Written By:
James Henderson - Date published:
8:21 am, May 8th, 2012 - 20 comments
Categories: privatisation -
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The Nats say they won’t sell more than 49% of our energy companies and AirNZ. As if that’s a good thing. As if it doesn’t carve a $100m per year hole in the budget. But, it turns out its worse than that. The Greens have discovered that every power station in the country is a wholly-owned subsidiary. 93 subsidiaries in all that own all the actual valuable stuff.
After privatisation, there will be nothing to stop them being flogged off one by one, and every incentive for the boards to do so to meet the profit motives of foreign buyers. It’s a formula for classic asset stripping, leaving a hollowed out companies in 51% public ownership that doesn’t actually own the real assets.
Like Clayton Cosgrove says, we’re told we’re ‘just’ selling half the horse but, actually, the rest will go bit by bit til we’re left holding nothing but the saddle.
But we can stop this. Download the Keep Our Assets referendum petition. Sign it. Get everyone you know to sign it, and get it back in (that’s the really important part!). Volunteer through the Greens and Labour to help more with the big push for 300,000+ signatures.
The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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Why doesn’t John Key address this and explain it to the nation?
(and while we’re at it, why doesn’t John Key ask John Banks the questions?
and why doesn’t John Key explain why thinks it is good to have foreign landlords?)
If there is one thing that really gets peoples goats it is a refusal to stand and answer. Witness the gormless coward ex-Pike Rive mine boss Gordon Ward. Witness John Banks. Witness now John Key, who will shortly be revered as much as the said cowards Ward and Banks. Pieces of shit.
NOBODY expects the National Party’s economic mismanagement! Our chief weapon is tax cuts… tax cuts and asset sales… asset sales and tax cuts…. Our two weapons are asset sales and tax cuts…and ruthless austerity…. Our *three* weapons are asset sales, tax cuts, and ruthless austerity…and an almost fanatical devotion to the Chicago school of economics…. Our *four*…no… *Amongst* our weapons…. Amongst our weaponry…are such elements as asset sales, tax cuts…. I’ll come in again.
Very good.
Where’s the focus and shouting about the actual voting share % being exempt so whilst the crown may retain 51% of physical monetary capital the voting rights and control can be sold off to pretty much any level they like.
This has been about for weeks yet nada from the so called opposition…..FFS leave the old man to dig his own grave with the MSM and his own foot and focus on the sell offs.
I have signed the petition, as has the wider family.
Brian Gaynor in the NZHerald yesterday floated the idea of parceling them out to different kinds of New Zealanders.
But we are unlikely to stop this. There will be a full grieving cycle to go through after they are sold.
But once they are, in the course of the next 2 years Labour and the Greens are going to have to generate policy that allows New Zealand to get along without much of those dividends.
We still need a state that forms new companies and partners with the economy. We will never in the foreseeable future regain the scale of these companies, or their dividend streams. But I seriously think we need an activist state that forms Joint Ventures with all sorts of companies.
For example, pass a law requiring Fonterra to raise capital frompublic New Zealand funds before gonig to international funds – eg the NZSuper Fund, EQC, and ACC.
In the South Island in particular the Ngai Tahu are really major players in the property and tourism fields. We should start to want a state like that again – in which you can see New Zealand Government crests and logos on a shole range of companies that they partially own.
I know this will be controversial for this site, but we have such a weak state, and a weak economy, that we really have to work and interact together. It will be a new form of Sutchean integration. It won’t be the same as (say) France’s massive corproate spinoffs from the statfe-backed defence industry, or Sweden’s. It will be smaller, but it has to be ours.
Why bother buying them back? Screw the parasites that buy them and nationalize the assets back… consider it a form of parasite tax… 😛
Does anyone know what the timeframe is on the petition (when it has to be back)?
12 months after the Clerk’s approval – so April next year.
Seriously? Won’t it all be over by then?
My bet is that they will all be sold by Budget next year ie end of May 2013. We need to face that, barring Key’s Parliamentary majority failing, this is going to go ahead. Just makes me drink on a Sunday evening, it all does.
Probably for Mighty River, but it’s a multi-year programme of sales. And the power companies plus Air New Zealand aren’t the only assets in public hands.
Edit: “The Share Offers are expected to be conducted over a three to five year timeframe, depending on a number of factors including market conditions and company readiness.” – https://www.governmentshareoffers.govt.nz/about/
Yes I was more thinking of the legislation to make it happen.
It’s not a binding referendum anyway. The only purpose of it is to embarrass the government, and also give the left-wing parties a bump going up to the next election.
they’re hoping to get the signatures far quicker than that. And only Mighty River will have been sold by then.
“The Greens have discovered that every power station in the country is a wholly-owned subsidiary. 93 subsidiaries in all that own all the actual valuable stuff.”
Nine power stations are already in private ownership. Contact is the second biggest power generator in NZ (according to wiki, but I think there are innaccuracies and inconsistencies in that article). Can’t quite figure out who exactly owns Contact now, but 51% seems to be offshore.
http://en.wikipedia.org/wiki/Contact_Energy#Power_stations
51% by Origin Energy of Australia.
High time to have on every roof in NZ solar panel(s) which will provide hot water and heating – maybe more.
Analysis: Filling foreigners’ pockets
By Brian Gaynor
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By Brian Gaynor
New Zealand has had a comprehensive privatisation programme since 1987.
Over the past 12 years 40 state-owned commercial assets have been sold, realising $19.1 billion. As at August 31, 1999 these assets had an estimated value of $35.7 billion, $16.6 billion above their original sale price.
The sale process is almost complete because the Government’s remaining commercial assets have a book value of only $4.6 billion.
The privatisation programme has been a huge windfall for overseas investors. Just over 79 per cent, or $13.1 billion, of the increase in value has gone to offshore interests.
A list of the biggest winners shows that foreign interests fill the top four spots.
At the top is a combined group of overseas institutions with a net gain of $3.8 billion. Telecom has been the main contributor. In the 1991 Telecom share float – which was initiated by Ameritech and Bell Atlantic – foreign investors were allocated two-thirds of the shares at 200c a share.
Ameritech and Bell Atlantic, the two original Telecom investors, are in second and third place with realised returns of more than $3.2 billion each. These figures do not include their share of Telecom’s $5.5 billion of dividend payments since privatisation. Ameritech’s return is higher by $150 million because the Chicago-based company sold its shareholding at a higher price than Bell Atlantic.
National Australia Bank, which bought Bank of New Zealand, is next in line. It is sitting on an estimated gain of more than $2 billion after buying at a cut-rate price in 1992.
New Zealand investors, including institutions and individuals, are in fifth spot. They have participated in these floats and share sales:
• Bank of New Zealand and Petrocorp – new shares were issued to the public by these Government-owned companies.
• Telecom, Air New Zealand and Tranz Rail – the new owners of these privatised companies sold shares to domestic and offshore investors.
• Auckland International Airport, Capital Properties and Contact Energy – the Government sold shares directly to the public.
• The sale of 104.5 million Fletcher Challenge ordinary division shares, 26.1 million forest division shares and 10.4 million Wrightson rights.
The Crown had obtained these shares when Fletcher Challenge exercised a put option associated with its Petrocorp purchase.
The outcome of these share sales has been a net gain to domestic investors of $1.9 billion. This is insignificant compared with the gains made by overseas interests. It is also minuscule compared with the profits realised by Australian investors from their Government’s privatisation programme.
Telecom accounts for more than 80 per cent of the domestic investor’s profits. Air New Zealand is in second place, followed by Auckland International Airport.
New Zealand investors lost money on the Bank of New Zealand, and at the end of August Tranz Rail was 50 per cent below its 619c issue price. Institutional investors are also well down on their purchase of Fletcher Challenge and Wrightson shares from the Government.
Fletcher Challenge has made an estimated profit of more than $1 billion from its investment in Petrocorp, Rural Bank and the methanol and synfuels plants.
Sir Michael Fay and David Richwhite have realised a total gain of $410 million. This is made up of Telecom ($274 million), Bank of New Zealand ($41 million) and Tranz Rail ($95 million).
Alan Gibbs and Trevor Farmer have realised a larger profit from their Telecom investment because they sold their shares at a higher price than the Fay-Richwhite interests.
Brierley Investments’ relatively small gain from privatisation is a reflection of the company’s poor performance in recent years. The investment group has recorded a $200 million plus gain on its Air New Zealand holding, a small profit from its investment in Petrocorp and a loss on its Forestry Corporation holding.
The country’s premier investment group was outmanoeuvred by overseas investors and a number of New Zealand interests when it came to picking winners from the asset sales process.
Edison International, which bought 40 per cent of Contact Energy at 500c a share, is the only investor sitting on a loss of more than $200 million.
The main objective of the privatisation programme is to repay Government debt, particularly overseas borrowings. On the surface this has been reasonably successful.
Since the asset sales began in March 1987 the total debt has declined from $42.5 billion to $36.0 billion and the public sector’s overseas debt has fallen from a high of $26.3 billion in March 1994 to $17.4 billion.
But behind these figures is another story. The sale of assets to offshore interests has led to a huge increase in dividend payments to overseas shareholders. This has a negative impact on the country’s current account or balance of payments.
Since privatisation Telecom has paid dividends of $5.5 billion and capital repayments of $1.5 billion, most of which have gone offshore.
These payments compare with estimated interest savings of less than $3.5 billion on the $4.25 billion of overseas debt repayment associated with the Telecom sale.
Offshore dividend payments by former state-owned companies have increased the current account deficit. A current account deficit has to be funded by borrowings and/or the sale of assets. Government debt has fallen since 1989 but offshore borrowings by the private sector have risen by $57 billion.
In the final analysis many of our best and biggest companies have been sold to offshore interests, yet New Zealand’s total overseas debt, both private and Government, has risen from $46 billion to $102 billion since the end of 1989.
The privatisation programme, although sound in principle, has had major flaws and wasted opportunities.
• Nearly 80 per cent, or $13.1 billion, of the $16.7 billion increase in value of the privatised companies has gone to overseas investors. This massive transfer of wealth to foreigners, which has had a negative impact on the New Zealand economy, has been facilitated by the Government’s sale procedure policy. (This was covered in last Saturday’s column.)
• Nearly $8 billion of the $12.9 billion invested by foreign interests has come from companies with long-term investment horizons. This indicates a strong potential to attract direct investment – investment that builds new factories and creates jobs – yet the Government has made little attempt to encourage this sort of foreign investment.
• A number of countries have used, or are planning to use, the proceeds from Government asset sales to promote investment in new, sunrise industries. If carefully organised, this can have a far more positive impact on an economy than a reduction in Government debt.
• Other countries are also putting the proceeds of asset sales into dedicated investment funds which will be used to finance future pension or superannuation liabilities. This has a two-fold benefit: it reduces the drain on the exchequer and stimulates investment markets, particularly the sharemarket.
On a scale of one to 10, New Zealand’s privatisation policies score no better than three. Hopefully the next Government – whether National or Labour dominated – will adopt a more sensible and realistic approach to the sale of state-owned assets.
No country can expect to generate widespread domestic wealth if it has a deliberate policy of selling its best assets to foreign investors.
This is what makes me despair.
A , so called, ” business commentator”, still says “The privatisation program, although sound in principle””, in an article which shows conclusively that privatisation was an unmitigated 14 billion disaster. AND that is without counting lost dividends, forcing on the exchange rate, price rises, extra business costs (lost international competitiveness) and replacement costs for run down assets which the privatisation “program” has cost us.
How much and how costly a fuckup do we need before the unthinking authoritarian followers who parrot “private is always better” accept that privatisation of essential infrastructure is NOT “Sound in principle”.
Of course, as we know, their leaders know it is not sound, The don’t care about principle, they just want to get their hands on the income from our assets.
Helped by sycophantic unthinking idiots.
So what?
Are lefties really this paranoid and economically illiterate?
I’d be shocked if the power stations weren’t individually owned by limited liability companies, the group director would be liable for fidicuary negligence if they weren’t. All it would take is for one station to have a massive judgement against it and the WHOLE group could be threatened. This is asset protection 101.