football team performing much better in front of 50,000 fans compared with at a training run with only a few coaches.

For example, Genesis Energy has gone from one shareholder to more than 55,000 shareholders, Meridian Energy from one to nearly 49,000 and Mighty River Power from one shareholder to in excess of 100,000.

The combination of a large number of outside shareholders, directors and senior management owning shares, and greater scrutiny by these shareholders and the media means that partially privatised companies are likely to perform much better than 100 per cent Crown-controlled entities. As a consequence, they also tend to pay higher, more sustainable dividends.

Gaynor concludes:

It is patently clear that a sharemarket listing and 51 per cent Crown ownership has been a win-win situation for taxpayers and investors in Air New Zealand, as well as the three electricity generators.

That’s quite different to Presland’s back of an envelope claims.

MRP float – success or failure?

Once you look past all the politicking I think it has to be seen as a moderate success, with a share price just below the range predicted. There’s been a good take up of shares from private buyers , New Zealand and international investors.

Labour and the Greens are trying to talk up various points of failure, but they ignore the reality – 49% of Mighty River has been sold at a reasonable price.

It may have been valued down by up to $200 milion due to the Labour-Green NZ Power announcement, which may also have scared off small and first time investors, but that doesn’t make the share float a failure.

I think that over a hundred thousand purchases is a reasonable number. About the only thing that would have been gained by more people investing would have been National bragging rights. It has made little or no difference to the sale price.

The success of the Mixed Ownership Model is another thing altogether. It will take years to see the real effect on Mighty River, on power generation and on power prices.

Solid Energy is a market casualty before it has had a chance to be floated, that’s just as well.

The success of MOM in National’s cuurrent term in Government will be determined as much by the next couple of floats.There has been a lot of interest in the first SOE part sale, that interest may or may not be maintained.

If Meridian goes on sale next and does at least as well then National could claim some substantial success rather than one-off success.

If the Meridian float doesn’t do so well then it would raise questions about how god an idea the MOM programme was.

Note: I have supported National’s right to progress their flagship policy but have had mixed views on the nature of the MOM programme. I would prefer it was based on more business-like decisions but election cycle syndrome means less than ideal decisions are made.

Green reaction to MRP

After the Mighty River Power share price and buyer statistics were announced last night the Greens were active.

The official word from Russel Norman:

Mighty River con revealed

The Mighty River sale has been shown to be a con on New Zealanders with less than 3 percent of Kiwis buying in and most of the shares going to corporates, Green Party Co-leader Dr Russel Norman said today.

“The charade is over: ‘mum and dad’ New Zealanders haven’t bought the shares; the big finance institutions and foreign corporates have,” said Dr Norman.

“John Key’s talk of ‘mum and dad’ investors was a con – less than 3 percent of Kiwis have bought shares in Mighty River Power.

“The fact that Kiwi retail investors are having their allotments scaled back so National can sell shares to foreign corporates shows what a farce this has been.

“The multi-million dollar ad campaign has failed to con Kiwis into buying Mighty River, they want lower power prices instead.

“The supposed 440,000 pre-registered investors turned out to be a figment of John Key’s imagination. The number of retail investors is only half the number who bought into Contact and less than half of what Treasury forecast.

“Over two and a half times as many Kiwis have signed the petition calling for a referendum on asset sales as bought Mighty River shares – that tells you what Kiwis think of John Key’s asset sales.

“John Key has wasted as much as $100m on the sale of Mighty River. That’s nearly $1,000 per retail investor. It’s been a disaster. He should cancel the rest of the asset sales and focus on creating jobs for Kiwis, not payouts for financiers,” said Dr Norman.

Comparing the number of share buyers with the number of petition signers is ridiculous. Signing a piece of paper costs nothing and often spur of the moment, purchasing shares is a significant financial decision.

Greens were active on Twitter:

@metiria
@patrickgowernz and so 300,000 ‘fake’ registrations Will you report the MRP disaster like that too? Hmm?

@patrickgowernz
@metiria nope

@metiria
@patrickgowernz really? What a surprise.

It’s not a surprise, there is no indication there were anywhere near that many ‘fake’ registrations – many people who registered simply decided not to buy (like me) –  although there were obviously some:

@metiria
I was registered fraudulently at least twice, another MP 5 times. I complained to treasury & they wouldn’t fix the system

And ditto on fake claims of the scale of fake registrations from Russel Norman:

@RusselNorman
So only 113000 retail investors in MRP. So by Key’s logic there were 330,000 fake MRP registrations. Key the conartist

@RusselNorman
So by your logic, Key had 75% fake registrations @patrickgowernz? Will you run that line?

@patrickgowernz
nope

@RusselNorman
no surprise there Paddy.

And…

@RusselNorman
Nats have spent $1000 of taxpayer money per retail investor in MRP. 100000 investors for $100m. Nats waste public money yet again.

More pertinent is querying whether the cost of promoting the share float would have been returned in increased sales interest and value of the sales. That can’t easily be measured – but it would be relevant to compare the cost of promoting this with the cost of promoting other share floats.

The party line:

@NZGreens

Key’s ‘mum & dad investors’ line revealed as a con. Less than 3% of Kiwis bought Mighty River shares http://www.greens.org.nz/press-releases/mighty-river-con-revealed … stop the sales

@PeteDGeorge@ClintVSmith If that’s why people rejected MRP, it’s only a recognition that NZ Power will bring down prices to fair level

Fair time to announce a policy affecting power prices & excessive profits was before the sale. Not like Key’s secret GST rise

Mighty River sale cost up to $100m: brokers ~$50m, bonus shares ~$40m + ads, fees, etc. What a waste. Stop the asset sales.

No. Key has wasted $100 on a sale that makes no sense & Kiwis oppose. He should be working on jobs, poverty, & sustainability

Plus every single poll has shown a large majority oppose sales.

And the troops – Gareth Hughes:

@GarethMP

First asset sale is a total con. Despite spending millions on ads: less than 3% of Kiwis buying in & most of the shares going to corporates!

@Matt_Green sure, but excessive profits in the past should never be guaranteed into the future.

@Matt_Green yeah, I think many did that too. The Govt did sweeten the deal with taxpayer money.

Have a listen to my short speech on #NZPower today.
http://www.youtube.com/watch?feature=player_embedded&v=zjWCjqi7nOk … Greens coming up with solutions while Govt focused on spying laws

@Matt_Green yeah, fair point. I dont think we ever had. We designed #NZPower if assets kept in Kiwis hands or flogged off.

MRP Share price $2.50. Asset sale costs $120m. Free share bribe $400m. Keeping assets Kiwi & delivering cheaper, cleaner power. Priceless.

 

Andrew Campbell:

@Andr3wCampbell

@patrickgowernz disaster for govt. way fewer than valid signatures on asset sales petition. Where are all the mums and dads buying?

@johnkeypm should apologise for the rort. How many fake registrations for MRP shares?

@CactusKate2 it was less than Govt said it would get and less than Treasury predicted. Worse than Contact original offer #epicfail

And Hey Clint doesn’t seem happy about it…

@stevenljoyce onyl 113,000? that’s a disaster. So much for ‘mum and dad’ investors

Only 113,000 ‘mum and dad’ investors in Mighty River. What a disaster. that’s half what Contact got. only a quarter of pre-registrations

@felixmarwick @katieabradford It’s the largest now because 2/3rds of Contact shareholders have sold. 113,000 is half Contact’s float number

@k8chap except that less than 3% of Kiwis have bought shares

@patrickgowernz guess the other 330,000 pre-registrations were fakes and false #Keycons Less than 3% of Kiwis have bought shares. Disaster

@VernonSmall Did the other 330,000 even exist? There were dozens fake Russel Normans. Less than 3% of NZers buy MRP, so much for ‘mum & dad’

@patrickgowernz what % of ownership is ‘mum and dad’? Sounds like most is institutional

@VernonSmall so they’re scaling Kiwis while selling shares to overseas corporates?

So much for ‘mum and dad’ investors. Nats are scaling back their investment to sell shares to overseas corporates

@hardsell @patrickgowernz because that would be a taxpayer subsidy, NZ Power gets rid of electric companies’ superprofits creates fair price

massive fail, 97% of Kiwis don’t buy MRP shares. Mr FixIt, Mr ForgetsIt, and Double Dipton f*ck up again @stevenljoyce

@CactusKate2 less than half what Treasury expected, half what Contact got 14yrs ago. So much for ‘mums and dads’ Most shares to institutions

@CactusKate2 what % of Kiwisaver savings are in MRP? What % of MRP do Kiwisaver funds own?

@patrickgowernz @metiria @GuyonEspiner so people who sign petition then move = fake. but 2 dozen Russel Normans pre-registered = real?

@thekiwicanary ‘mum and dad investors’ is Key’s term to make the asset sales more palatable. Hence my inverted commas. Take it up with him.

@sthnjeff would you have preferred the Greens kept their plan to lower power prices secret until in govt? Like Key did with GST?

@CactusKate2 That’s why I thought I’d ask you. #330000short

@patrickgowernz @RusselNorman mate, $100m spent on MRP sale, 113,000 retail investors that’s failure. Asset sales referendum is gonna happen

Hey, where was Key at the Mighty River sale announcement? This is his one economic policy. Such a disaster he wouldn’t front up. $100m waste

@thekiwicanary john key’s twitter account is @johnkeypm if you want to abuse him for calling you a ‘mum and dad’ investor #patronising

@kht27 @patrickgowernz that’s key lies. nz power means only fossil fuel plants affected by ets. Under nats ets, hydro owners get a windfall

@Garner_Live @liamdann @patrickgowernz treasury thought 250,000 would buy. We never imagined it would be this low. Thought at least 200,000

@duckky007 @kht27 @patrickgowernz why? NZ Power eliminates economic rents to hydrodam owners, they’re making those regardless of yr discount

@thekiwicanary @stevenljoyce shld they have kept their lower power price plan secret past election asJoyce & Key did w their sneak GST rise?

xxx

How much will the MRP float sink?

The Mighty River Power share offer closes tomorrow. There is conjecture about what the share price will begin at. The price will be set on May 8 (next Wednesday) and are expected to list on the 10th (Friday).

The top end of the $2.35 to $2.80 price range was initially expected, but after The Labour and Green power policy announcement it is now expected to be set at the lower end of that range. Estimates of a loss to the Government (us) have ranged from $100m-$400m.

National’s asset (partial) sales policy has been strongly contested since before the 2011 election. Labour and Greens have been contesting it strongly, as has the Maori Council through the Waitangi Tribunal and the courts.

Labour and Greens have been accused of deliberately sabotaging the share float. Their responses have ranged from lukewarm denial to satisfaction that the share float was being disrupted.

Due to the Labour Green announcement being made after the share float started those who applied for shares have been allowed to withdraw. The ODT report there is still ‘Reasonable demand’ for Mighty River Power shareorders:

Milford Asset Management senior analyst William Curtayne said yesterday the Labour-Greens announcement around the nationalisation of the electricity industry had caused some retail investors to cancel their share orders.

I registered an expression of interest but have decided not to apply. I’ve still been tempted since the disruption, the chance of capital gain have increased but so have the risks and I don’t have funds I’m prepared to expose to the level of risk at the moment. I don’t know if the Labour Green action has made the difference in whether I buy or not.

But there was still ”reasonable demand” from New Zealanders and institutions interested in the yields Mighty River Power would pay.

I have heard a number of people in social media saying they have increased the number of shares they have applied for, it seems to be a mixture of seeing an opportunity for getting more shares for their bucks, and there are also hints of political motives – to support the share float and to spite Labour and Greens.

The degree of success of this float may influence the Government on their other proposed floats.

”National won’t want Labour and the Greens to win so they will want to press ahead with the partial sale of Meridian. But if Mighty River is so bad, it might be back to the drawing board. I think the Government will plan to get another one across the line,” Mr Curtayne said.

Unfortunately this will not just be a business decision, there is too much politics loaded into the whole Mixed Ownership Model mess. National will want to float Meridian this year to get it done before election year, whether it’s the best timing from a business perspective or not.

Stuff summarise this in Opposition’s power plan: A rundown:

How will this affect the Mighty River Power float?

There are claims it will reduce the Crown’s return from the sale of 49 per cent of Mighty River Power, possibly by $400m, although the organisers have played down the level of withdrawal from investors who have already paid.

Other investors are apparently increasingly interested, as they see the chance to acquire power shares at a lower price, albeit with the greater risk that the returns on offer will be much lower.

They also raise an interesting point:

Politically, Labour has fired a warning shot, but it may have risked giving rival National a chance to share the blame if the state asset sales do not raise the at least $5 billion the Government has promised.

The outcome of all of this in next year’s election is hard to predict, but it’s easy to predict that claims and counter claims will be prominent in the lead up.

It’s certain that the MRP share price and return to Government will be less due to the nature and timing of the Labour Green power announcement.

It’s much less certain whether it will sink National – this will depend on how much the MOM sales sink from initial predictions, and how far Labour’s financial credibility has sunk.

Gower and Hughes confirm the obvious – intent to sabotage

In a blog post Broadcasting ‘Hey Clint!’ was right move Patrick Gower further confirms what most of the media have obviously known since last Thursday – that Labour and Greens timed their NZ Power announcement to inflict damage on the Mighty River Power share float.

Gower says exposing this was the key factor behind exposing the “Hey Clint” faux pas by Gareth Hughes. Good on him for doing that.

Now I know a lot of people watch “Hey Clint!” and find it funny.

But to me it showed much more than a bit of humour. It showed what we know – the Greens, like Labour, are trying to act like they are not gleeful that the policy is screwing with the MRP float.

In fact, it looked like Gareth Hughes was stoked. It was in the public interest to run it. No question.

It busted spin, in fact, it blew the spin apart.

It showed that the Greens, like Labour, are trying to come up with ‘lines’ to pretend that it’s not about wrecking the float.

And that’s fair enough; the Greens want to emphasise what they see as the good parts of the policy.

But, thanks to Gareth’s indiscretion, we could show what they really feel.

“Gareth’s indiscretion” revealed a practiced party puppet who broke a string and stumbled. It wasn’t a good look.

But more importantly, despite what they are claiming, it shows that Labour and Greens wanted to spike the share float, and were pleased that they had some success.

And they appear to not care about the affect on the share market, nor the return of the MRP float which has been estimated to cost the country $200-400 milion dollars.
It’s shameful that MPs and parties act this way, and it needs to be exposed for what it is more often.

Labour and Greens intended to disrupt the MRP float, and now they keep lying about their intent. Disgraceful.

The rest of Gower’s blog is worth reading to see how political reporting works, and how hard it can be to break through the practiced bullshit.

Immediate and potential costs of NZ Power

The NZ Power announcement last week could be very costly to New Zealand.

Whether a Labour-Green government get the opportunity to implement the policies or not there is an obvious immediate cost – the timing of the announcement is almost certain to adversely affect the price Government gets for the Mighty River Power shares see Spooked investors off the hook:

Business Herald columnist Brian Gaynor estimates that the Government could pocket $400 million less for its 49 per cent sale of Mighty River Power because of the effect of the policy.

Gaynor’s estimate is probably on the high side, $200 million has been a more widely mentioned estimate. That is still substantial, and would be a direct cost to the taxpayers (that’s us).

Labour and Greens continue to deny any deliberate attempt to sabotage the MRP float:

Greens energy spokesman Gareth Hughes said the purpose of the planned purchasing agency, NZ Power, was not to frustrate the asset sales “but to drive down power prices and eliminate the excessive profits of the electricity companies”.

But Hughes was caught out on 3 News last night,  unsure if revealing glee at disrupting the share float was appropriate. When asked about his reaction to the temporary suspension of the share float he was shown asking his media minder:

Hughes: “Hey Clint. Are we pleased?”

Clint: “That is not why we did the policy”.

Hughes: “I know, but…”

The doing of the policy is not the issue, it’s the timing of their announcement that is highly questionable.

And Labour continue to play their political games:

Labour state-owned enterprises spokesman Clayton Cosgrove said that “after five days of going troppo, National has finally calmed down and allowed those who have applied to buy shares in Mighty River Power the opportunity to reconsider”.

But in Govt gives MRP investors chance for refund

“Investors need time to consider the changes we are proposing. National would be well advised to stop repeating its wild and silly accusations of socialism and communism and let cool heads prevail. The ridiculous allegation of economic sabotage has been demolished,” Cosgrove said.

The allegation of economic sabotage is far from demolished.

If Labour were serious about giving investors time to consider the changes they would have announced their policy well in advance of the beginning of the share float, not after it had started and people had already applied for shares – and paid for them.

Claims by Hughes, Cosgrove and others that there was no intent to sabotage the share float are either dishonestly devious or incompetently ignorant of the likely outcome of their actions.

And this is just the immediate affect of the timing of the announcement.

Should Labour and Greens form the next Government and implement a yet to be determined version of their policies (there are significant differences in what the two parties propose) there could be much greater costs to the country.

Mark Warminger, a Portfolio Manager at Milford Funds has blogged Rolling blackouts could be our future where he points out the flaws in the proposals and potential costs:

This analysis is naïve and does not take into account the full direct and indirect costs.

A 1% increase in debt servicing costs for New Zealand’s overseas borrowing, in time would add up to NZ $2.5bn a year to the debt bill.

The state owned power companies would need to write down asset bases by around 30% on an asset base of $15bn. This equates to $4.5bn of capital destroyed.

The flow on effects to New Zealand’s listed power companies is just as detrimental.

This will adversely affect many KiwiSaver schemes that have direct exposure to these companies.

It seems inevitable should the Labour/ Greens proposal be enacted that the listed power companies would take legal action, based around property rights. This is likely to be lengthy and costly with the Government footing much of the bill.

And the potential bottom line:

In conclusion, to save $700m per annum from our total electricity bill the direct and indirect costs of such a scheme would be in the order of the following;

  • $2.5bn in additional debt servicing costs, $450m reduction in dividends, $4.5bn asset write-downs from State owned enterprises,
  • $1bn of capital destruction of the listed power companies and a reduction of $100m of dividends per annum to New Zealand shareholders. 

In addition, there will be highly skilled jobs lost as power companies reduce capital expenditure and development.

That is speculation from someone with an obvious interest in the share market, but it is representative of significant concern about potential substantial costs to the country. Another financial analyst suggests Power policy a ‘hand grenade’ for listed firms:

The Labour and Green parties’ power policy could wipe as much as $1.4 billion off the values of Contact Energy and Trustpower, says a Forsyth Barr analyst.

In a research note published today, analyst Andrew Harvey-Green described the Opposition’s policy as a “hand grenade” with far-reaching implications for the industry.

See also: Experts criticise Labour’s power plan

There are huge implications for the New Zealand economy.

At best Labour and Greens have been too focussed on trying to win political points and have not considered the wider ramifications of their proposals.

At worst they are cynically risking possibly billions of dollars to try and advance their political ambitions.

And regardless of whether they succeed politically or not they have already cost us perhaps $200 million.

Labour and Greens on “coincidental” power policies and timings

Where there three remarkable coincidences of Labour and Greens:

  • working on very similar power pricing policy independently of each other,
  • they were both planning to announce their policy at about the same time, and
  • the timing had nothing to do with the Mighty River Power share float?

Or are Labour’s David Parker and Green’s Gareth Hughes not being truthful?

They were both interviewed on The Nation yesterday and were both asked about the coincidence of Labour and Greens working on similar power pricing policy.

Rachel Smalley interviewing David Parker…

Rachel: How long have you been working on this policy?

David: Me personally off and on over the years I’ve been working on this since 2006, 2007 to be honest.

Rachel: This specific policy?

David: Well the options that we have to improve our electricity system yes.  This specific system pushing it forward to this the last month.

Rachel: Pretty much a month.  Was it a Greens’ policy that Labour jumped on?

David:  No, it’s an absolute coincidence that we put out a press release last week saying we were announcing this week.  They then phoned us and said they had a plan for this week.  We got together and we found our plans were very similar.

Rachel: You weren’t comfortable appearing with the Greens though alongside us here on the programme?

David: We didn’t want it to be thought that this is Greens’ policy.  This is actually independent Labour policy.  The Greens I think have a similar view in respect of theirs, they’ve arrived at a similar conclusion independently of us.

Rachel Smalley interviewing Gareth Hughes:

Rachel: So let’s talk about this new power policy and what you’re going to be doing with the electricity market, whose policy was this.  Who thought of it first this joint plan if you like?

Gareth: Well we’ve been working on it independently.  We started talking to Labour after their press release on Sunday, realised we had very similar proposals, so we decided to work together on launching them together.  I think it shows the solutions we’re both proposing are commonsense, they’re smart, they’re going to be effective, we both independently reached them.

Well I’ve been thinking about how do we make a fairer more affordable electricity system for some while.  We have been working on this mostly this year.  

The conclusions we’ve both reached independently are broadly similar. 

Putting these two responses together we have:

  • Hughes has been “been working on this mostly this year”.
  • Parker claims “this specific system pushing it forward to this the last month”.
  • Labour “put out a press release last week saying we were announcing this week”.
  • Hughes: “We started talking to Labour after their press release on Sunday”.
  • Parker “Greens phoned us and said they had a plan for this week”.
  • Parker “We got together and we found our plans were very similar”.
  • Hughes “realised we had very similar proposals, so we decided to work together on launching them together”.
  • Parker “it’s an absolute coincidence “.

And there’s a third coincidence.

Rachel: Okay, your timing is at best coincidental.  At worst it’s pretty cynical it has to be said.  You’re toying with Mighty River Power here, it’s an asset that’s valued at around one and a half billion dollars.

Gareth: It is coincidental.

Smalley asked Parker:

Rachel: Is this a genuine economic policy Mr Parker or is this a stunt to derail asset sales?

Parker avoiding answering that, and Hughes claimed MRP float timing “is coincidental”, but that’s at odds with both of their leaders.

Norman was interviewed on Firstline on Friday:

The timing of the policy announcement has been questioned, coming four days into the three-week sale of Mighty River Power shares. Dr Norman says they chose to release the details now, rather than later, so Kiwis considering buying in know what the future might bring.

“We think it’s important that people know, so if you’re thinking about buying Mighty River Power shares it’s only fair enough you know.”

David Shearer said…

…it was not an attempt to derail the Government’s Mighty River share offer which began this week or the wider asset sales plan.

But…

He said it was likely to have an impact on share prices so he had written to the board of Mighty River Power, 49 per cent of which is about to be floated on the stock exchange by the Government, and to shareholding ministers asking them to issue a supplementary disclosure.

“This will allow Kiwis who have applied for shares since Monday to reconsider”

That’s contradictory.

Should we believe the similarity in policies, both parties independently planning an announcement at the same time, and the timing of the announcements in relation to the Mighty River Power share float, were all “an absolute coincidence”?

Source The Nation:

Labour confused on power policy

Labour Leader David Shearer and Finance Spokesman David Parker still appear to differ on whether power generator SOEs will pay a dividend under the party’s new electricity policy.Mr Shearer issued a media statement yesterday saying the party would forgo dividends.But today,…

Greens deny political games

Green Party energy spokesperson Gareth Hughes echoed David Parker’s statement by denying the two parties co-ordinated their announcement as a political…

The Nation clarifies NZ Power play – it was dirty

There were some excellent interviews on The Nation this morning, making it clearer that Labour and Greens have colluded in rushing a hit job on the Mighty River Power share float.

Rachel Smalley interviewed David Parker, Gareth Hughes, Winston Peters and Max Bradford with a focus on the Labour-Green power policy announcement.

Parker squirmed his way out of some obviously uncomfortable questions.

Hughes smugly avoided most of his questions by diverting with ideological policy recitals.

Winston was Winston – notably he effectively categorically ruled out a coalition with National saying the buying back of Mighty River Power shares were a bottom line, which National couldn’t agree to.

What stood out as not credible:

  • The claim that Labour and Greens were independently working on much the same policies and suddenly found this out after Shearer’s press release last Sunday night is obvious nonsense. Parker was particularly uncomfortable trying to explain how long he had been working on the policy, he eventually admitted it had been for about a month, which confirms the obvious, it was a rush job.
  • That there was no intention to sabotage the Mighty River Power float. Both Parker and Hughes made no credible denial.

A fairly clear picture emerged despite the attempts at avoiding giving honest answers.

  1. The policy is obviously Green initiated.
  2. Labour picked up the core of this policy, that Government sitting between power generators and retailers as a single buyer and price controller (despite David Carter investigating this and speaking against it when part of the helen Clark government.
  3. David Shearer put out a hurried press release on Sunday night signalling an announcement to follow, the timing almost certainly so he could claim to have warned that Labour intended doing something that might affect the MRP float before it opened the following day.
  4. On Monday Shearer was very vague about when details would be announced, they were probably still waiting on the BERL report they had requested to back up their policy.
  5. On Tuesday it was announced that the announcement would be made on Thursday, indicating that they were making up the schedule as they rushed through their internal processes.
    UPDATE: The BERL report is dated Tuesday 16th.
  6. The joint Labour-Green (Shearer-Parker-Norman) announcement was made on Thursday.
  7. The parties actually announced separate policies with one major point in common, the single purchaser model.
  8. Despite Shearer promoting it as “the big Kahuna” there are obvious differences and Greens have at least been honest describing theirs as a discussion document rather than a fixed policy. There is still much to be worked out.
  9. Shearer said he had written to Might River Power asking them to update their float warnings with the hurried and belated Labour-Green spiking.

This makes it all look like a rush job orchestrated to impact on the Mighty River Power float, with the aim of sabotaging it as much as possible.

Labour and Greens seem intent on trying (and happy to try) and substantially reduce the amount the Government gets for the float as they feel that a failed Mixed Model will help them politically. They appear not to care about the direct costs, nor the potential collateral damage, which could be substantial.

This is politics at it’s self interested worst.

I’m slightly surprised that Labour would stoop to this level. Power at any cost seems to have overwhelmed their care for the interests of the country.

I’m very surprised that Greens climbed on board Labour’s hit job, they usually pride themselves on being a very principled party, this shows them up as no better than the worst.

If you missed The Nation it will be replayed at 8 am tomorrow and will be available online at 10 am at Frontpage.

The cost of NZ Power

If NZ Power is implemented it will cost the Government – and that means it will cost all of us. That will depend on next year’s election result.

But the Labour-Green policy announcement will have more immediate costs.

It is likely to significantly reduce how much the Government (us) gets in the Mighty River Power share float.

It is already costing investors in power companies which have lost about $500 million in value. That is not just overseas investors, it is both large and small New Zealand investors, including many of us with KiwiSaver retirement investments.

This is due to both the nature of the NZ Power policy and the deliberate timing of it. Fran O’Sullivan points out the obvious:

No one with any residue of grey matter left will believe Shearer’s protestations that the timing of this joint announcement has nothing to do with the pending Mighty River Power IPO.

This policy has all the signs of being rushed out with one aim in mind: To spook the private investors (including the many smaller shareholders who are being enticed back into a New Zealand sharemarket, which was on the verge of its own demise a few years back) who are lining up to buy shares in the forthcoming float.

The effect on the sharemarket was immediate – Power shares keep falling:

Investors take seriously Labour and Greens’ plan to shake up the electricity market

JB Were investment strategist Bernard Doyle said a move to a state buyer of power risks being a retrograde step for the New Zealand economy.

“Secondly, we believe it will prove damaging for New Zealand capital markets, and comes at an unfortunate time given the significant progress made here since 2010.”

And Plan puts frighteners on investors:

Investors spooked by the Labour-Green plan to cut power prices have wiped more than $500 million off the value of three listed energy companies since the policy was released.

Economic Development Minister Steven Joyce said that by 5pm yesterday $326m had been wiped off the value of Contact Energy, $200m from Trustpower and almost $34m from Infratil.

Is this unintended consequences? A bit of collateral damage to business?

Not if you listen to what Labour people are saying, 3 News reported in Opposition ‘trying to disrupt share sales’:

The new policy, which will be implemented if there is a change of government at the 2014 election, is expected to drive down the issue price of Mighty River Power shares.

Labour and the Greens accept the consequences of their policy and say investors will have to take the risk into account.

“People choose to buy shares, they don’t choose to buy electricity,” said Labour leader David Shearer.

@ImperatorFish (Scott Yorke):

The people benefiting from excessive profit-taking are now realising that the good times may be over? Not seeing a problem.

Anthony Robins at The Standard in Reaction to NZ power:

Opinions opposed consists of a fair bit of squealing business folk. Well they would, wouldn’t they. Because this policy isn’t for them. It’s for the roughly one quarter of Kiwi families that are living with fuel poverty due in part to the ever rising prices of the failed market model.

Labour’s finance spokesman, David Parker, on National’s reaction:

“Their scaremongering shows they’re worried that hard-working New Zealanders, who are sick of paying through the nose for electricity, will embrace our new policy.”

The policy is to transfer wealth, to take business profits and give them to “the people”.

Mr Shearer…

…was referring to the impact of lower profits the companies would make under its policy, and therefore lower taxes and dividends.

A full on attack on business and the stock market is a very risky move by Labour. In what seems to be a cynical use of NZ Power to get themselves back into power could have a cost – and that could be a major cost to the country.

The loss of value to the Government in the Mighty River Power share float, possibly hundreds of millions of dollars, will be an immediate impact.

But by introducing major uncertainty into the whole share market at a time that it was finally showing signs of recovery after a long struggle during the Global Financial Crisis could have a serious impact on business confidence and investment.

The cost of NZ Power will be significant in dollar terms for the country, and that means us.

The cost of Labour’s attempt to regain power could be much greater.

And Labourites seem happy to stick it to business and investors to achieve a position of power. They seem to think that any means is justified in achieving their goal.

Will the cost to the country be worth it?

Smart, green economics?

The asset petition is nearing completion. What does that have to do with smart green economics?

Greens (or Green employees) seem to be doing the final counting and collating.

Andr3wCampbell Andrew Campbell
Final counting of citizens initiated referendum petitions to stop asset sales. Formal handover to clerk next Tuesday

Petition - smart Green

That looks like a Green office by the look of the wall poster. Have Labour, Grey Power and the unions left it all to the Greens to finish off?

All that paper, all those treets, all that polluting manufacturing.
All the travel involved in collecting signatures.
All the time spent on collecting, collating, counting.

But that’s relatively minor. Sure, some parliamentary funds have been used employing petition workers, much MP time has been spent and much MP travel expenses have been clocked up.

But once the petition is handed over it starts another phase of expenses. State employees will have to count and check the petition to make sure there are enough valid signatures.

If the petition is successful, the costs will escalate as a referendum will have to be held. That will cost millions of dollars.

For what?

The Mighty River Power share float will have already been and gone. One or two other share floats will also have either taken place or will be well advanced. And it has been clear all along that the referendum will have no affect on the progress of the partial asset sales.

At best, if the referendum has a good turnout and if the referendum is strongly against the share floats all Greens and Labour will be able to do is say “We told you so”.

At what cost?

Smart, green economics?

Or futile, expensive political point scoring?