Over the years I have written a number of posts about the consequences of the great power company and Air New Zealand share selloff that National engaged in during its last term.
In my last post in January 2019 I calculated that the privatisation had cost New Zealand Inc the sum of $2.3 billion in lost dividends and the the shares that were sold were then worth $4.2 billion more than what we sold them for.
FIRST Union, NZCTU, and 350 Aotearoa have just released a joint report suggesting that the privatisations were not only disastrous for the country’s finances but also disastrous for the planet.
From the NZCTU website:
A new report co-authored by FIRST Union, NZCTU, and 350 Aotearoa argues that since the partial-privatisation of our electricity companies, the four big generator-retailers (“the gentailers”) have delivered billions in excess dividends to shareholders. Excess dividends are payments to shareholders in excess of the profits earned by the gentailers.
“From 2014 to 2021 these firms have collectively paid out $3.7 billion more in dividends to their shareholders than they have earned in profits – an average excess dividend of $459 million a year,” said FIRST Union Researcher and Policy Analyst Edward Miller.
“Excess dividend distribution has starved our electricity network of the investment needed to build new generating capacity, hiking prices on households in the midst of a cost of living crisis, and keeping coal and gas-powered generating assets on life support”, said Miller.
“In December 2020 the NZ Government declared a climate emergency, but we are yet to see the kind of urgent action required to match the scale of the threat”, said Miller.
“Private ownership of the electricity industry has lost us almost a decade of possible progress in the fight for a just transition to a low-emissions economy”.
Miller said the era of excess dividends must now end.
“As the largest gentailer shareholder, we’re calling on Government to propose resolutions at shareholder meetings that will channel profits into building new renewable generating capacity, and using any dividends to buy back the gentailer shares”, said Miller.
CTU Economist Craig Renney said “The government has recently acted on the banking sector, and on petrol companies to ensure that they are delivering better outcomes for New Zealanders. This report demonstrates that there is a pressing need to do this for the electricity sector as well.
New Zealand now generates more electricity through coal and gas than we did in 2018. Prices for customers are rising, but new renewable electricity generation that might tackle rising bills and our climate commitments has been missing in action”.
“If the Government wants to honour its commitment to a just transition, it needs to continue to be proactive in holding companies to account.”
The report also calls on the Government to commit the equivalent of its excess dividend into financing new community and household generation ($1.35 billion), and to levy a windfall tax on the gentailers for their remaining excess dividend ($2.36 billion).
350 Aotearoa Executive Director Alva Feldmeier said the Government had a crucial role to play in establishing a solution.
“We can’t expect the market to fix itself. The gentailers feel more accountable to their shareholders than to their consumers which is delivering neither fast emission reductions nor addressing the huge levels of power poverty in Aotearoa”.
Miller said “A majority of people opposed partial-privatisation in the 2013 asset sales referendum; ignoring those voices has come at great cost. It’s time for an electricity system that serves people and planet, not shareholders.”
The associated report contains the calculations behind the conclusions and for the purpose of its analysis includes Contact Energy which was privatised by a previous National Government in 1999 and excludes Air New Zealand.
The conclusions in the executive summary for the report are damning:
Next time a National Party politician criticises the Government for Aotearoa still burning coal or for the high cost of electricity remind them that their sell off of the country’s electricity companies led directly to this situation.
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