Hard News by Russell Brown

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Hard News: Unwarranted risk

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  • BenWilson, in reply to Sofie Bribiesca,

    I’d suggest that Labour should be working with the other opposition parties to put together a plan to acquire these firms back for the NZ people

    That is only going to make them even more profitable to buy into when they are sold off, because it means there is a buyer out there with incredibly deep pockets.

    Labour could, however, head that off at the pass by saying that they will insist on buying back at the original price - this could deter investment altogether, indeed it would be a very aggressive move to block the sales outright, casting uncertainty over the whole deal. Or they could make it their policy that they will cap power prices, and pass laws that force the utility companies to reinvest a percentage of their profits into maintenance and new development. Anything that frustrates the ability of investors to strip this incredibly valuable asset right down will bring the price down to what it is actually worth as a sustainable business.

    But I would never ever expect such a move by them. It's no more outrageous than saying you're going to repeal a controversial Act (like National said about the F&S Act), and it could also be quite populist. The supposed mandate held by National is not actually popular at all, every survey shows that. It could easily be a crippling move. But I believe that Labour are far too cowardly to do it.

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • insider, in reply to Ross Mason,

    @ Ross Mason

    No, we taxpayers never (or at least not in recent history) owned them. They were (and many still are) owned by ratepayers through MEDs and the like. My family was really happy to get $1500 in the mail when Transalta was created. I object to the otehr half being retained by the self important former councillors like John Terris who like to sit doling grants out to the masses because they thought we were too dumb to know what to do witht the money ourselves.

    Lines charges in Wellington are no worse than any other region (but then they are regulated...) and the service is not noticably worse. I've been seeing a lot of investment going in to power pole and pylon replacement. Hardly the platform for revolution.

    Wellington • Since Sep 2011 • 31 posts Report Reply

  • Steve Barnes, in reply to Sacha,

    a whimper don’t take much stifling :)

    Not the point. What we are seeing is a concerted effort by National of attacking the opposition, a tactic often coming under the title of "Attack is the best method of defence" not, to my knowledge, a tactic used before in NZ politics by the party in power. Attacking has previously been the preserve of the Opposition and by taking that ground National has stifled any dissent, I would have thought there would be some kind of speakers ruling on this but I will not hold my breath.

    The wireless north ;-) • Since Dec 2006 • 4941 posts Report Reply

  • Bart Janssen, in reply to Sacha,

    That the staggering financial illiteracy on display

    I think you're wrong Sasha. It is not fiscal illiteracy. It is not even stupidity.

    These guys are smart enough and knowledgable enough to know this shit and even if they weren't there are plenty of advisors who know this stuff coming and going.

    They know this is bad for New Zealand, but they want to do it for other reasons, so they will. For three years they can do whatever the hell they like and will.

    Auckland • Since Nov 2006 • 3434 posts Report Reply

  • BenWilson, in reply to Sofie Bribiesca,

    but, really high power bills now it's all privatised.

    Yes, I only said there's almost a case. I would not actually advocate the sale at all, but the damage of a sale would be a lot less if we had a very powerful super fund sector here. It would still not be fair, people with much bigger funds would profit disproportionately, but at least most people would get some kind of a look in.

    I actually think that it's already bad enough that our utilities are structured as SOEs, required to turn a profit. That's killed our power generation investment all on its own. It cripples the ability of the government to invest, because blue murder is screamed by the entities that can't compete with the government.

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • Russell Brown, in reply to insider,

    Do you include the $1b loss in value from unbundling legislation?

    Unbundling of Telecom was a solution after the fact of sale; the "value" was a reflection of its almost-unregulated monopoly control of the local loop. Even NBR got on board with unbundling in the end.

    There should have been wholesale-retail separation at sale. Or at least some meaningful regulation to curb market abuse.

    Instead, the fourth Labour government left out any mention of interconnection from the Telecommunications Act on the basis of a promise that Telecom would “ensure that interconnection would be provided to competitors on a fair basis, and the relationships between Telecom companies would not disadvantage competitors.” That might have meant something when Telecom was an SOE. It became utterly meaningless when Telecom was sold.

    You'll note I'm not objecting to the privatisation of the incumbent telco. Just the idiotic way it was conducted, and the decade of official sitting on hands and hoping that followed.

    Auckland • Since Nov 2006 • 19019 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    But I would never ever expect such a move by them.

    Such opposition would require them to be vertebrates

    Auckland • Since Nov 2006 • 3434 posts Report Reply

  • merc,

    How was it a monopoly (Telecom) was listed on the sharemarket?

    Since Dec 2006 • 2471 posts Report Reply

  • Rich of Observationz, in reply to BenWilson,

    Wasn't that much of what I said? :-)

    Back in Wellington • Since Nov 2006 • 4471 posts Report Reply

  • insider, in reply to BenWilson,

    "That's killed our power generation investment all on its own. "

    You must live in a completely alternative reality Ben because you seem to have completely missed the 1500MW of new generation commissioned since about 1998. Given we only have about 9500MW of generation, it seems a fairly decent level of market investment.

    Note that quite a lot of that 1500MW was not done by the govt. Note also that the main special pleading in recent years came from an SOE; that required a special intervention by govt before it would commit to build Huntly 5.

    Wellington • Since Sep 2011 • 31 posts Report Reply

  • insider, in reply to merc,

    @ merc

    Same way the monopolies Vector, Port of Tauranga, Powerco managed to get listed.

    Wellington • Since Sep 2011 • 31 posts Report Reply

  • steven crawford,

    I hope nobody gets pissed of enough to start cutting the power lines to epsom.
    I, will be investing in solar panels, inverter technology and batteries to vent my anger.

    Wellington • Since Nov 2006 • 2775 posts Report Reply

  • DeepRed, in reply to BenWilson,

    That is only going to make them even more profitable to buy into when they are sold off, because it means there is a buyer out there with incredibly deep pockets.

    Quick solution #1: Whip out the anti-trust chainsaw à la local loop unbundling, sit back and watch the share prices plummet to junk bond status, and buy back the lot at a fire-sale price. It'll send the usual suspects into DEFCON 1, but maybe the means justify the ends.

    Quick solution #2: Create a KiwiBank of electricity. The usual suspects will probably stop at DEFCON 3, but at least no 'property rights' will be stamped upon.

    Slow solution: Same as the quick solution, but instead wait for the privatised power co's to go the way of Air NZ in 2001 and minigun themselves in the foot.

    The southernmost capital … • Since Nov 2006 • 4403 posts Report Reply

  • Rob Stowell, in reply to BenWilson,

    But I believe that Labour are far too cowardly to do it.

    Cunliffe came pretty close...

    Whakaraupo • Since Nov 2006 • 1582 posts Report Reply

  • Simon Poole,

    Cunliffe came pretty close…

    And look where that got him.

    Labour have picked their leader - now he needs to start leading.

    Since Dec 2008 • 161 posts Report Reply

  • insider, in reply to DeepRed,

    @ deepred

    This is fantasy stuff. And maybe Xena will come swooping down out of the trees too.

    Option #1 - what loop are you going to unbundle? The national grid which is owned by the govt? It's already effectively open access, as is the local grid. #2 You'd be talking about Kiwibank that has a marginal share of the banking market after 10 years and where banking margins have increased. Great model. # 3 Well maybe, if they plan on investing in overseas assets that are hugely overpriced.

    Wellington • Since Sep 2011 • 31 posts Report Reply

  • merc,

    Serious questions, how much has Kiwi Bank cost the taxpayer? Was it really the part privatisation of Post Bank?

    Since Dec 2006 • 2471 posts Report Reply

  • insider, in reply to merc,

    @ merc

    It has about $600m invested in it (shareholder equity). What the 'cost' of KB is, is a different question. PS Post Bank was privatised way before KB came into existence.

    Wellington • Since Sep 2011 • 31 posts Report Reply

  • BenWilson, in reply to insider,

    You must live in a completely alternative reality Ben because you seem to have completely missed the 1500MW of new generation commissioned since about 1998. Given we only have about 9500MW of generation, it seems a fairly decent level of market investment.

    I'm completely underwhelmed that in 14 years our electricity generators have reinvested to improve their generation by a total of 15.7%. So far as I'm concerned that's "killed reinvestment". It's a truly pathetic growth rate, and if you can't see that you're the one in the alternate reality. Electricity production is a key driver of economic growth, and 0.88% growth per annum is hopeless, and all the reason anyone needs to see why costs are constantly mounting.

    Edit: Math fail. Make that 18.75% growth, and 0.89% growth pa.

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • BenWilson, in reply to Rob Stowell,

    Cunliffe came pretty close..

    He's still around...

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • Russell Brown, in reply to BenWilson,

    Labour could, however, head that off at the pass by saying that they will insist on buying back at the original price – this could deter investment altogether, indeed it would be a very aggressive move to block the sales outright, casting uncertainty over the whole deal.

    It might also have the effect of deterring investment in New Zealand altogether. And it would certainly paint a big political target on Labour's back.

    Or they could make it their policy that they will cap power prices, and pass laws that force the utility companies to reinvest a percentage of their profits into maintenance and new development. Anything that frustrates the ability of investors to strip this incredibly valuable asset right down will bring the price down to what it is actually worth as a sustainable business.

    I don't actually see Telecom/TranzRail-style looting here. The risks are a bit more subtle than that. But there are viable regulatory options, yes.

    Auckland • Since Nov 2006 • 19019 posts Report Reply

  • Russell Brown, in reply to BenWilson,

    Cunliffe came pretty close..

    He’s still around…

    I always think that people don't appreciate what Cunliffe achieved with telecommunications reform. It looks like he'll have plenty to get his teeth into if he sticks around long enough to return to government.

    Auckland • Since Nov 2006 • 19019 posts Report Reply

  • BenWilson, in reply to Russell Brown,

    It might also have the effect of deterring investment in New Zealand altogether.

    Yes. I have mixed feelings about that. Investment in NZ isn't always all good. Practically, it means giving away a little piece of the ownership of NZ every time.

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • BenWilson, in reply to Russell Brown,

    I don't actually see Telecom/TranzRail-style looting here.

    No I haven't got a crystal ball either. But I have seen Telecom/TranzRail-style looting here, and once bitten, twice shy.

    Auckland • Since Nov 2006 • 8615 posts Report Reply

  • insider, in reply to BenWilson,

    @ Ben

    Well the numbers are more impressive than that, but apologies in advance if they underwhelm you. We had 7860MW in 98 and in 2010 we had 9667MW so that's more like a 23% increase, comfortably ahead of demand over the same period of 20%. What would you prefer: we build power stations for the hell of it just in case? How much do you think that will cost on your power bill?

    Wellington • Since Sep 2011 • 31 posts Report Reply

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