A poor investment

Written By: - Date published: 11:07 am, June 28th, 2012 - 60 comments
Categories: business, capitalism - Tags:

People who know I’m strongly against asset sales have taken to asking me if I’ll be buying shares now it’s a done deal. On one level that’s a moral dilemma – on one hand I don’t see why I should be profiting at the expense of those Kiwis that can’t afford these shares. On the other, all I’d be doing would be buying back my grandchildren’s birthright – better they keep some of the wealth their ancestors built for them than have it go overseas.

Upon reflection however, I think that these are not going to be good buy at all. From an investment point of view the electricity companies being floated are effectively the same company. They’re regulated the same way, they’re majority owned by the same shareholder, they share the same (very) limited market, and they share the same well-matured technologies. These aren’t heavily R&D based high-tech exporting companies that have options to develop new products and sell them into international markets – they make their money by generating electricity in much the same way and by selling it to the same people. Which is why we were better off when the whole damn lot was being run as state owned monopoly infrastructure.

Add to that the fact that floating these companies will seriously skew the NZX toward being an energy company index with a few other sundry stocks and you’ve got a recipe for over-supply and very low growth in share value. If not a drop in value as more shares are rolled out.

Institutional investors know this. “Mums and Dads” not so much. I’m predicting that there’s a brief flurry of activity and a few short term gains based when Mighty River hits the market but that will be a bubble driven by the government spending tens of millions of (our) dollars on PR. What will definitely happen is that stock prices will drop as successive companies are floated. After all – how much demand is there for billions of dollars worth of what is effectively the same company selling the same product into the same tiny market?

The upshot will be that any trace of political good will amongst “mums and dads” who buy into Mighty River will evaporate once the second float knocks the value out of their investment. I’m guessing that’ll be the point at which institutional investors will start picking up shares.

But whether there’s significant gain to be made even after all the sales are made is anyone’s guess. The bulk of dividends will come from power price hikes but getting those will require some cartel behaviour which will be very hard to get away with. I also suspect future governments will have fewer qualms about intervening in the market to regulate essential services than the current late-20th century throwbacks. And if the sales are stopped before all the electricity companies are sold I’d imagine whatever companies remained in government hands could (and likely would) be geared to dominate the electricity market pretty quickly.

On the other hand, demand for electricity isn’t going away any time soon so, long-term, these could be good investments if the full sale goes through. Not quite the golden goose John Key’s making them out to be though. Oh, and we already own the bloody things.

So no, even putting the distasteful concept of having to buy assets I already own, I don’t think I’ll be putting any of my dollars into this float.

60 comments on “A poor investment ”

  • Comments are now closed

  1. mickysavage 1
    28 June 2012 at 11:22 am

    There are a few fish hooks in the sale of Mighty River Power that may affect things.

    I was amazed that Tainui was not part of the action to seek an urgent Waitangi Tribunal ruling on water as it was the Iwi most affected.  The Waikato River has no less than eight hydro electric power stations on it.  I now realise that it is probably because Tainui already think they have a good deal.

    The Tainui settlement concerning the Waikato is contained in the Waikato-Tainui Raupatu Claims (Waikato River) Settlement Act 2010.

    It provides for Tainui to be involved in the co management of the river and in decisions which affect “the processes for granting, transfer, variation and renewal of consents, licences, permits and other authorisations for all activities that potentially impact on the health and wellbeing of the Waikato River”.  MRP better be nice to Tainui.

    And a recent Supreme Court decision could mean that another part of the Waikato near Mangakino could still be in the ownership of Ngati Wairangi, Ngati Moe, Ngati Korotuohu, Ngati Ha, Ngati Hinekahu and Ngati Rakau.

    Anyone performing due diligence ought to take into account that Iwi can dramatically change MRP’s rights to the water flow through the Waikato.

    This battle is not over yet.

  2. Dv 2
    28 June 2012 at 11:26 am

    Contact has produced a return of 4% per year in the 12 years

    Probably bank interest would have been better.

    • aj 2.1
      28 June 2012 at 11:54 am

      I own a few contact shares and I was going to do that calculation, so thanks. My back of the hand reckoning was that it hasn’t been an outstanding investment.

      What will happen to Contact shares when MRP is floated is another thing to think about. They may well fall if people cash them and buy MRP in an attempt to collar quick gains when MRP is floated.

      Ahh, it’s all a traders dream, isn’t it.

    • Deano 2.2
      28 June 2012 at 12:38 pm

      If you’ve got a mortgage, paying that down is the better option than nearly any punt on the sharemarket because it’s effectively a tax-free return of about 6% – how many shares give you that?

  3. mike e 3
    28 June 2012 at 11:31 am

    Contact profits have been effected by droughts.
    In good years they’ve made good profits.

    • mike e 3.1
      28 June 2012 at 11:36 am

      Privatizing power production will end up just like our petrol companies and banking cartels when one moves all the others follow each taking their turn to prove their is no cartel.

      • IrishBill 3.1.1
        28 June 2012 at 11:41 am

        It’ll be hard for them to act as a cartel until all the generators are privatised and even then it’ll be hard with the govt holding 51%

        I’m not sure this government has enough time left to get the sales that far.

        • Poission 3.1.1.1
          28 June 2012 at 8:47 pm

          I’m not sure this government has enough time left to get the sales that far.

          Opposition parties should be implementing strategies for the upcoming Epsom by election.

  4. Tom Gould 4
    28 June 2012 at 11:41 am

    Buying MRP shares for ‘feel good’ reasons will end it tears. Ask anyone who bought FB? It’s a dog of an bet for small investors. Keep your dough in the bank.

  5. aerobubble 5
    28 June 2012 at 11:48 am

    Economy.
    Under Clark Labor saw through the greatest US market collapse,
    after 9/11, in recent history. Decades of exuberance was
    shuffled off the books, and a new fake cycle began. The
    current economic fashion however did not start with her
    prime minister-ship nor ended with it. The NZ economy, or
    shall we say, NZ dollar rather as it better reflects our
    economic reality, bounces around at the behest of the world
    economy, basic stuff really. So why would Key’s government,
    claim that the economy was badly run under her leadership?
    There was no crying from national at the time about the huge
    problem of private debt, or solutions for it. No, it kept
    climbing, and National were actually actively pushing for
    tax cuts to loose even more economic deck chair shuffling
    on the NZ economy (despite the Reserve bank increase interest
    rates to cool the housing bubble).
    And even today National think the problem is government debt,
    which it would not have been had they not lowered taxes to subdue
    the wealthiest as they planned (and are now implementing)
    assets sales. No, right thinking business sells their best
    performing subsidies, that secure long term stablity to their
    books.
    so the question is, how is National actually dealing with the
    NZ private debt crisis. Caused by banks lending too much money
    for housing and property. Well by pushing for Fonterra to
    alter their nature, from co-op to investment vehicle, and
    selling energy companies, National is increasing the gross private NZ collateral
    in the mostly foreign owned NZ banking system, thus easing their
    deleveraging problems.
    And where does National plan to get the money, well by first
    borrowing money and cutting public services, then giving it
    to the wealthiest for them to buy shares in the former fully
    owned public companies.
    You see if they’d done it backwards it would be obvious who
    was getting shafted. try it. National sell assets, then
    hand the wealthiest a tax cut, this would also mean the
    government would not have needed to borrow private citizens
    would have. And therein is the second odious result, that
    National would not have a government debt wedgie to worry
    about.
    But hey, blame yourself, Key did a similar thing during the
    election, the teapot was all about making him the victim
    this time of the evil oppresses, the press. He even keenly
    connect his own tape invasion to that of UK victims of
    UK press privacy invasions.
    Now the problem with victim-hood is its a position of weakness.
    They is very good reason to believe that the asset sales
    won’t pay for the tax cuts, and the now burdened government
    books will cause a soviegn downgrade (especially when China
    comes off the boil realizing much of its boom is based, like
    most capitalism on exploiting the planet, counter to the worlds
    needs and Chinese long term health).
    You see, I started with the statement that our economy is
    at the whims of the world, Nz does not build for long term
    economic sustainability (think finance companies, think super
    up and then down, think no CGT, etc,etc). and the crisis
    in the world is a market misalignment, the world has too many
    calls on wealth (petrol and resources), while energy and other
    resources are locked into to low petrol prices economics,
    and demand is locked out of low usage patterns (sprawl,
    voter love of private motor vehicles, high energy consumption,
    high quality raw ingredients in messy garbage out waste, etc).
    so the best that can be said of National is they are out of
    touch, bunging the holes sinking the boat (never fast enough),
    and the worst that we’re spending money of highways, and
    borrowing off public services, communities, and our kids to feed
    even more useless economic activity, pen pushing profits, for the few.
    profit is what you target after you fed, housed, provided health
    care, educated your citizens, and kept the environment clean.
    Not the first priority. Capitalism good, Stupid capitalist bad.

  6. dd 6
    28 June 2012 at 11:50 am

    I know very little about shares etc.

    How much capital do you need to invest? Are we talking like a grand to get a foot in or more than this?

    Do you need a share broker or is it easy enough to go it alone?

    • TheContrarian 6.1
      28 June 2012 at 11:54 am

      $1000 is the offering I believe and if you don’t know about a shares a good financial advisor is a must.

      I have a very good one in Wellington who is going to advise me on this and Fonterra once floated. I’d more than happy to share his thoughts 

  7. Rich 7
    28 June 2012 at 11:57 am

    If it looks right (e.g. the issue has been underpriced to get it away and to try and get NZ retail investors interested) I’m going to buy as many as I can get and sell them on the first day of trading.

    Might make 5-10% in two weeks, which is not a bad return (130-260% annualised).

    Of course, I’m screwing the NZ taxpayer, hastening the powercos transfer to overseas ownership and driving up energy prices, but maybe that will convince people to not be so stupid as to vote National next time.

  8. BillODrees 8
    28 June 2012 at 12:04 pm

    “mum and pop” investors should not put more than 10% of their savings in a single narrow sector.   KiwiSaver is the best place for them. After they have their max savings  there, they  should spread between cash, bonds, stock and  their own property.  
    John Key is not a licences Financial Advisor. He should not be giving investment advice: and he is giving crap advice.

    • Dv 8.1
      28 June 2012 at 12:13 pm

      >John Key is not a licences Financial Advisor

      Could he be investigated and prosecuted?
      That would be interesting.

  9. Kevin Welsh 9
    28 June 2012 at 12:13 pm

    Why not buy some shares, then when the government changes at the next election, offer them back?

  10. Kevin 10
    28 June 2012 at 12:22 pm

    @Irishbill
    After reading your thoughts regarding the partial sell down of energy assets it is probably best that you don’t invest because you don’t exhibit a great deal of knowledge on the subject.
    For instance in capital markets shares in energy utilities are amongest the most highly prized of investments because they produce a consistent and regular income stream, an excellent return on investment.
    In a New Zealand context the energy utilities are still partially owned by the government which affords good protection from competitive activity, because governments are in a good position to regulate the market and reduce the extreme swings that occur in other markets such as rental housing or finance companies.
    Share values in utilities don’t experience the highs and lows of other markets, therefore it is a misnomer that trading in the shares alone is the quick route to wealth, it is not. Investors in this market are in for the long haul and the dividends and relative security of the investment.

    IrishBill: It is probably best you don’t comment on blogs as you seem to lack basic comprehension. Take a week off for starting a comment by insulting an author.

    • Tom Gould 10.1
      28 June 2012 at 12:43 pm

      If you are correct, you make a compelling argument for the public to hang on to them. Today, around 4.5 million kiwis gain the benefits you describe. By October, that benefit will likely be captured by around 200 thousand kiwis. Thanks John.

    • JR 10.2
      28 June 2012 at 1:51 pm

      @irishbill
      As a regular reader of the standard but not a commenter, I am a bit shocked that you would ban someone for that? For those of us without strong leanings one way or another in the political spectrum it is interesting to see and hear both sides of an argument. Given some of the hysterical comments and insults that get thrown around Kevin’s barely registered. What prompted me to reply was the fact that instead of countering his argument you have a bit of a sulk and ban him for a week?! If his logic and conclusions are cobblers then have the courage in your argument, develop a bit of a thicker skin and demonstrate the flaws in his – not throw a wee tanty and silence his perspective. If all you want are fan boy like responses – ok, but tell people up front….Open dialogue whether you like the comment or not is healthy even if it is just to prove the soundness of your own position. Many of the bannings I have seen were fully deserved – but this just came across as shutting down a view you didn’t like because you thought it made yours look incorrect. Poor form

      IrishBill: For all your regular reading you’ve obviously not paid attention to my moderation style. If you come into my house and start by insulting me you’ll get slung out. I also dislike people attributing motives to me so you can take a week off for that and for your “tanty” remark.

      • JR 10.2.1
        28 June 2012 at 3:58 pm

        @irishbill, not a problem….I will happily go back to just being a reader, I don’t think I can be banned from that can I LOL- you kind of made my point for me, I wanted to see your response to his point but to the average reader with an interest in the topic your choice came across as that banning was simpler than counter argument. Open abuse of RWNJ’s is ok and never banned, but any considered opposing thought that contains the slightest of negative comment attached gets banned. Is that really the message? Would you not rather have 500 replies covering all aspects of the topic at hand that show why it is valid versus the RW position. By all means ban the dross that passes for comment but being a bit precious and banning people for having the temerity to stand up for their thoughts….really? Why even write a blog or opinion piece then? BTW No nead to publish this – you have made your position clear. Just giving mine. Have a good week

        • IrishBill 10.2.1.1
          28 June 2012 at 4:48 pm

          Whatever.

        • Bob 10.2.1.2
          29 June 2012 at 2:40 am

          This is typical of the ‘Nanny State’ left!
          Reason #236 why they currently aren’t in power (the financial literacy that is shown by IrishBill in the article above is reason #1).

          Kevin is 100% correct JR, that was his biggest mistake, with no retort all IrishBill could do was ban him for a week to stop him from further embarrassing him on his own topic.

          Tom, before I take my imminent (probably permanent) vacation from The Standard, according to the latest figures from treasury (take these with a pinch of salt), the sell down of 49% of these powerco’s is going to reduce income by approx. $100M per annum. The float is expected to raise $4-$7 billion. This means (in very simplistic, inflation not taken into account terms) it would take 40-70 years to raise these funds through dividends. Who knows what new power producing technologies will be available by then……the French are currently working on fission reactors as one example.

          If power prices go up as everyone here keeps saying they will, the government dividend goes up and that 100M gap is reduced, so everyone saves money (using the logic of ‘we already own the power stations’). Power prices go down, the government has already cashed out while they were profitable.

          • Murray Olsen 10.2.1.2.1
            29 June 2012 at 2:58 am

            So sell and hope something better comes up makes economic sense? The sales make perfect sense from a trader’s point of view, but not so much as investments. Key is by nature a trader and a speculator and seems completely unable to take any other viewpoint. Now please go back to your dominatrix state on steroids. While you’re at it, feel free to google “fission reactor” and think about how it can be a new technology.

          • IrishBill 10.2.1.2.2
            29 June 2012 at 6:51 am

            sockpuppet.

  11. Penny Bright 11
    28 June 2012 at 1:05 pm

    FYI – The Mixed Ownership Model Bill is not yet law – it still does not yet have ‘Royal Assent’ (according to Parliamentary staff to whom I spoke on Wednesday 27 June 2012, from the Table Office – who are responsible for facilitating ‘bills’ into legislation.

    Apparently, ’Royal Assent’ from the Governor-General, is a few days away…..
    _______________________________________________________________________________

    ‘OPEN LETTER TO THE GOVERNOR-GENERAL’ – Please consider using your ‘Reserve Powers’ to refuse Royal Assent to the Mixed Ownership Model Bill (if passed).

    (Sent Monday 25 June 2012, 5.12pm)

    Penny Bright
    to Antony.Paltrid., saphron.powell,

    (I apologise for the lateness of this email. It unfortunately involved more work than originally anticipated).

    My intention was to try and get it to the Executive Council as an ‘Item of Business’ for the consideration of the Governor-General.

    Please can you forward this correspondence to the Governor-General at your earliest opportunity?

    Thank you.

    Penny Bright

    ____________________________________________________________

    25 June 2012

    ‘OPEN LETTER TO THE GOVERNOR-GENERAL – The Rt Hon Sir Jerry Mateparae

    Please consider using your ‘Reserve Powers’ to refuse Royal Assent to the Mixed Ownership Model Bill (if passed).

    Dear Governor-General,

    I understand that the Executive Council, comprising of all Ministers of the Crown, meets today, 25 June 2012 at Parliament at 4pm, and you will be presiding over this meeting.
    http://gg.govt.nz/content/executive-council

    The Executive Council is the highest formal instrument of government. It is created by the Letters Patent that also establish the Office of Governor-General and is part of the executive branch of government that carries out formal acts of government.

    The Executive Council comprises all Ministers of the Crown, whether those Ministers are inside or outside Cabinet.

    The Governor-General presides over, but is not a member of, the Executive Council.”

    I wish this letter to be included as a urgent ‘Item of Business’ for this meeting of the Executive Council, whose members have sworn the following oath:

    http://www.legislation.govt.nz/act/public/1957/0088/latest/whole.html#DLM316134

    19 Executive Councillor’s Oath

    (1)The oath in this Act referred to as the Executive Councillor’s Oath shall be in the form following, that is to say:

    I,…, being chosen and admitted of the Executive Council of New Zealand, swear that I will to the best of my judgment, at all times, when thereto required, freely give my counsel and advice to the Governor-General for the time being, for the good management of the affairs of New Zealand. That I will not directly nor indirectly reveal such matters as shall be debated in Council and committed to my secrecy, but that I will in all things be a true and faithful Councillor. So help me God.

    ____________________________________________________________

    I understand that as the Governor-General of New Zealand, you do have the power to refuse ‘Royal Assent’ for legislation, although, to date, this power has yet to be used.

    http://gg.govt.nz/role/powers.htm

    In a very few instances, the Governor-General may exercise a degree of personal discretion, under what are known as the “reserve powers.” The most important of these is the appointment of a Prime Minister following an election, or accepting the resignation of an incumbent Prime Minister.

    By convention, the Governor-General will always appoint as Prime Minister the person who has been identified through the government formation process as the person who will lead the party or group of parties that appears able to command the confidence of the House of Representatives. The Governor-General expects that there will be clear and public statements that a political agreement has been reached and that a government can be formed that will have the support of the new Parliament. The Governor-General abides by the outcome of the government formation process.

    Other reserve powers are to dismiss a Prime Minister, to force a dissolution of Parliament and call new elections, to refuse a Prime Minister’s request for an election, and to refuse assent to legislation.

    These powers to act without or even against ministerial advice are reserved for the most extreme situations and with the exception of the appointment of a Prime Minister following an election, no New Zealand Governor-General has ever needed to use them.

    ____________________________________________________________

    In my considered opinion, as an ‘anti-corruption campaigner’, the passage of the ‘Mixed Ownership Model Bill’, would constitute a ‘most extreme situation’, and Royal Assent should be therefore refused for the following reasons:

    1) Although the National Party ‘campaigned’ on asset sales during the 2011 General Election, they only received enough votes to return 59 out of 121 Members of Parliament.

    (Irrespective of the number of votes cast by electors – it is votes cast in the House which determine the passage of legislation.)

    59 National MPs out of 121 is NOT a majority – so National’s claimed ’mandate’, has arguably no basis in fact.

    No majority – no mandate.

    2) If National genuinely believe that the majority of New Zealanders support the ‘partial privatisation’ of key State assets, then why not support the confirmation of this belief through a public referendum on this matter?

    http://www.stuff.co.nz/national/politics/7162589/Asset-sales-set-to-pass-last-hurdle-this-week

    3) As it stands, provided the 3 Maori Party MPs vote against the Mixed Ownership Model Bill at its third reading, National are dependent on the pivotal votes of United Future’s Peter Dunne, and the ACT MP for Epsom, the Hon. John Banks.

    Herein lies the problem:

    a) Complaints have been lodged with Police, alleging electoral fraud against the Hon. John Banks.

    I know, because I, along with fellow ‘community activist’, Lisa Prager, am one of the complainants:

    On Fri, Apr 27, 2012 at 3:55 PM, BENEFIELD, Mark wrote:

    This email is to formally acknowledge your complaint under the Local Electoral Act 2001(LEA) in respect to the 2010 Mayoral Election and allegation of a false return made by the now Hon John BANKS in respect of his returns under section 109 LEA.

    For future reference File 120427/9334 refers.

    At this point in time I will be your point of contact.

    Regards

    Detective Inspector Mark Benefield

    Field Crime Manager Auckland City District

    Extn: 95766

    DDI: 09 3026 766
    Mob: 0274 741902
    Fax: 09 3754652″

    _____________________________________________________

    However, it is unclear if the Police have even questioned the Hon. John Banks about this alleged electoral fraud, although the complaint was made on 27 April 2012, almost 8 weeks ago, as per this recent correspondence with the Auckland District Commander of Police, SuperIntendent Mike Clements, dated 20 June 2012:

    ………………………………
    _____________________________________________________

    There are a LOT more reasons which help substantiate why the Mixed Ownership Model Bill should NOT be granted ‘Royal Assent’ – READ MORE on http://www.dodgyjohnhasgone.com

    Penny Bright
    ‘Anti-corruption campaigner’

    • dd 11.1
      28 June 2012 at 1:17 pm

      Hey Penny.

      Would it be more effective to keep the message shorter and include a link for the more detailed stuff.

      Your posts are often just too much text to take on for someone whose just quickly scanning the page.

      Otherwise, love you work keep it up. Heard you talking to JT and Jackson the other day. .

  12. RedFred 12
    28 June 2012 at 1:48 pm

    The shares are going to be a place to stash cash to protect capital; the institutional investors will snap these up, especially if the European crisis gets worse or the upcoming US fiscal cliff causes another meltdown –

    http://www.cnbc.com/id/47961747

    So.. no, the shares could be a very good investment as they are concrete and steel assets.

    • IrishBill 12.1
      28 June 2012 at 3:00 pm

      I don’t doubt that but I don’t think the first tranch will be a good deal.

  13. Dh 13
    28 June 2012 at 2:26 pm

    I don’t see any moral issues. I won’t be buying them. They’re not worth buying anyway unless you’re a big investor who gets offered a reasonable parcel of shares. For mom & pop it’s a few grand for hopeful gains of only a few hundred. Why bother. I guess all the dreamers who see themselves as the next Rockefeller might dive in so they can pump their chests out & brag about making a profit on shares (about enough to buy them lattes for a week) but I sure won’t be.

  14. vto 14
    28 June 2012 at 3:59 pm

    The best investment is to get off-grid.

    And anyway, how come nobody wants the assets sold, yet everybody wants to buy them? That certainly doesn’t sound like people expect this to be a win-win. It actually suggests everybody expects it to be a lose-win.

  15. Tanged up in blue 15
    28 June 2012 at 4:21 pm

    What of all the people that don’t have kids but would like to buy some shares?

    Mums and Dads get all the breaks. First WFF, now this!

  16. Paul Campbell 16
    28 June 2012 at 4:23 pm

    Selling our power companies is a bad investment let me tell you why:

    go and look at the Clyde dam – there are two penstocks that go nowhere, no turbines, no power house, no generators. Why? someone was thinking ahead.

    Now what’s going on in Central Otago around the Clyde dam? windpower – lots of it, it’s one of the best places in the country – what’s the problem with windpower? the wind stops blowing – you need a peaking unit to keep things going – wouldn’t it be great if there was a renewable way to save power when the wind blows and generate it when it doesn’t – like letting the lake fill when the wind blows and generating extra power with those extra penstocks ….

    The problem is that if the energy companies are all split up they’re competing, not working together to make things more efficient – not only are they competing but they make the most money for their shareholders when electricity is in short supply (anyone remember Enron?) plans that try and carefully spread loads to find efficiencies so that this never happens are not in their interest – and them making more money from selling us electricity is not in our interest

    • mike e 16.1
      28 June 2012 at 4:34 pm

      Paul Campbell the two extra pen stocks were for the extra capacity created if a luggate dam was built.

      • insider 16.1.1
        29 June 2012 at 11:35 am

        So it was basically tens of millions wasted… Forward investment can be a two edged sword if things change. There are some piles sticking up out of the Clifton Tce car park in Wellington that were put in in the 70s for the second Terrace Tunnel Entrance road. It is still only a vague prospect 40 years later.

    • mike e 16.2
      28 June 2012 at 4:42 pm

      also losses during transmission are higher the further electricity has to travel so its better to build wind farms in the north island

      • IrishBill 16.2.1
        28 June 2012 at 9:20 pm

        Or a gas peaker near auckland…

      • Paul Campbell 16.2.2
        29 June 2012 at 8:47 am

        Mike – I completely agree – but the solution there is to waste LESS power shipping it between islands – let’s increase power to NI users to match the losses on the cable (30%?) and make SI industry more cost effective – it’s silly generating all that power and using it to warm the ocean.

        Once we’ve stopped warming the water we can use SI power more efficiently by closely integrating wind and hydro – we can avoid damming any more of our rivers to be wasted on the north.

        The real problem of course is that too many of us live up north but expect southern resources to be used wastefully to support them – it’s time we cut that cable and let that fish float away 🙂 Our new nation anthem (to the same old tune) that old standard from the 70s

        Way back up in Cromwell gorge
        Tons of co-on-cre-ete they-ey wi-ill forge
        All our farmland they will drown
        Right back up to Albert Town
        Flood the Wilkins, Dam the-e Reese
        Will their pla-a-ni-ing e-ever-er cease
        We must know where danger lurks
        Vandals of the Public Works

        First the valleys, then the-e creeks
        Next they’ll flood our fla-a-mi-ing peaks
        While for Auckland power abounds
        Our South Island slowly drowns.
        Climbers of the Alps unite
        For our snow we now must fight
        Keep it for our pleasure now
        Not for making bloody power.

        Benmore, Roxburgh, Avie-e-more
        Manapouri, how-w ma-a-ny more
        Will our trees and forests last
        When the waters top the Haast.
        Halt Kawarau’s mighty drop
        Arawata they-ey mu-ust stop
        When they reach Aspiring’s top
        God defend New Zealand

        • insider 16.2.2.1
          29 June 2012 at 11:44 am

          This is actually done. There are significant costs on the hvdc link and it is only for power going south to north. It’s basically a form of locational pricing and Meridian hated it. They may be a bit more relaxed about it now they have NI assets. But the losses I believe are only about 10 to 15%. The real issue is there is no locational pricing in the rest of the market which signal the cost of generation AND transmission, so losses aren’t really factored in to pricing of power from other areas in a way that incentivises say wind farms or close to load because the losses tend to get smeared across all consumers evenly.

  17. Jeremy Harris 17
    28 June 2012 at 4:36 pm

    While the underlying fundamentals of a business (and it’s industry) can give you a good idea if a business is one that may be worth investing in, ultimately you cannot know whether these shares will be a good investment until you know the price they will be offered for, “the business creates the value, the price the opportunity”. Until then the question is moot.

  18. Cannot think of something clever 18
    28 June 2012 at 5:35 pm

    In terms of investments – utility shares such as Contact and MRP are seen as good and relatively safe long term investments. Utilities typically pay higher and more consistent dividends and retain reasonable value even in difficult times.

    These dividends are why I think the 4% calculation of return for Contact is inaccurate. Contact, from their web site, seem to pay about 4-5% of share price in dividends (reasonably typical for a utility). If you then use their dividend reinvestment plan the dividend buys more shares. Based on that the return is probably closer to 8-9% (before tax) and that after fact that the shares have performed rather badly for the last few years as Contact has lost market share.

    MRP is likely to be the most attractive of the utilities on offer as National need this to work so would be the one to buy in to. Depending on offer price of course.

    • Dv 18.1
      29 June 2012 at 12:03 pm

      The 4% per year is what I have received, based on bonus shares received and the prices paid and current share value. (No adjustment for inflation).

  19. fatty 19
    28 June 2012 at 6:21 pm

    I would never buy any of them…I hope the sell off is a failure, and I have no respect for any Kiwi’s who buy them.
    As soon as everyone no longer owns the assetts, then they may as well go overseas.
    How do I benefit if the rich & selfish prick down the road owns it, or if a rich & selfish prick from overseas owns it? The ‘Mum and Dad investors’ slogan is a sham…don’t believe it
    We should avoid and disconnect from those assetts and watch them crumble. If I am a customer of any of these assetts I will be leaving them within a few weeks…even if that means I go to another privatised company. I want to see this sell-off fail, we shopuld all do this to ensure it happens again. Don’t support the sell off.

    • Descendant Of Smith 19.1
      28 June 2012 at 6:30 pm

      I was thinking the same thing as well. Immediately transfer my business away from those sold as they get sold.

      If they lost 50,000 customers in the first week after sale that would be another clear statement.

      Actually doing it now and not waiting would be even better. Erode the customer base between now and the sale.

    • Murray Olsen 19.2
      28 June 2012 at 8:45 pm

      I wouldn’t buy stolen goods, but at this stage a consumer boycott, beginning with the first company to be sold, sounds like a very good idea.

      • Gosman 19.2.1
        29 June 2012 at 2:31 pm

        If you think you can survive for very long without power good luck to you.

        • fatty 19.2.1.1
          30 June 2012 at 3:54 pm

          “If you think you can survive for very long without power good luck to you.”

          …and once again Gosman comes in with an irrelevant statement that completely misses the argument…how unsurprising. yawn

  20. SandFly 20
    28 June 2012 at 7:46 pm

    I sold my Contact shares and are now slowly building up an array of solar panels, reducing car trips, further insulating the house and swapping in LEDs – far better return on investment with much less risk!

  21. PoliticallyCorrected 21
    28 June 2012 at 10:25 pm

    Asset Sales Explained by Plumedekiwi – http://bit.ly/MZelqh

    I would laugh if this didn’t also make me cry. Please share.

  22. chris73 22
    29 June 2012 at 6:47 am

    Financial advice from a blog thats anti-asset sale suggesting it might not be a good be a good deal…yep I’ll take that on board and act accordingly

    • felix 22.1
      29 June 2012 at 9:16 am

      Context, chris.

      If it is such a great deal for potential buyers (like my electrical pun?) then there’s even less reason for us to sell it.

      • Gosman 22.1.1
        29 June 2012 at 2:30 pm

        Depends what you want. If it is a steady if unspectacular return on investment over the long term then it might well be the investment for you. If is it potential high growth and rapid development you are after then it probably isn’t for you.