Mighty Big Gamble on Mighty Big Gift

Written By: - Date published: 8:43 pm, August 20th, 2013 - 19 comments
Categories: capitalism, infrastructure, Privatisation, water - Tags: , , ,

Hey John, how much public money are you going to pay the wealthy to “buy” our assets? (And how just desperate are you…?)

The announcement yesterday that JK and his buddy Bill have come up with a scheme to give interest-free “bridging loans” to the small number of already wealthy NZers who dabble in the share-market to entice them to buy little slices of Meridian Energy (a company they and the rest of us already own) is the kind of farcical extreme that belongs in a parody show like The Thick of It, or The Daily Show.

A quick recap:

1) You, I and all other NZers own Meridian (just as we all owned Mighty River Power before they flogged off 49% of it).

2) The $30 million subsidy flung at Rio Tinto to keep them operating in the south for the next few years was always about propping up Meridian so it could be flogged off.

3) The predicted return on the asset sale was always shonky, but when we add in the cost of these sweetheart loans (up to 40% of the share value, no interest for 18 months and returns paid every year on the full value of the shares – including those that haven’t been paid for) it’s hard to see this as anything but a loss. A lost asset, a financial loss, and a loss of credibility for the government.

4) It’s ridiculous (but typical) that this sly wee deal hasn’t been costed (or rather, that the costing isn’t being released to us – the people who are paying for it both through the loss of a major part of our state asset and through the direct financial cost of the loans scheme).

5) In the absence of any other assessment, the Greens have announced an estimate – $40 million. Maybe they’re right, maybe they’re wrong. Hard to know when the boys aren’t talking. If they’re right, we’re now talking $70 million up front to help convince a minority of wealthy NZers to buy something currently owned by all NZers.

6) And why do they need convincing? Well, how are those Mighty River shares going, mate? Don’t worry – probably just a market fluctuation. After all, the market knows best.

And all this on the same day as the Reserve Bank announces restrictions on home lending that will make home ownership a phantom dream for the many whose tax money is being used to subsidise this gift to the few.

Perhaps The Civilian has crossed over to The Dark Side and has taken employment as a policy advisor for the National Party…

— red blooded

19 comments on “Mighty Big Gamble on Mighty Big Gift ”

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  1. r0b 1
    20 August 2013 at 8:56 pm

    Spending even more of our money to sell our assets to the already wealthy. Spending even more of our money to prop up a privatisation campaign for purely ideological reasons.

    This on top of $30 Million of handouts to Rio Tinto – social welfare bad, corporate welfare good! (Seems corporate welfare caused a bit of a flutter in question time today…
    https://twitter.com/norightturnnz/status/369652209362800640
    https://twitter.com/danylmc/status/369652392897163264
    )

    Meanwhile – MRP shares closed at $2.22 tonight…

    • Tamati 1.1
      20 August 2013 at 9:02 pm

      The Rio Tinto bailout probably harmed Meridian more than anything. The would make more by selling the power on the national grid. The problem is that “shock horror” power prices would fall and the other companies would be compromised. The $30m bailout is a drop in the water compared to price we all pay in higher power prices!

      I think the MRP float/flop will probably spook the bookmakers into underpricing Meridian. It’ll probably be a decent buy.

      • r0b 1.1.1
        20 August 2013 at 9:25 pm

        The Rio Tinto bailout probably harmed Meridian more than anything.

        It certainly seemed to harm MRP – the share price fell steeply over the few days following the announcement, and still has not recovered.

        The $30m bailout is a drop in the water compared to price we all pay in higher power prices!

        Exactly.

        • IrishBill 1.1.1.1
          20 August 2013 at 9:38 pm

          MRP will continue to fall with the Meridian float. It’s simple supply and demand. Supply more energy shares into a market with a finite demand for them and the price falls. I’ll be interested to see how far MRP shares have fallen by this time next year.

          Weirdly the nats seem to have come up with a deal in which both the buyers and the sellers lose out. Perhaps someone more financially adept than I am can explain where all the wealth goes because as far as I can tell (in a quick once over) it just seems to evaporate.

          • Colonial Viper 1.1.1.1.1
            20 August 2013 at 9:45 pm

            It’s a chance for foreign institutional investors to pick up generator shares on the cheap and hence acquire more shares of the asset as local (“ma and pa”) investors (and the country as a whole) lose out on their initial investment.

            By acquiring their shares at a reduced average cost basis per share, the foreign institutional investors enjoy an effectively increased dividend yield from their ownership.

            tl;dr it’s giving away the generators to foreigners for fuck all.

          • Draco T Bastard 1.1.1.1.2
            20 August 2013 at 9:51 pm

            Perhaps someone more financially adept than I am can explain where all the wealth goes because as far as I can tell (in a quick once over) it just seems to evaporate.

            That’s all that ever happens with paper wealth.

  2. Tamati 2
    20 August 2013 at 8:58 pm

    Yep, sounds like a sweetheart deal indeed! I bet the creative accountants will also book the proceeds of the sale the day it goes public, despite not receiving the cash for another 18 months.

    [lprent: You still have another couple of days on your ban. I’ll reluctantly forgo my usual doubling up of the full ban on each comment for people commenting while banned because I suspect that you have never seen it. But you will be in auto-spam for the next few days. If I find too many comments left there then you’ll get into doubling.]

  3. vto 3
    20 August 2013 at 9:42 pm

    30% down
    no interest
    don’t pay anymore until 2017

    • David H 3.1
      21 August 2013 at 8:16 am

      But and here’s the rub, it’s not a home appliance HP agreement. But that’s how it’s being sold.

  4. vto 4
    20 August 2013 at 9:43 pm

    john key at his peak

  5. chrissy 5
    20 August 2013 at 9:58 pm

    What does this man think we are. A bottomless piggy bank.

  6. AsleepWhileWalking 6
    20 August 2013 at 10:19 pm

    How about interest free loans to those severely disadvantaged in the housing market?

    • Colonial Viper 6.1
      20 August 2013 at 10:28 pm

      Yes but only to be fixed price socially provided housing, otherwise it risks heating up the housing market even further.

  7. red blooded 7
    21 August 2013 at 7:10 am

    And now, adding insult to injury, we are told that Genesis will be on the block while you and I still have money out in loans for Meridian. Maybe they’ll just simplify the process and give these ones away. A few judicious bribes in key electorates, perhaps… (Please note, JK, that was sarcasm, not a suggestion.)

    • Andy-Roo 7.1
      21 August 2013 at 11:55 am

      I can see the headlines now:

      “Left wing blogsite supports Genesis share giveaway to the wealthy. John Key says “This proves the hypocrisy of David Shearer and his commie mates” “

  8. Tracey 8
    21 August 2013 at 8:34 am

    Can you imagine if the Clark Government was doing this???

  9. Sable 9
    21 August 2013 at 8:48 am

    Who are the real “bludgers” in this society. Just take a look at National and their mates for an answer to that question…

  10. Tracey 10
    21 August 2013 at 8:59 am

    Srylands must be excited, free money for his portfolio.