Analysts are apparently ‘not worried’ about the impact of the increasingly likely-looking closure of Tiwai Point on the price of electricity and, hence, on the value of the assets National is trying to hock. A 12% reduction is all one analyst sees in Mighty River’s price is Meridian floods the market with some of the cheapest power going. The analysts have missed the politics.
That’s the problem with economists, they tend to think of our socio-economic system as an economic system with social and political factors tacked on insignificantly around the edge. That’s not true. Especially in the case of the electricity system. Our electricity system has been in a state of near constant reform for the past 25 years. The oldest institution in the system that hasn’t been radically transformed is Transpower – and that’s a state-owned monopoly. Everything else has been cut up, sold off, renamed, retasked, constrained, unrestrained, taken apart, and put back together differently just in the past 15 years.
If you think that 15% of the country’s electricity suddenly becoming freed up is merely an economic issue that will see some expensive plant mothballed but do little else (not that a 12% reduction in the value of these companies is little, really), then you’re ignorant of history and political reality.
Such a situation will present a golden chance for a government to break the oligarchy of the big 5 generator/retailers. In a surplus situation of that magnitude, the power goes from the people with the plant to the people buying the electricity, especially if the government chooses to intervene on their side (and who doesn’t want to be the politician who brings down power prices?). It will be all the more fiscally easy to do so if those companies are less on the government books and more in private and foreign hands – ie after the asset sales.
All buying into those asset does is make it easier for a future government to slash their value.