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Nats trying hide Mighty River risks?

Written By: - Date published: 1:49 pm, April 21st, 2013 - 21 comments
Categories: privatisation - Tags: , ,

It is absolutely essential for National that lots of ordinary Kiwis buy Mighty River shares. They’ve staked their whole reputation on it. To that end, they’ve fostered a belief that the shares will be a licence to print money.

That was never the case – in fact, at the share price offered, it’s a low return company. Tiwai and NZ Power only add to the negatives of Mighty River as an investment.

Yet, as Rod Oram found, there’s no independent advice available to ‘mum and dad’ on the size of the risks. Why is it so hard to find that advice? National must have such advice and so must the big firms they’ve contracted for the sale.

But that advice is being kept from the public and all we’re hearing is them beating the ‘buy, buy, buy’ drum – because they have a financial and political interest in Kiwis blindly paying their money down, and they don’t care if ‘mum and dad’ come a cropper later.

Update: See also:

MRP refuses to release engineer’s report

Mighty River Power refuses to divulge a full engineer’s report into its power generation assets.

The state-owned power company, which is being partially privatised, included a summary of the Beca report in its prospectus and investment statement.

But MRP says the full report “is not publicly available, pursuant to our agreement with Beca”.

Why aren’t potential investors getting all the facts? Why not release the report?

21 comments on “Nats trying hide Mighty River risks? ”

  1. Lanthanide 1

    I think anyone who buys into it now is a sucker.

    I decided if I bought any at all, it’d be from Meridian, on the basis that Tiwai closing down will actually be good for them, as they can re-sell the same electricity at a higher rate to other users. But now with NZPower, even that seems like a remote possibility.

    Also this: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10875890

    Quite a lot, it turns out, if you read the 257-page offer document, as all potential investors should.

    Firstly, Mighty River Power has a fair amount of debt and is forecasting to increase it by $250 million to $1.126 billion in the two years to mid next year as it ramps up its geothermal investments. This higher debt and a rise in interest costs helps explain why its underlying earnings are expected to fall 13 per cent next year.

    Yet Mighty River Power isn’t keeping anything in reserve. It is forecasting paying out 107 per cent of its profits in dividends this year. In effect, it is borrowing a bit to pay next year’s dividend.

    Mighty River is also relatively expensive, forecasting a price to earnings multiple of up to 24.4.

    • QoT 1.1

      Pardon my ignorance, but hasn’t “ramp[ing] up its geothermal investments” turned into a giant red flag following the NZ Power announcements? If you’ve got any inkling Labour/Greens form the new government, doesn’t geothermal suddenly become a lot less profitable?

      • Lanthanide 1.1.1

        MRP are investing in geothermal development overseas: Chile and the US apparently.

        Their website says this:

        Geothermal is a premium renewable, in demand globally. Mighty River Power is committed to a strategy of applying our geothermal experience and expertise gained through our domestic geothermal development, construction and operations. Following completion of our Ngatamariki project near Taupo (New Zealand) in mid-2013, we do not expect development opportunities in New Zealand within the next three to five years due to market conditions – and international markets offer better opportunities for growth.

        So if anything, their international investments would put them in a better place compared to NZ-only operators, when NZPower is set up. Assuming, of course, that they can manage an international investment situation and not cock it up; their massive debt levels aren’t very encouraging to me.

  2. Tigger 2

    Thanks for the link. Wow, that Oram piece is scary reading, especially given the author’s credentials. If he can’t find advice, who can? No one, that’s who.

    The Nats have totally screwed themselves with this policy. It’s a mess.

    • Tim 2.1

      Yep, you should have heard him on NinetoNoon the other week with Ryan trying her best not to let him get a word in edgeways.
      Kathryn must be ‘utterly devastated darling’ her potential share portfolio could rapidly disappear up her own etc.

  3. tc 3

    See now why heffernden’s getting 500K to stay through the sale and then he’s off, being an engineer by profession , then a politician in his current role, he’s no idiot when it comes to the cold harsh reality of what’s going to happen.

    Withers and the other fat cats are there to keep the lid on matters. What economic vandals they are paying outa dividend like that and these are the captains of industry the NACT place all their bets one, NZild you’re being conned.

    • Tim 3.1

      “…..being an engineer by profession , then a politician in his current role…..”
      That’s not meant to excuse the guy (in the manner of “awe – he’s not really such a bad bloke is he?”) is it?
      Should have stuck to engineering. Knowingly laying down with dogs has an outcome that was always going to be inevitable

      • tc 3.1.1

        I’m not excusing him for a nano second, the former social credit candidate knows exactly what is being cooked up.

        Just pointing out that he has the analytical numerical skills to know where this is headed and totally agree with the lying down with dogs, the board and this govt is full of them.

        • stever 3.1.1.1

          He might also be stepping outside the acceptable ethical standards of a proper engineer, as required by IPENZ (the NZ engineers’ institute) and the international bodies that IPENZ says it peers with.

          Anyone know if he’s an IPENZ member?

  4. dumrse 4

    ” Rod Oram can’t find indepenant advice…”. Then he should refrain from being a commentator if he is that thick. I’m a “mum and dad” investor and I had no trouble getting advice on risk. Then again I didn’t expect to get it for nothing of have it shoved under my nose.

    • freedom 4.1

      dumrse, so you won’t share your access to this info so other mums and dads can make an informed decision? prat!

      As if you are any diifferent from thousands of others of small time wannabes who are going to be slaughtered by the big boys once the price drops and you bail, then the real investors take it over. You are just a wanker spouting horeseshit, staring up the tailpipe of your inevitable demise.

      Buy your shares and you will only lose money as certainly as the mukapuna to come have lost their heritage.

    • Galeandra 4.2

      Read Oram’s article, Dumbarse, in which he explains how many advisors/institutional experts he sought responses from, and got nowhere with. That was the point of his piece; any reasonably intelligent investor seeking advice on the Mum’n’Dad scale has no hope at all of getting realistic risk assessment.. The no doubt highly competent ‘advice’ you received, on the other hand, I hope you follow in spades. Go on, double up, you know you want to. You deserve it!!

    • Shaz 4.3

      I think you have missed the point possibly because you have not heard the link. Rod’s case is pretty compelling. There is one set of information for institutional investors and a smaller, already out of date set for independent investors as a number of the risks outlined in the prosepectus have eventuated. There is a blackout on advice because MRP sale is bound by US securities law and not NZ securities law. This is (as far as I can understand), because the government either were not able (or overlooked) drafting the MOMA legislation so as do what they had committed to – to ensure New Zealanders residents are at the head of the queue.

      A nonsensical , immoral and economically insane policy that is now also failing on its own terms

  5. Jackal 5

    I was under the impression that it’s a requirement under the law for those selling shares to divulge any and all information concerning risks.

    Anyone who makes investment recommendations is viewed by the law as an investment adviser and can be prosecuted as such for any misleading material. Not stating risks if there are risks is viewed as misleading potential investors.

    A failure to divulge information and mislead potential investors is a prosecutable offence resulting in imprisonment for a term not exceeding 5 years or a fine not exceeding $300,000.

    Perhaps National is taking advice from the likes of John Banks and Don Brash who misled investors concerning the risks involved in the Huljich KiwiSaver scheme?

    • Colonial Viper 5.1

      Institutional investors are going to ask for far more technical and financial information than the average citizen can understand, in order for their own in-house analysts to work on.

      And they are not going to share the results of their analysis with you and I. And also probably not the Government.

    • tc 5.2

      Our corporate/investment governance is a joke, they don’t need an amateur like Banks with joan withers who was on the feltex board when it ‘allegedly’ misled the market.

      Any half decent financial hack who bothered to visited feltex factories would have seen what a joke that joint was but our MSM fawn at the feet of these captains of industry and follow the spin rather than do any actual work.

      MRP will go the same way under Shonkey.

  6. Steve Withers 6

    National have proven themselves to be untrustworthy when private business interests and executive power collide with the public interest and democracy.

    Never mind ideology. Never mind policy.

    You just can not trust them.

    The gutting of democracy in Auckland as a consequence of the amalgamation, the CERA dictatorship in Christchurch and the referendum to get rid of MMP all stand as clear signs they have no time for democracy.

    Getting rid the TVNZ Charter, canning TVNZ7, gutting DoC, ignoring climate change…..are clear signs they have no time for the wider public interest.

    These are just a small number of the many things that collectively render them untrustworthy. They will do as they please for the narrow interests who they actually represent (farmers, transport operators and any foreign corporate) no matter what most people want done. The asset sales programme is just one more example.

    I won’t be buying shares in any of these assets because I *already* own them.

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