We know that only 2.5% of Kiwis bought shares in Mighty River Power (despite 400,000 registering to buy). English now talks of ‘tens of thousands’ buying Meridian shares. This ain’t no widespread ownership – it’s the few buying and the many losing ownership. So far, we’ve paid at least $100m for these sales. Yesterday, Key added $40m in interest-free loans to Meridian buyers.
See, the Mighty River bonus share bribe didn’t work. Bugger all people bought the shares, and even fewer have held on as the shares have plummeted 10% since listing. So, Key’s come up with a different bribe for the Meridian sale – pay 60% of the price of your shares up front, the other 40% in 18 months (Cosgrove asked ‘what next, a free set of steak knives’ 🙂 ).
You might ask ‘so what, they still pay in the end’. Yeah, maybe (although you want to check out what happened with these dodgy schemes in Aussie), but use of money has a cost, that’s what interest is. Key’s effectively giving the 2% or fewer of Kiwis who buy Meridian shares an interest-free loan for 18 months. And the price of that is the government doesn’t get the cash up front, it has to wait 18 months. That means Key will have to borrow the missing money for that 18 months until the 2% cough up. The Greens’ estimate, based on the Treasury’s estimate of Meridian’s value and how much of Mighty River went to ‘mum and dad’, that the additional borrowing cost to the Crown as a result of giving these interest-free loans to Meridian buyers will be around $40m.
As Danyl points out, this isn’t how things work in the real world. Well, not in the real commercial world. Unfortunately, it is how things work when rightwing governments are trying to line their supporters’ pockets with the public’s wealth.
Think about that – our government is selling shares in companies that belong to all of us collectively, which we collectively don’t want sold. We are already stuck with permanently larger government deficits as a result of the lost dividend streams. We are already stuck with paying the brokers, the lawyers and all the other parasites to the tune of tens of millions. We are already stuck with paying $30m in a bribe to Rio Tinto to give the electricity market some illusion of stability while National gets the sales done. We are already stuck with higher power prices because private investors demand a higher rate of return. We’ve already been stuck with $25m to give bonus shares to the Mighty River looters. And, now, we’re going to pay another $40m to the Meridian looters.
It’s like a sick joke: we’re paying the people who are taking our shares, putting our government deeper in debt, forcing up our electricity prices, and now we’re paying to give the buggers an interest-free loan too.
The total bill for the asset sales before this latest kick in the teeth was at least $103m according to the Greens’ costwatch. Make it $143m now – and we haven’t even counted the last 3 months’ costs or the actual sales costs of Meridian yet. What a bloody rip-off.
What’s going to be interesting though is that in a fortnight we’re going to get the official confirmation that the asset sales referendum will happen. Key will probably have to hold it in conjunction with the local elections (he won’t want to hold it in election year and there’s no justification for holding it close to the date of the local elections but separately, adding to the cost). The local elections are on October 12. That’s a month before the sale of Meridian will happen.