Has John Key jumped the shark?

Written By: - Date published: 9:22 am, March 18th, 2013 - 50 comments
Categories: business, energy, john key, Privatisation - Tags: , ,

Micky savage of Waitakere News looks at John Key’s involvement in the Solid Energy fiasco. National’s undeserved reputation as sound economic managers takes another hit…

Has John Key jumped the shark?

Key-jump-the-shark

 
Happy Days was a highly successful American sit com that screened for a decade.  Its popularity was legendary.  The primary reason was one character Fonzie who was so cool that nothing seemed to be beyond his ability.  But the show declined dramatically after in one episode Fonzie jumped a shark while water skiing.  For a decade he was the epitome of cool.  But jumping a shark while on water skis caused too many people to think he had pushed things too far.  “Jumping the Shark” has since become part of our lexicon.

In my humble opinion recent events surrounding Solid Energy may be John Key’s jump the shark moment.

I have spent a bit of time on boards.  Directors tend to be business orientated and relatively right wing but my experience is that they are dedicated and intelligent and they enjoy a competition of ideas.

Professional directors are usually from one of four groups, ex politicians, engineers who are usually process and result driven, accountants who focus on the finances, and lawyers who present a mixed bag.  The difference between board meetings and political meetings are that the board discussions are mostly far more civlilsed and people are interested in addressing the merits of the argument rather than score points.  There may be an ideological bias, but it is an ideological bias that usually pays attention to reality.  Directors have to be realistic.  When they serve under a Labour administration they have to make sure that the Government’s ideals do not take them too far, when they serve under a National administration they have to make sure that the desire to maximize profit and minimize cost does not destroy the entity.

National has a natural advantage with Directors who could be described as generally being part of National’s core constituency.  They enjoy the privilege and the pay and are willing to fulfill the wishes of their master, whether it be to maximize profit or maximize overall benefit, depending on the preference of the ruling administration.

There is a pecking order in terms of board appointments.  Solid Energy have been one of the most prestigious boards to be appointed to.  Being a director for an entity that was worth $2 billion in happier times has a whole lot of mana attached.

And so recent events have been startling and directors throughout the country must be thinking twice about accepting appointments to the boards of any crown entity.

National has this habit of blaming individuals for any adverse outcome.  Whether it is lawyers about legal aid, Christchurch Council for the rebuild, Auckland Council for housing not being more affordable or the Solid Energy Board for Solid Energy’s woes National does not hold back.

The trouble is that this has the definite appearance of being a pattern of behaviour.  And journalists are startling to check the claims that National makes, rather than accepting these at face value.

Key has made various recent claims about Solid Energy.  He claimed that Solid Energy wanted a billion dollar cash injection to fund business expansion, that the Government was in a pitched battle with Solid Energy over the sale of part of the business and that the company’s woes were because of investments in risky areas.  But there are problems with each of these claims and they all reek of hyperbole.

Former Chair John Palmer, a respected Company Director, said that the request for the billion dollar cash injection did not occur.  Key replied by releasing a Treasury briefing to the Government which he alleged recorded the request for a billion dollars of funding.  The only problem is that the paper actually backs Palmer’s statement.  It recorded the company’s current business plans for the Lignite deposits in Southland and some general proposals for expansion into other areas of activity but the paper states that this would be funded through retained earnings.  Solid Energy was not looking for direct funding but was outlining its plan to Government for it to expand into different markets.  Given that the Government had put a great deal of emphasis on the exploitation of the country’s natural resources the fact that Solid Energy saw itself as a possible leader in the area was not unusual.  Such arrangements have worked well in other countries, for instance Petrobas in Brasil is responsible for the return of considerable wealth, and Norway’s and Venezuela’s healthy economies can be directly attributed to their decisions to keep as much of their wealth local as possible.

The paper also does not support Key’s claim of a pitched battle over 18 months over sale of parts of the business.  The only project with any sort of development was the Urea extraction project in Southland and the proposals to increase Solid Energy’s area of activity would require specific Government support.  Besides it was a battle that Solid Energy would always lose.  Ministers as shareholders control who sits on the board.

The final claim about the company’s woes being related to risky investments directly contradicts a letter that Labour unearthed whereby in 2009 Solid Energy was instructed by then Minister Simon Power to increase debt and the payment of dividends.  Key has claimed that Solid Energy’s view of the future price of coal was bullish and out of kilter with the Government’s view but if this is so then you really have to wonder about why the Government still insisted on increased debt and dividends. Interestingly the letter reinforces this and in the letter Power says the following:

I am disappointed with the forecast decline in Solid Energy’s financial performance over the next three years, in particular the dramatic decline in profitability and dividends.  While this is understandable, given the significant decline in forecast coal prices, it is far from clear why Solid Energy forecasts [redacted].”

So the Government knew that Solid Energy was predicting worsening performance and the significant decline in forecast coal prices but still required Solid Energy to increase debt.  The company’s current predicament has a certain amount of looking in the rear vision mirror inevitability about it.

There is a further development which may haunt the Government.  Acting chief executive Gary Diack and Board Chair Mark Ford were both questioned by Clayton Cosgrove at the Commerce Select Committee on Don Elder’s then apparent unavailability to give evidence.  Ford said that Elder had not approached him and Diack said that he was not aware of Elder approaching anyone on that basis.

Elder subsequently confirmed to the committee that his lawyer had written to Solid Energy’s lawyer and copied the letter to Diack and offered to appear but was told that he was not required to attend.  Although Diack has written and corrected his answer this needs to be investigated further.

The Solid Energy fiasco has the potential to hurt the Government in a number of areas, in its reputation for being sound economic managers, in removal of a significant company from the privatisation process and attendant reduction in the sale proceeds and through National’s relationship with an important part of its constituency.  And most importantly through the dawning realization that John Key is not the multi talented businessman his PR says he is.

Has John Key jumped the shark?

50 comments on “Has John Key jumped the shark? ”

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  1. One Tāne Huna 1
    18 March 2013 at 9:46 am

    There won’t be any major shift in public opinion until the headlines change from “Key says” to “Key caught out lying again”. The real story has always been that our Prime Minister is a pathological liar.

  2. ghostwhowalksnz 2
    18 March 2013 at 10:21 am

    What fascinates me is Keys ability to dig the hole even deeper:

    He makes even wilder claims to cover up that he was speculating in the first place.

    Same happened with the TVNZ land for Sky City convention centre. When challenged at first he claimed the TVNZ spokeswoman ‘wasnt in the loop’ and he knew better.

    There is a pattern though- there seems to be an elephants graveyard of Keys outright lies!

    We all know they exist but such is his power that the journalists dont go there.

    My guess is that his office makes it clear they should drop it or else.

    Remember what happened about the claim early on that Key said he didnt want wages to rise.

    It was open and shut, yet Keys henchmen went to media board level to make it go away

    • SpaceMonkey 2.1
      18 March 2013 at 10:41 am

      And it looks as though they’ve done the same again. A quick once over Stuff and NZ Herald and Solid Energy isn’t on the front page of either.

      • ghostwhowalksnz 2.1.1
        18 March 2013 at 12:21 pm

        The online versions dont really have front pages as it changes every couple of hours.

        Ive also noted that Nationals research unit spends a lot of energy in digging up contradictions – sometimes years back from Labour , Greens, NZ First

        These are usually passed on to Oily Orca and Farragoblog.

        But of course if its Shearer , they push these in the media, often with some success.

        At some occasions Keys minders will quickly try and correct a real clanger right away.

        There seems to be major effort going into Keys credibility. Making it look better than it is.

    • Tiresias 2.2
      18 March 2013 at 3:57 pm

      “What fascinates me is Keys ability to dig the hole even deeper:

      He makes even wilder claims to cover up that he was speculating in the first place.”

      As we saw from the US Congress investigation last week into J.P.Morgan’s ‘London Whale’ fiasco this is par-for-the-course behaviour for trading floor operatives:

      http://dealbreaker.com/2013/03/senate-subcommittee-feasting-on-whale-today/

  3. MaxwellS 3
    18 March 2013 at 10:29 am

    Wrong title for this piece. Betteridges’s law of headlines states that “Any headline which ends in a question mark can be answered by the word no.”

    Clearly this isn’t the case as JK has jumped the shark half a dozen times now.

    http://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines

    • Lanthanide 3.1
      18 March 2013 at 12:45 pm

      “Clearly this isn’t the case as JK has jumped the shark half a dozen times now.”

      The whole point of “jumping the shark” is that in retrospect it is a clear demarcation of when things went bad. By definition you can’t have multiple of them.

  4. ad 4
    18 March 2013 at 11:34 am

    Rather than “jump the shark”, partial privatisation plays into the Government’s hands by enabling analysts to claim that it will increase public scrutiny, transparency and accountability. (See NZHeraldn Business B4). For all the warnings that COMU may or may not have given, for all the claims the Prime Minister makes that there were apparently “18 months of robust discussions” between his Cabinet and the Solid Energy Board, they were not made public.

    Linking accountability and privatisation plays into the Government’s hands, more by accident than design.
    Both Solid Energy and Mighty River power have in different ways illustrated that the Boards have hidden how they were planning from their public shareholders.

    In Mighty River power’s case it was the US$250m offshore managed fund – of which they were the sole beneficiary – which they just had to spend US$24.8m unwinding from the management company. And their wilful refusal to front this to Parliament.

    Solid Energy’s transparency sins have been well canvassed.

    It enables the Prime Minister to show that transparency of decisionmaking can only be achieved through sharemarket listing.And with the listing cover the whole thing in glamour and greed.

    This is a singular confusion of ownership and accountability.

    At base the corporate model within the State Owned Enterprises Act is sick. It may not be popular, but if a progressive government wants to alter the economy, it has to turn these entities back into Departments or similar. Just wipe out this myriad of Boards and the elite that they manufacture out of thin air.

    Public sector corporatisation has given us the worst of all worlds: no policy implementation, no direct Parliamentary oversight to speak of, no accountability, and a junkie’s relationship to dividends in exchange for doing whatever they want. And this goes for Ports of Auckland as well.

    Either we will go down the route of more and more power being taken off Parliament and given to regulators and stock analysts, or a new government has to completely reform the State Owned Enterprises Act. Rather than jump the shark, they need to pull the shark to the boat and transfer it to a glass aquarium for all to observe and tame.

  5. ghostrider888 5
    18 March 2013 at 11:54 am

    on the subject of the extraction economy; Taranaki performing the best of the provincial economies, lazily extracting fossil fuels (great standard of living, for now, though)
    Manawatu / Tararua regions given go ahead for “prospectors” (security guards overseeing machinery and operations; this is what it is coming too; maybe Fracking next) Go NAct!

  6. red rattler 6
    18 March 2013 at 12:28 pm

    The SOE’s were designed to prepare themselves for privatisation. Their boards took this seriously.
    They are monopolies so can deliver big dividends to the state and the Clark Labour Govt preferred this option of robbing its worker consumers in order to pay them WFF etc trickledowns.
    But SOEs contradict the NACTs position that monopolies should be privately owned. NACTs can lose power and SOEs are capable of being easily returned to State Departments, horrors.
    So you can privatise by maximising dividends to get a good sale price (MR), or the state can asset strip to bankrupt and flog off to mates for next to nothing (Solid Energy).
    This latter suits what the NACTs see at the big growth opportunity, and rather than have it under a Kiwibras or a PPP under residual public accountability, they want to open it to the big boys for rip,shit, bust.

    • Draco T Bastard 6.1
      18 March 2013 at 1:46 pm

      +1

      Everything that National have done since gaining power is about transferring more wealth to the rich.

      • Green machine UpandComer 6.1.1
        19 March 2013 at 12:15 am

        Apart from increasing welfare for rich people like pregnant women, or reducing the taxes of two thirds of everybody to 17.5 cents in the dollar, or maintaining student allowances, WFF, giving people max house prices in the red zone, keeping inflation low by not printing money like lunatics, etc etc

        • Colonial Viper 6.1.1.1
          19 March 2013 at 12:29 am

          Bill English’s household got a $1500 per week tax cut. He doesn’t need you shilling for him mate.

          keeping inflation low by not printing money like lunatics, etc etc

          How is this better than borrowing that same money from loansharks who source it from the US and Japan, where they are printing the money like lunatics?

          or reducing the taxes of two thirds of everybody to 17.5 cents in the dollar

          So that’s income tax.

          Did you miss the increases in GST and petrol which hit the lower income the hardest?

          Wake up man you’re suffering from a shit case of right wing snow job blindness

      • Green machine UpandComer 6.1.2
        19 March 2013 at 12:22 am

        opps I meant even richer folks like pregnant teenagers, oh and reducing prison numbers, oh and also making health a non-issue, oh and heck even with all the problems with Novopay it’s still about 25% less error rate then the previous system, so teachers are getting paid what they should finally. Novopay has a 2% error rate. What else have they done to transfer money to the ‘rich’, oh yes they removed some of those tax write offs on investment properties that always lost ‘the rich’ so much money, oh yes and recoupled the company and personal tax rates, so that rich people could pay more tax etc etc

        • Colonial Viper 6.1.2.1
          19 March 2013 at 12:26 am

          Novopay has a 2% error rate.

          Fuck this is a disasterous error rate that you couldn’t achieve with untrained monkeys.

          Computerised systems need to run error rates 100x lower than this.

          • McFlock 6.1.2.1.1
            19 March 2013 at 12:42 am

            Fuck computers. If a checkout operator had a 1% error rate in the accounts at the end of each day, including $11,000 bananas and 20c champagne, they’d be gone by lunchtime.

    • Murray Olsen 6.2
      18 March 2013 at 8:48 pm

      The secret of being a successful businessman in Aotearoa is to be mates with NAct. At least in the US and A they lobby Congress to get what they want. NAct MPs grovel in front of them and do it all for free.
      The SOEs being sold off is far more than just selling plant and assets. There is also years of institutional knowledge and research, paid for by the taxpayer. There was also the contribution the old Departments and Ministries made to communities in terms of employment. This went well beyond a railways tarpaulin at the back of every house in Northland. Whole communities flourished because of the employment provided and the goods and services bought by employees. We’ve swapped this for a failed pig farmer’s dream of America’s Cup yachts and Hawaiian mansions for a select few, with her majesty’s loyal opposition making boring meaningless speeches until they can slot into a UN job. We’re well past the hour of taking it all back, and changing things drastically so it can never be taken off us again.

      • Draco T Bastard 6.2.1
        18 March 2013 at 9:43 pm

        +1

        Nice and succinct.

      • Green machine UpandComer 6.2.2
        19 March 2013 at 12:16 am

        yes we all remember the glory days when NZ had the atmosphere, look, productivity and popularity of a Polish Shipyard, and two types of chocolate. Except in the Polish shipyard the workers at least looked like they were doing something.

        • rosy 6.2.2.1
          19 March 2013 at 1:50 am

          No, actually I don’t remember the days before the neo-liberal revolution being like that at all. I remember my dad working extremely hard at his blue collar job, a deposit for a house via capitalisation on the family benefit, free education and plenty of good healthy food with dessert (sometimes chocolate) once a week.

          Your 2 types of chocolate throwaway line is as much an issue of changing consumer preferences creating demand rather than problems with a closed economy. An yes, I know there were restrictive import tariffs. In fact if it wasn’t for those import tariffs Cadbury’s would not have been made in NZ.

          I’d swap my increased chocolate choice for cheap healthy food and full employment any day, but I reckon I wouldn’t have to do that.

  7. ghostrider888 7
    18 March 2013 at 12:33 pm

    Leather Tuscadero *sigh*

  8. Treetop 8
    18 March 2013 at 12:48 pm

    Simon Power had to have seen the writing on the wall regarding Solid Energy and he probably tried to explain the dire situation to Key. Had Key listened to Power about bleeding Solid Energy dry, Solid Energy may not have fallen over.

    Key does not have the pride to stop the energy asset sales. The asset sales are a distraction to the government’s running of the country. Key has the time to go to South America to discuss alternative energy and in his own country he drops the ball again and again.

    I actually have some sympathy for English because he is the one who has to be the messenger.

    • tc 8.1
      18 March 2013 at 2:16 pm

      ‘The asset sales are a distraction to the government’s running of the country’
      No the assets sales are a huge part of why they are there and an essential part of their ‘running’ the country.

      ‘I actually have some sympathy for English because he is the one who has to be the messenger.’
      Not me, you lie down with dogs, awake with fleas. Sympathy for a born trougher, unlikely.

      ‘Key does not have the pride to stop the energy asset sales’ No he doesn’t have any directions from the hollowmen to do so. It’s not about pride it’s about the trnasfer of wealth, what bankers do best.

  9. AmaKiwi 9
    18 March 2013 at 2:13 pm

    The increased gearing (borrowing) and increased dividends to the government are a Ponzi scheme.

    The increased dividends made the government’s income look better than it actually was. Solid Energy could NOT afford to pay them but did because they were ordered to.

    The increased gearing was in reality the government borrowing more money to make it look like its SOE was profitable. But the borrowing was concealed because it showed up on the books of an SOE instead of the Crown itself.

    Ponzi scheme. Pretend you are making handsome profits and therefore pay generous dividends. But in reality, you are losing money and the so-called “dividend” is money you borrowed and probably can’t pay back.

    Bernie Madoff made billions doing it.

    • DH 9.1
      18 March 2013 at 3:27 pm

      “The increased dividends made the government’s income look better than it actually was. ”

      Agreed. It’s disgraceful behaviour and there really isn’t any doubt it was a deliberate ploy to make the Govt books look better. When you consider it’s at the behest of the Finance Minister it doesn’t set a good example for accountants in this country, small wonder there’s so much creative accounting these days.

      English’s only mitigation is that Cullen played the same games. Doesn’t make it right though.

    • mickysavage 9.2
      18 March 2013 at 8:38 pm

      Yep.

      It was all part of the give everyone a tax cut effort. The only problem was that tax cuts are permanent whereas driving up debt only has a limited time during which it can be sustained. Eventually it no longer is an option.

      What is really bizarre is that the Government knew that coal prices were weakening yet still insisted in increased dividends and debt.

      Solid Energy was a train wreck waiting to happen.

      • Anne 9.2.1
        18 March 2013 at 8:52 pm

        Hi mickysavage:
        This is off topic but I asked a question on today’s Open Mike (24) and you can probably answer it. There’s a reason why I ask, it’s not just nosiness. I might elaborate on that reason in due course.
        Thanks.

  10. handle 10
    18 March 2013 at 3:08 pm

    Key was a money trader. He knows very little about business.

    • Tim 10.1
      18 March 2013 at 3:27 pm

      That’s actually an observation, and one of the ‘keys’ as to why a semi-financially-literate electorate has been conned by this “ultra krismetic, evrudge Koiwoi”, son of the supposed struggling solo-mum Proim Munster.
      The assumption that because JK worked on Wall Street, he MUST know how to handle a Con – me.

      It’ll take a while for Hobbits to awaken, but the good thing is that when they do – they’ll be all the more pissed off.
      Such a shame that the people that actually understand the capabilities of JK, his Munster of Foinence, and his Munster of ALL are the ones that are out of favour, and who feel threatened by what’s fast becoming a rabble of an opposition.
      I hope any and all of them aren’t too concerned about their respective legacies. (Some, though it’s sad – have spent most of their careers actually being FEKTUV in FISHINT – yet seem prepared to have their reputations fucked over by the Man from the UN).

  11. aerobubble 11
    18 March 2013 at 3:53 pm

    Solid Energy fell over because John Key did not act as a competent CEO, or PM, but a merging of the two. Any competent government would have rolled a new entity to investigate bio-fuels, or lignite, or whatever. Any competent CEO who have ring fenced their money cow. So what did the hybrid monster our PM has become do? He run up debt in a risky industry where Coal prices jump and drop. The board has a ‘out’, it can argue the banks did their due diligence when loaning the money, how were the banks or the board to know Key would cut the biofuel component in petrol.
    And Key also has advice, surely the 100% shareholder knows best that about the future of coal prices, for the government does have a much large budget and also backtop if anything goes wrong.
    i.e. its was government right to take the risk.

    So Key ran the show, pulled the biofuel strings, and the show came to a almighty clanging stop.
    Key does not believe the GFC was so bad, for a long time the term-idea never crossed his lips. Then
    Key raise debt levels. Then Key did not see the effect biofuel changes would have. But hey its not Key’s money, he didn’t get rich risking his own money.

    Public private partnerships don’t work if the government doesn’t believe in government.

    • Tiresias 11.1
      18 March 2013 at 4:09 pm

      Kind’a like Thinking Big without thinking.

    • mickysavage 11.2
      19 March 2013 at 5:56 am

      Yep.

      Remember National’s hundred days of action back in 2008? Labour had just mandated the inclusion of biofuels in petroleum and there was a requirement for petroleum to be supplemented by environmentally sourced biofuel. The change was going to save NZ $17 million a year in Kyoto credits and in the first four years as it started to ramp up it would have resulted in over a million less tons of CO2 being produced. National was that concerned about it that it destroyed the industry as a matter of urgency.

      Astounding.

      • aerobubble 11.2.1
        19 March 2013 at 3:01 pm

        National screwed the carbon trade by allowing foreigners to buy credits, now at all time low in price. Most countries have a limit on foreign sales. So essential your some big russia company wanting to offset your carbon admissions and there’s this island in the pacific selling them cheap. Low and behold the NZ$ dollar jumps….

        …I don’t know the consequences but it can’t be good when someone starts asking for us to balance the carbon – which I presume is what a credit is, a promise.

  12. AmaKiwi 12
    18 March 2013 at 4:10 pm

    Key “didn’t get rich risking his own money.”

    Are we sure he’s not getting rich on these government deals?

    How would we know if a hidden off-shore account loaded up on Sky Casino shares or NZ dollar futures contracts?

    • UpandComer 12.1
      19 March 2013 at 2:49 pm

      Well David Shearer might have another account that he’s failed to declare stacked full of money/shares/bonds/God knows what, he also won’t say he’ll buy the shares back…

  13. Peter 13
    18 March 2013 at 6:16 pm

    Unless the Left come up with Solid Energy sound bites that register with Middle New Zealand our teflon PM will once again avoid jumping the shark and continue his commanding lead in the polls.

    Having Left leaning sympathisers despair on the sidelines is of no significance and the Nats know it.

    • Colonial Viper 13.1
      18 March 2013 at 8:42 pm

      Just give the Labour PR team another day or two to come up with something pithy for a soundbyte

    • mickysavage 13.2
      18 March 2013 at 8:49 pm

      You are right to an extent Peter.

      The reality is that National are crap economic managers. They are like a bunch of cost accountants trying to nickel and dime stuff to make next week’s accounts look slightly better. And they have no idea of the complexity of Human nature and what is needed to get the best out of people. They are too loud, their opinions of themselves are hyper inflated, and they do not have the decency to accept that they are less than perfect.

      But you are right. The best way to counter National’s propaganda is by the use of well targeted truth.

    • tc 13.3
      18 March 2013 at 10:19 pm

      yup plenty of evidence here but can the opposition do its job.

  14. Anne 14
    18 March 2013 at 9:03 pm

    And they have no idea of the complexity of human nature and what is needed to get the best out of people. They are too loud, their opinions of themselves are hyper inflated, and they do not have the decency to accept that they are less than perfect.

    The perfect truth.

    Unfortunately, we have an MSM who aspire to be like them. The false values of materialism and greed is all pervading and none of them are equipped to see the folly of their own behaviour. I can think of a few former National leaders who would be spinning in their graves at what was being done to their beloved National Party.

    I can think of a few long gone Labour leaders who would be doing the same…

  15. paul scott 15
    19 March 2013 at 12:17 am

    Yes punters and you are correct MickySavage , Solid Energy , Don Elder is a disgrace,but I read in the news paper today he is highly employable because he is so mercenary venal, so suck that.
    jump the shark.
    It is New Zealanders that are dumb, don’t balme the PM for understanding how stupid we are, it means he is bright, and you Labour can have Winston Petyers and Nationalisation and Green and print money, and devaluation of NZ dollar, and you will lose the next election

  16. Green machine UpandComer 16
    19 March 2013 at 12:18 am

    Can I just ask. What do you people think of a Labour leader who has not declared at least $50k of an offshore account for the past few years even though it has been reminded to him by IRD every financial year? Given that you are so consistent, will you apply the same standards as you would to John Key and money?

    • Colonial Viper 16.1
      19 March 2013 at 12:24 am

      even though it has been reminded to him by IRD every financial year?

      Where did you get this please?

  17. pollywog 17
    19 March 2013 at 2:54 pm

    Major Stumblefuck…stumbles from one major clusterfuck to the next.