Where did Mighty River get that spare $50m?

44 comments on “Where did Mighty River get that spare $50m? ”

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1. darren 1

   16 October 2013 at 8:11 am

   It has it on its books, its merely a blip on the horizon, you worry too much about nothing.
2. Lanthanide 2

   16 October 2013 at 8:48 am

   “But the bigger question is: where did Mighty River get a spare $50m in the first place?

   From you and me, of course. By charging too much for power.”

   Of course, had MRP still been owned by the government, it is very likely it would have the same $50m. Only it would be going to the government as a dividend, rather than used for a share buy-back. But the outcome is the same: households and businesses paying more for power than they should be.
   • Lightly 2.1

     16 October 2013 at 9:25 am

     which is why we need NZ Power. Over-priced power is a tax (and a bad tax) no matter whether its going to public or private coffers.
     • Draco T Bastard 2.1.1

       16 October 2013 at 12:36 pm

       NZ Power is a waste of time. Renationalisation would be much better.
       • Tamati 2.1.1.1

         16 October 2013 at 2:05 pm

         +1
       • Matthew Whitehead 2.1.1.2

         16 October 2013 at 6:16 pm

         The upside of New Zealand power is that you don’t have to splash out as much capital on the power companies, and nobody can accuse you of being too radical and anti-capitalist. The downside is that you still have a lot of essentially free money going to overseas investors care of our private power companies.
   • felix 2.2

     16 October 2013 at 9:25 am

     Yep, as long as these entities are set up to behave as corporations for profit that’s exactly what they’ll do.

     Such important pieces of infrastructure should never have been treated this way.
     • Draco T Bastard 2.2.1

       16 October 2013 at 12:36 pm

       +1
     • Lanthanide 2.2.2

       16 October 2013 at 12:53 pm

       Yes, but the flip-side is that a profit motive is an effective method of ensuring finite resources are used in the most productive fashion.

       Not the only method, but a proven one.
       • Draco T Bastard 2.2.2.1

         16 October 2013 at 3:04 pm

         Yes, but the flip-side is that a profit motive is an effective method of ensuring finite resources are used in the most productive fashion.

         Incorrect, the profit motive is, as a matter of fact, an effective method to ensure that finite resources are used up ASAP and not efficiently either. It’s why we have cars rather than good public transport and why National is looking to dig up all our resources and sell them.
   • Draco T Bastard 2.3

     16 October 2013 at 12:34 pm

     That would depend upon if it was run as a government service or as an SOE. As a government service the government doesn’t get to demand a dividend and so the surplus can be decreased making prices lower but still maintaining enough income to maintain existing infrastructure and building new infrastructure as needed. Even the latter could be removed from the electricity price if the government paid for new infrastructure through taxes.
3. ghostwhowalksnz 3

   16 October 2013 at 8:51 am

   Its not just a ‘share buyback’ but its also a reduction in the number of shares on issue, months after they just issued a whole swag.

   Seems like the board has advisors who say one thing and then say another- which is of course code for politicians.
   Then again, it makes it easier for a corporate takeover of MRP by one of the other power companies, which is what this whole share sale schmozzle is about
   • Lanthanide 3.1

     16 October 2013 at 9:00 am

     Yeah, I think Key saying it’s just a normal part of business is being disingenuous.

     I think you’d be hard-pressed to find any companies that had a share buyback within 5 months of an IPO.
     • Tracey 3.1.1

       16 October 2013 at 9:16 am

       ah, that answers my question below. Thanks.
   • bad12 3.2

     16 October 2013 at 9:01 am

     No it’s not a reduction of the number of shares on issue, that reduction only occurs if the shares bought back are cancelled,

     Mighty River have already stated that as a result of the share buyback they have no intention of cancelling the shares,

     Which then of course begs the question of where the shares are destined to be ‘onsold’ to…
     • ghostwhowalksnz 3.2.1

       16 October 2013 at 9:28 am

       Thats interesting, that contradicts one of the other reasons the market likes it.

       “Share buybacks typically reduce the number of shares on issue in a company, boosting the value of the remaining shares.”- So thats not the reason
       As well they say the amount involved is too small so they need to spend more !

       This was interesting from English before the float, when he was taunting Labour about their opposition to asset sales

       “Bill English says he is still waiting for Labour to pledge to buy back the shares that National is planning to float in four state-owned companies. The Minister of Finance is waiting in vain.”
       Armstrong in The Herald -http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10814415

       Buyback the shares ? Who would have guessed.
       Seems like a good question to ask English in parliament- ?
       • David H 3.2.1.1

         16 October 2013 at 10:05 am

         Thats an article from 2012 FFS, can’t the Herald clean up it’s pages of out of date dross.
         • ghostwhowalksnz 3.2.1.1.1

           16 October 2013 at 10:54 am

           So share buybacks were bad back in 2012 and a good idea today ?
4. Saarbo 4

   16 October 2013 at 9:07 am

   John Key quote:

   “…The member is making a huge mistake in showing her complete lack of knowledge of financial markets if she wants to conflate pricing with the capital structure of the company.”

   I am trying to work out why Key would have made the above statement because “pricing” drives profitability, which directly affects “capital”…so of course “pricing” affects “capital structure”, he is just trying to do the classic National Party baffle with bull shit.

   Metiria has not made a “huge mistake in showing her complete lack of knowledge of financial markets…”, quite the opposite, John Key is showing his lack of knowledge.

   Ultimately they have $50m surplus cash because they have over charged customers.
   • Lanthanide 4.1

     16 October 2013 at 9:17 am

     I think the point Key is making is that decisions about capital *can* be independent of those about pricing. He hasn’t established that this is the case in this instance, however.
     • Tracey 4.1.1

       16 October 2013 at 9:19 am

       It’s also unusual for such a large majority shareholder to be so disinterested in Board decisions and the future direction of their company.
       • ghostwhowalksnz 4.1.1.1

         16 October 2013 at 9:29 am

         Not really, Solid Energy Comes to mind
         • Draco T Bastard 4.1.1.1.1

           16 October 2013 at 12:41 pm

           This government had a lot to say about the direction that Solid Energy went. Most of what they said increased Solid Energy’s debt so that the government could pull out larger dividends.
   • Draco T Bastard 4.2

     16 October 2013 at 12:40 pm

     John Key is showing his lack of knowledge.

     No, John Key is lying.

     Ultimately they have $50m surplus cash because they have over charged customers.

     Exactly.
5. Tracey 5

   16 October 2013 at 9:14 am

   Infratil and Air New Zealand, have they just had a huge portion sold to market by NZers?

   Is it normal for this to happen immediately AFTER a large stock exchange float and sale?
   • ghostwhowalksnz 5.1

     16 October 2013 at 9:31 am

     Infratil, has just offloaded some airports in Europe , at a loss of $100 mill plus, so they need to pump the share price
     • Tracey 5.1.1

       16 October 2013 at 9:41 am

       and not right after a IPO
       • Tamati 5.1.1.1

         16 October 2013 at 2:06 pm

         This wasn’t an IPO. It was the sale of existing shares from one shareholder to another.
6. geoff 6

   16 October 2013 at 9:35 am

   Electricity price increasing at four times the rate of inflation!

   Utterly criminal.

   Not that you’ll hear much from the country’s comfortable commentariat. Probably the Mora’s, Armstrongs and O’Sullivans etc have small or non-existent mortgages, well insulated houses, and secure income. What problems, they ask?

   Disconnected. Out of touch. Ruining the country one smug remark at a time.
7. Ozymandias 7

   16 October 2013 at 10:04 am

   Seventh-form economics should have taught you that a commerical company’s first responsibility isn’t to its customers – it’s to its shareholders. Under capitalism a commercial entity needs only to ‘look after’ its customers to the extent necessary to build or maintain its market share or, in other words, charge as much as the market will bear. In the electricity sector that means the market price is just below the cost of the most expensive generation from time to time.
8. Plan B 8

   16 October 2013 at 10:15 am

   The 50 million has to have come from borrowing if the company owes any money at all then not paying off the debt is the same as borrowing more. So they are leveraging up – each share now has more debt
   • tamati 8.1

     16 October 2013 at 2:59 pm

     Nothing wrong with that.
9. Bill 9

   16 October 2013 at 10:43 am

   Duly noted that JK only seems able to use ‘dead hand’ business speak in response to Metirea’s more social-centric questioning.
10. Draco T Bastard 10

    16 October 2013 at 12:30 pm

    Now, seventh form economics was a while ago, but I’m pretty sure that efficient market hypothesis says that a company that is making excessive profits (thanks to the Randian heroes running the show, no doubt) will lower its prices in an attempt to garner more market share, thus eliminating the super-profits and delivering a better result for customers.

    Not exactly.

    Theory starts it with a monopoly making super profits which encourages other companies to come in to the market with lower prices to try to capture some of the market from the existing monopoly. This will lower profits across the board. If we take the efficient market hypothesis to its logical conclusion then there are no profits (to be more correct, profits will be infinitesimal).

    Of course, Steve Keen has proved that even competitive firms use monopoly pricing to garner super-profits. This would be especially true in a demand monopoly situation such as electricity.

    Rt Hon JOHN KEY : We have a very competitive electricity market in New Zealand.

    No we don’t, we have the illusion of a competitive market with all the added costs that that brings but none of the theoretical benefits. Prices are going up, profits are increasing and people are suffering because of it.

    Time for renationalisation and the efficiencies and cost savings that that brings about.
    • Lanthanide 10.1

      16 October 2013 at 1:04 pm

      “Of course, Steve Keen has proved that even competitive firms use monopoly pricing to garner super-profits. This would be especially true in a demand monopoly situation such as electricity.”

      I’m now effectively in the market for re-carpeting my house, and have noticed the plethora of carpeting companies with ads on TV and all the different places that sell carpets and floor coverings.

      I can only conclude from the massive advertising spend, that all of these companies are raking it in and there’s no true competition going on – if there was, surely we’d see fewer companies, bigger companies and less advertising?
      • tamati 10.1.1

        16 October 2013 at 3:02 pm

        It’s much harder to have an effecient market where companies aren’t selling interchangerable products. Electricity is one of the few (or only?) products, where each selling sells exactly the same product.
      • Draco T Bastard 10.1.2

        16 October 2013 at 3:08 pm

        Whatever makes you think that they’re different companies?
        • Colonial Viper 10.1.2.1

          17 October 2013 at 12:53 am

          Very smart
11. darren 11

    16 October 2013 at 6:52 pm

    Of course this all became possible under Labour, where dividends were extremely high because of record high prices, 78% in 9 years..shamefull.
    • Draco T Bastard 11.1

      16 October 2013 at 8:39 pm

      Ah, the old but Labour did it toooo whinge which completely ignores the facts that 1) nobody here want Labour to continue doing it and 2) that Labour has promised to change things.
      • tamati 11.1.1

        16 October 2013 at 8:52 pm

        The problem being “old labour” promised to change things too.
        • Draco T Bastard 11.1.1.1

          16 October 2013 at 11:41 pm

          Really? I don’t recall the 5th Labour government ever making such a promise.
12. tricldrown 12

    17 October 2013 at 12:09 am

    During the clark years thetr were droughts and electricity shortages due to a rapidly growing economy .
    The clark govt gave these profits back to the people as working for families the cullen fund huge increases in R&D etc.
13. darren 13

    17 October 2013 at 12:42 am

    rubbish, just as many droughts when national was in, and not the increases in power, 78%

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