With the Paris Climate Change Conference beginning today and the public memorial service for Jonah Lomu, you may have missed the news that “tens of thousands” of investors who bought shares in the sell off of Genesis and Meridian Energy in 2013/14 have in turn sold off those shares which has seen an increase in, you guessed it, overseas ownership. That you missed that bit of news was quite obviously planned; Meridian, Genesis and the current government would have looked for a busy news day to blunt the criticism.
However the most fascinating bits of the report are not the entirely expected sell off by investors who are quite clearly not the “Mums and Dads” that John Key tried to convince us they were, nor the criticism of the price received for those companies; the most fascinating bits are the advice of Treasury to the government at the time and the new revisionist response of Bill English, the Minister of Finance, to that advice.
Apparently Treasury advised the government not to sell the three companies: Mighty River Power, Genesis Energy and Meridian Energy, so close together as this would flood the market and ensure a lower price. Bill English is now telling us that, whilst the government was aware of the advice, it had “other priorities;” namely that the electricity market was too great a commercial risk as an industry for the government to be involved in:
“Owning those assets now entails taking a lot more commercial risk than it did ten years ago, so we are pleased that now there’s a market out there with a whole lot of analysts and shareholders who will be managing those risks, rather than the government.” – Bill English
There is no mention of this risk as a motivator for pursuing the mixed ownership model as outlined in the lead up to the election in 2011. Indeed, in the National Party’s own press release they explain that the mixed ownership model is being pursued:
“…to recycle existing capital towards high priority future investment in assets like schools, hospitals and broadband. The proceeds will fund about a third of the Government’s new investment in core social infrastructure.”
During the debate of the Mixed Ownership Model Bill in 2012, Tony Ryall said “the debate is about debt.” Nowhere is there mention that this debate is about reducing the government’s exposure to commercial risk.
So let’s be clear: Bill English went on the radio this morning and lied straight to our faces about why those assets were sold. He lied because the Mixed Ownership Model has been an unmitigated disaster.
When it was announced John Key and friends claimed the government would make $7 billion from the sales. Then they sobered up and gave a ball park $5-7 billion from the sales. Then things were going badly and they said a bit over $4.5 billion.
When it was announced they said “Mums and Dads” were in a great place to invest. Since the float, Meridian has lost 14,000 investors (21 percent of their total investors) and Genesis has lost 16,000 (22 percent of total investors). Overall, local ownership declined from 11 to eight percent and overseas ownership has increased from 11 to 14 percent.
When it was announced we were told there would be new schools, new hospitals and ultra-fast broadband for everyone! Turns out the government can’t maintain what it currently has, so each year, 83 percent of new government capital expenditure on infrastructure (about $5 billion) goes into maintenance, not new infrastructure projects at all, and Bill English himself has stated that “the management of that – has been pretty patchy.” The minimal money we got from these asset sales hasn’t even touched the side of our current infrastructure needs, let alone building new stuff.
The Mixed Ownership Model has been an unmitigated disaster.
Do not be fooled by the spin of a sober looking man in a grey suit. This was not a well-managed approach, this was not about reducing commercial risk to the government, this did not achieve the goals set and this has not encouraged greater involvement of everyday New Zealanders in the stockmarket. This was purely and simply the transfer of public assets into private hands; the one percent profited. The problem for Bill English and the National government is that the facade slipped on this one, so we’ve all got a good look at how selfish and short sighted they have been. They keep piling on the lies; we need to keep piling on the pressure.
[The header image is Genesis Energy’s Tekapo B operations. The photo is by Gerard O’Brien and originally featured in the Otago Daily Times.]