Amidst the froth of predatory “excitement” about the sale of our power generation assets, it was refreshing to read in The Herald yesterday a single lone voice who was thinking long term. Thank you Wayne Cartwright:
Wayne Cartwright: Asset sale is ‘strategic blunder’
The Government’s plan to sell publicly owned hydro-energy resources is a huge strategic blunder. This is not due to the objections raised so far, such as worries about the public-private ownership model or transgression of Maori water rights. The reason is arguably much more important than both of these concerns.
The Government has grossly underestimated the value of hydro-energy assets to New Zealand citizens. The assets are likely to be worth at least double the amount the Government is prepared to accept. This is because the valuations have apparently ignored the implications of clear signals that global energy costs and prices will increase greatly and permanently within the next 7 to 10 years. …
New Zealand’s distinctive energy endowment provides us with the huge future benefit of already providing the high proportion of moderate-cost and renewable energy sources that most other countries, far more dependent on fossil fuels, will struggle to achieve. This means our capacity for hydro and geothermal electricity generation has remarkably high future value. These endowments are truly sovereign strategic assets. They have a very high holding value arising from future strategic opportunities and applications that will emerge for New Zealand if ownership of them is retained.
It seems this high holding value has not been understood either by the generating companies or by the Government and its advisers. This appears to be because the mainstream traditional commercial valuation techniques consider only current and projected electricity prices. The value of strategic holding opportunities is ignored … and underestimates the value of the asset. …
Government’s hydro asset sales strategy is inept because it is blind to the future global energy situation. The strategy is extraordinarily naive and demonstrates both an alarming absence of strategic common sense and a lack of understanding of future economic realities. It squanders a resource that has huge future value to the nation. Implementation of it should be stopped pending proper development of a strategic holding plan.
Dr Wayne Cartwright is a strategy consultant and retired Professor at the University of Auckland Business School.
I don’t know whether the Nat government doesn’t understand this, or simply doesn’t care. But once again we have a classic case of stupid short-term thinking stuffing our long term prospects. It has happened far too many times in this country.