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Just give it up

Written By: - Date published: 7:41 am, August 23rd, 2012 - 50 comments
Categories: privatisation - Tags:

The Nats’ asset sales are beset at all sides. The companies aren’t ready for sale. Their future revenue is too uncertain to attract investors. The Government would end up with more debt not less. New, hidden, fiscal costs keep on coming to light. Few New Zealanders want to buy the shares. Over 200,000 have signed a petition against the sales.

The Government is quietly admitting Mighty River won’t be sold this year.

Now, they’ve got to answer why they should be sold at all.

50 comments on “Just give it up ”

  1. You have to admire the gall of Rio Tinto in trying to leverage an even better electricity supply contract at a time where they must have known that any doubts raised would have a significant affect on the share market float.  I expect they thought the Government would cave in and agree to a sweetheart deal.  After all it has been done before.

    • tc 1.1

      I wouldn’t be surprised if that’s exactly what happens so Shonkey can blame that awesome free market with devaluing the entity making it even cheaper for the hollowmen to snap it up…yum yum.

      I’ll throw this out there but wouldn’t we as a country be better off in helping them pay out the workers to close it down and use that 15% back in the grid. This alleviates price pressure using the extra generation.

      I mean how much profit/tax does it pay into NZ not it’s parent offshore ?

      • Speaking of Rio Tinto, if there was ever a company that deserves the corporate death penalty, they’re up there. We should disestablish them in New Zealand and seize their assets.

    • vto 1.2

      Micky, nothing less could be expected from private business. They see an opportunity to take advantage of weakness in one of their suppliers and have leapt at it.

      Remember Tranzrail.

      It will be most interesting to see how these self-appointed master business negotiators will perform. Methinks they will not perform as the cards are already dealt.

      he he he Think I might go back to the right

    • toad 1.3

      In two minds on this one.

      If Rio Tinto were to close the Bluff smelter, Meridian would flood the electricity market with cheap power, its competitors would be poked, and the asset sales programme would have to be abandoned. That would be a good thing.

      The downsides are the impact on the Southland economy and jobs, and the fact that Rio Tinto would almost certainly build a replacement smelter somewhere else in the world and use coal to generate the electricity to power it.

      • Lanthanide 1.3.1

        “If Rio Tinto were to close the Bluff smelter, Meridian would flood the electricity market with cheap power, its competitors would be poked, and the asset sales programme would have to be abandoned. That would be a good thing.”

        One report I read on the matter said this wouldn’t be the case, because the electricity production would be “stranded”. Presumably this means there isn’t sufficient transmission lines to get it out of the area to the rest of the country. Of course why would there be – it was always envisioned that the smelter would be there for decades.

        • Lightly 1.3.1.1

          there’s a new transmission line going in that will mean manapouri can send its power up the country. it will significantly strengthen Meridian’s bargaining position.

          • Colonial Viper 1.3.1.1.1

            Nope. That new line will only have capacity to carry maybe 1/4 of what Tiwai point uses.

            And there is no demand for that extra electricity at night and at weekends anyway – Tiwai point runs 24/7 and NZ does not need that surplus power 24/7.

            • Kevin Welsh 1.3.1.1.1.1

              Then update the line for higher capacity and we help future-proof our supply. That along with improved building standards with regards to energy efficiency and insulation can only be good for this country.

        • toad 1.3.1.2

          According to Brian Fallow:

          While it is remote, the costs of upgrading the national grid to make Manapouri’s power available to the rest of the country would not be prohibitive. It is, in short, in no danger of being a stranded asset, were the smelter to close.

          And as the cheapest power available it would be dispatched.

          The tricky part to calculate is which, and whose, other generation assets would be crowded out and what the impact on wholesale electricity prices would be.

          • Colonial Viper 1.3.1.2.1

            The tricky part to calculate is which, and whose, other generation assets would be crowded out and what the impact on wholesale electricity prices would be.

            The awesomeness of this is that Rio Tinto’s push for even cheaper (free!) power is that it not only distresses Meridian’s sale prospects, it fucks over MRR and Genesis as well.

            I LOVE Rio Tinto!!!

        • Peter 1.3.1.3

          There are two 220kV lines that could get the power north to Roxburgh (and another line that will get it north to Dunedin) but it will require considerable grid reconfiguration. Not impossible on current assets. Another line would certainly help, or even better, an extension of the HVDC south to Invercargill or Roxburgh to allow for that power to be more easily used in the North Island.

          I still think that the economic benefit of using that power in NZ, for electrifying a large percentage of our transport is far greater than the loss of the smelter’s exports and jobs. After all, that’s a whole lot of oil we don’t need to import.

          • lcmortensen 1.3.1.3.1

            No grid reconfiguration is needed – many people think Manapouri and Tiwai are isolated from the rest of the grid, but they are connected to the grid at North Makarewa and Invercargill with lines heading north. All the upgrades to increase capacity on the lines north to the Waitaki Valley and the Benmore HVDC terminal are already approved – they just need to be constructed.

            • Peter 1.3.1.3.1.1

              The issue are the lines to Roxburgh – two single circuit 220kV lines. They can’t take all of the Manapouri load.

              • lcmortensen

                They are currently modifying the North Makarewa (Nth of Invercargill) – Three Mile Hill (Dunedin) – Roxburgh 220kV line to allow more power through northbound between Invercargill and Roxburgh in the short-to-medium term, but eventually they will need a new line (probably Invercargill area to Waitaki Valley direct, 220kV or 400kV)

    • infused 1.4

      I actually think they will be told to f*** off.

      • Colonial Viper 1.4.1

        I sure hope so, mate. In response Rio Tinto is likely to finalise a closing date for the plant and torpedo the sale of Meridian once and for all.

        • RJL 1.4.1.1

          Would Rio Tinto perhaps be thinking that if their actions depressed the value of Meridian sufficiently, then they could buy the Meridian shares cheaply, and thus subsequently negotiate a cheap electricity deal with themselves?

          • mickysavage 1.4.1.1.1

            That is such a scheming underhand cynical manipulation of a dominant market position that it may well be true!
             
            Whatever the motivation is this shows that Key and co are absolute chumps in dealing with the market and that the sale of these assets is a very, very silly idea.

            • tc 1.4.1.1.1.1

              Chumps or champs for their backers after a cheaper price ?

              It also shows what a bad deal for the consumer this whole industry is producing with a country of 4+ million people being run by big ego’s being paid far too much (heffernden) protecting their turf not the consumer.

              Recall the akl blackout in 97….still there’s no true redundancy in akl CBD 15 years later and I see patrick strange of transpower (former vector CEO) going on the front foot about it as it’s nearing completion but 15 years FFS !

    • DH 1.5

      I’m a bit bemused by this one. Rio Tintos argument is that the price of aluminium has fallen so they need to get their costs down or they’ll have to close the plant. Well hello?

      The first question here is why has the price of aluminium fallen? It’s not a raw material, it’s a manufactured product with a fairly fixed cost of production. Has the price fallen because other smelters are making it cheaper or is it because there’s a glut on the market?

      A quick Google finds the answers;

      http://www.china.org.cn/business/2012-06/18/content_25675077.htm

      They’re quoting Chinese producers paying 0.45 yuan for one kilowatt-hour of electricity which in $NZ is 8.7c. It’s been reported that Tiwai are paying 4.7c

      Seems pretty clear that Rio Tinto want a state subsidy to prop them up in the hope that the market sorts itself out again. Also seems clear that China is trying to dominate the aluminium market, squeezing competitors out by dumping stocks at below cost. Don’t we have an FTA with China?

  2. If I hear “Mum and Dad Investors” one more time, I’m going to go nuts. Who are these mum and dad investors? How many mums and dads actually invest like this, in companies like this? Surely, most mums and dads have managed funds rather than buy shares directly?! For me, the problem is that as much as we may want the assets to stay in the hands of these mysterious M&D investors, they simply won’t, because this demographic is made up, and does not invest like this. There must be studies on this somewhere…

    • toad 2.1

      In the case of the Contact Energy privatisation, there were 225,000 subscribers to the IPO. There are now only $80,000 shareholders – most of the Mums and Dads on-sold their shares to corporate investors.

      With the Government’s proposed asset sales this effect will likely be delayed by the “loyalty bonus” rort, but eventually the same thing will happen.

  3. Mary 3

    Does John Key still believe the election result gave him his “mandate”? Is his grasp on what democracy is still so shallow and superficial?

  4. captain hook 4

    kweewee never got a mandate.
    its just a word his spin doctor read in a dictionary of politics and it sounds good.
    I bet he never heard the word before someone told him so last year.
    a mandate is an overwhelming degree of support but the national party has never had that and never will.

  5. On the mandate issue: I didn’t vote for him, but I believe he did get a mandate. He said from day one that he was going to sell assets. Anyone that voted National (or its coalition partners) knew that, and they now have little complaint to what Key is doing. It’s smart politics in my view, he knew he was going to win easily in the last election, he prepared this asset sales thing very earlier on – “no asset sales in the first term”, was heard throughout the land. He knew what he was doing. I didn’t like it then, and I don’t like it now.

    • Mary 5.1

      Do you think the election result still means Key has that mandate? I’d say that even if it’s accepted that straight after the election he did have it, it’s since eroded away to pretty much nothing now. The point is there’s more to the creation of a “mandate” than an election result.

    • Draco T Bastard 5.2

      I didn’t vote for him, but I believe he did get a mandate.

      Nope, to have a mandate requires over 50% of voter support. National and friends got less than 50% and at least one of those friends didn’t campaign on selling NZ out.

    • Colonial Viper 5.3

      Total misuse of the idea of a “mandate”.

      Key has a mandate to lead an elected Government. And an elected Government is there to listen to the concerns of the people and respond to the voices of the citizens.

      It is not a 3 year dictatorship.

      He knew what he was doing. I didn’t like it then, and I don’t like it now.

      But you appear OK with bending over and taking it? Its a democracy, at least you can voice your concerns instead of defending Key’s bad decisions.

      • Fair comments. Maybe I should’ve used a different word than “mandate”. What I meant to say was that it was no surprise to anyone he was going to sell going into the election. He said he would, and that’s what he’s trying to do. I’m not defending him, by any stretch, I couldn’t be more opposed to asset sales. I guess all I’m saying is that anyone who voted for him has little right to complain that he’s now selling our assets – its not like they weren’t put on notice.

        • Colonial Viper 5.3.1.1

          Oh its no surprise he wants to sell them, and its no surprise people are going to be gutsy in order to stop him.

          I guess all I’m saying is that anyone who voted for him has little right to complain that he’s now selling our assets – its not like they weren’t put on notice.

          You are aware that you can vote for a party and still disagree with some of their policies, right?

    • tracey 5.4

      But you do so at the collective peril when the mainstay of their plan, and i use that word loosely, is to sell assets.

    • A mandate is not something you get, it’s something you keep, and there’s no guarantee that winning an election gets you a mandate for your policies, let alone allows you to keep it long enough to implement them. I still say that anyone shilling for the old “mandate to privatise” line has brought into spin so much that it would be pretty painful to untwist them.

      If the election had been substantially about privatisation on the right-wing side, (instead of about half-heartedly opposing it in the case of the Labour Party) then there might be an argument. But we didn’t even learn most of the generalities of the privatisation plan until after the election.

  6. MMP gave Key a mandate to do what he said the Nats would do.
    If you don’t like it scrap MMP.

    • Lanthanide 6.1

      Or, change the rules of MMP so it isn’t in National’s best interests to orchestrate tea parties.

      • prism 6.1.1

        Yes NACT should aim at champagne parties, at least NZ wines.

      • tracey 6.1.2

        anomolies will always exist, you cant change everything to deal with a very isolated situation.

        • Lanthanide 6.1.2.1

          Nor am I suggesting ‘everything’ should be changed. In fact I’m saying we should keep MMP and tweak it, Fortran was saying we should throw the baby out as well.

    • AmaKiwi 6.2

      MMP is not the problem. Elected dictatorships are. Under our system of one house, no binding referendums, and local bodies dis-empowered by Parliament, we have an elected dictatorships under both MMP and FFP.

      I would delighted if you would tells us how we, the voters, can place some restraints on parliament.

  7. UpandComer 7

    Doesn’t the situation with solid energy and AirNZ actually prove that these, like any other assets, are inherently risky? Therefore Russell Norman’s arguments about ‘guaranteed revenue’ are silly, and Bill is right?

    • Draco T Bastard 7.1

      They’re only risky if we sell them. If we keep them then they’re perfectly safe because a state service doesn’t have to make a profit.

  8. OneTrack 8

    How is the referendum going to reach the required 300000. It seems to have been “over 200000” for some time now.

    • Georgecom 8.1

      By people asking others to sign it, either as part of some co-ordinated activity or simply doing it by themselves. Over the past 2-3 week I have got 20 plus signatures simply passing the petition round places or leaving it lying round. Thats 20 more toward the 300,000 plus. A few hundred people leaving it ‘lying around’ translates to some thousands of signatures.

      The required number of signatures will be gathered.

    • Mary 8.2

      Don’t worry OneDimension, by the time all other elements of our constitutional democracy have been applied correctly (and you finally realise Shonkey’s precious “mandate” is no more) there’ll be plenty of signatures to go around, way more than 300,000 signatures. Don’t worry your one-track wee head, you’ll be fine.

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