Transpower’s Travel

March 22nd, 2010 at 3:00 pm by David Farrar

Chris Hipkins blogs:

This morning’s Sunday Star Times reveals that spent $2.2 million on overseas travel in the middle of the recession. Between July 2008 and November 2009 they spent $1.3 million on overseas airfares and another $900,000 on “travel expenses”.

To put that into context, all government ministers (including those outside Cabinet) collectively spent about $2.6 million on overseas travel during 2009. I understand the need for Transpower to tap into expertise from overseas, but this just seems excessive.

I have to agree with Chris – it does seem excessive.

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27 Responses to “Transpower’s Travel”

  1. starboard (2,447 comments) says:

    Is/was Chris Carter on the board ??

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  2. Murray (8,835 comments) says:

    Good god were the hostesses moonlighting from keeping Stephen Versalko happy or something?

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  3. RRM (8,988 comments) says:

    According to their website, they have just arranged a bond issue for $73.1 million (HKD 400 million) at 4% for ten years to fund their capital investment programme.

    Imagine borrowing $73.1 million at local overdraft rates? Makes at least some of that travel seem worthwhile… (IMHO)

    http://www.transpower.co.nz/n3535

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  4. aardvark (417 comments) says:

    Why is anyone surprised?

    This is a monopoly SOE. They can do whatever the hell they want and, if they run short of money, they can just put the prices up to keep the cash flowing into the government’s coffers by way of dividends.

    The government isn’t going to bite the hand that feeds it so they continue to remain unaccountable with total impunity.

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  5. davidp (3,319 comments) says:

    Why contrast Cabinet (approx 25 people) with Transpower (approx 300 people skilled enough to be earning more than $100k, other staff, plus presumably a number of contractors)? $2.2million divided by 300 is just over $7k each, which doesn’t seem particularly excessive to me. Even less excessive when you budget some travel for the other 200 staff plus some contractors. And especially when the period for Transpower is 16 or 17 months, rather than only a year.

    So what is the comparable expediture for Labour MPs? If it is greater than $4k each per year, then Hipkins is a big hypocrite. Because there is, by definition, no government business that requires them to travel overseas.

    My own travel, accomodation, and per diem for overseas travel the last 12 months has been around $30-35k. That’d be a hell of a lot less than my boss would spend. It’s just part of running a business.

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  6. Grizz (474 comments) says:

    Could the $900,000 on travel expenses please be explained. They have an extensive physical network consisting of several thousand of kilometers and lots of technical stuff in between. Maintenance costs alone will be huge. Skilled workers will have to stay somewhere overnight and have to be mobilised in order to maintain it.

    Also there is a lot of work and consultation in progress for the new Waikato Transmission line. Again this is expensive.

    The overseas travel may seem excessive. However is it justified? Arguably, if it keeps an old lemon functioning, then maybe. Most people will not understand the efforts and technicalities involved in running the national grid, so it is easy to criticise. Maybe Chris Hipkins is caught up in the same hysteria. He needs to qualify his statement.

    On the other hand, how much does telecom, meridian energy, Fonterra, Genesis Energy spend on overseas and domestic travel? It would be interesting to see how transpower compares.

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  7. Put it away (2,888 comments) says:

    Why are they travelling overseas at all ? Is maintaining NZs power lines an export business ?

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  8. MikeMan (171 comments) says:

    Put it away (620) Says:
    March 22nd, 2010 at 4:34 pm
    Why are they travelling overseas at all ? Is maintaining NZs power lines an export business ?

    So New Zealand breeds all the good ideas and no peer review is needed right?

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  9. burt (7,083 comments) says:

    Sure it seems excessive, no argument there. However is it new ? Has anything material changed in their travel spending in the last 18 months and if not then why was this never a concern under Labour ?

    One thing we can say about the current National govt, they are delivering on Helen Clark’s promise of a new standard of openness and accountability.

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  10. Jeff83 (765 comments) says:

    Why is anyone surprised?

    This is a monopoly SOE. They can do whatever the hell they want and, if they run short of money, they can just put the prices up to keep the cash flowing into the government’s coffers by way of dividends.

    The government isn’t going to bite the hand that feeds it so they continue to remain unaccountable with total impunity.

    And the difference would be if we had a private monopoly? Nothing, well I guess we could send the profits overseas. That would be beneficial I guess.

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  11. PaulL (5,774 comments) says:

    Usually, as a network owner, you find other people come to you with ideas. Typically vendors. And they pay for their own travel to come see you. If you’re going to see other people to get ideas, particularly to the tune of $2 million, you’re probably junketing.

    As to a bond issue for $70 million, I wouldn’t have thought there would be much save on that. The total interest cost at 4% is $2.8 million per annum, so you reckon they spent $2.2 million on travel to save how much exactly?

    Junkets, that is the reality.

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  12. RKBee (1,344 comments) says:

    NZ Power companies overseas based CEOs taking the micky out of gullible Kiwi’s pay packets.
    When are we going to stop this abuse… they’re laughing at as all the way to the bank.
    NZ CEOs are fast becomming the new bottom of the list of the least liked and trusted.
    That makes them worse than NZ politicians and car salesmen..
    I call them corporate prostitutes without the service.

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  13. aardvark (417 comments) says:

    Jeff83, I’m not suggesting that *any* form of monopoly is acceptable.

    What I do believe however, is that critical infrastructure (such as the power industry, especially transmission), the national broadband network, the PSTN, roading and such, all be operated on a cost-recovery basis rather than as either another form of taxation or a way of lining the pockets of private shareholders’ pockets.

    Some things are just too important to leave to the decidedly “unlevel playing field” of profit-lust.

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  14. Tauhei Notts (1,508 comments) says:

    That foreign currency borrowing;
    Ouch.
    Been there. Done that. Got dusted on the exchange rate moving the wrong way. I really hope Transpower have suitable foreign exchange cover in place for any eventuality. What with the cost of that cover, I also hope that with the cost of the cover added in that 4% is a good rate.

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  15. Poliwatch (335 comments) says:

    I wonder why they borrowed in foreign currency. The interest rate does not look that good. No doubt they will have bought cover over fx fluctuations unless they are covering HK assets (unlikely). I am sure they could have got a similar interest rate (as a substantial SOE) from an NZ Bank, or is it a bit too risky for them.

    As to the travel a bit more detail is needed
    How much for Board and senior execs
    How much for other staff
    How much to bring foreign contract staff into NZ
    It does seem a bit high though. Perhaps they are pre-warned about power cuts and all head to Sydney for the day so they can keep using their laptops.

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  16. IMF (5 comments) says:

    Aarvark – what you say is not correct. Transpower can’t just put their price up when they like. They are regulated by both the Commerce Commission (which sets limits on what it charges) and by the Electricity Commission, which approves the grid upgrade expenditures (above $1.5m) of Transpower. With both their prices and their major expenditure under control, their ability to put up prices is very limited.

    The amount they spend on travel may or may not be excessive, but they spend it within tightly controlled caps.

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  17. aardvark (417 comments) says:

    The whole structure of our electricity system is poorly designed.

    We’re constantly told that we need to conserve electricity but the tariff structure is designed so that saving power doesn’t pay much in the way of a dividend.

    If the line-charge were built into the unit-cost then savings would have far more of an effect on the monthly bill than they do right now.

    As it is, if the average household halved its power consumption they’d see far less than a halving of the monthly electricity account. What’s needed is some *real* reform, not the idiotic reforms that the last National government stuffed up.

    And as for Transpower — is it paying a dividend to government? If so then why do they need to borrow?

    Surely it makes far more sense to reduce the dividend payout and fund the costs from profits — rather than pay government a huge dividend then have to go borrow money on the markets.

    As it stands, the money paid to government by way of dividend is just another form of taxation and thus the borrowing that Transpower does is effectively government borrowing by any other name.

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  18. toad (3,654 comments) says:

    Most of the expertise Transpower requires form overseas is technical. Wake up Transpower, you can get that via email and internet these days. It’s not as though most of you were having to negotiate anything, which is when I agree there is a good reason for overseas travel.

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  19. Poliwatch (335 comments) says:

    Aardvark, why do they borrow. Because Government (via Treasury) treats them like any shareholder treats a company and that is to have a certain debt to equity level. Some shareholders might set that at 0 but most don’t and certainly the Government does not. Over the years they have pushed for a higher and higher debt level although it is still quite conservative to many non government companies – often because Boards and Management push back on what Treasury request.

    I have investments in a number of companies (all well managed) and there is no way I would want them to stop paying a dividend just to repay debt. As long as the dividend fits into a suitable dividend range to profit and as long as debt does not grow too high. If it does then I sell the shares. And if they stop paying a dividend (and there are no other upside benefits) then I sell.

    Hang on – I think I might buy into your argument and then suggest that the government sells these companies.

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  20. PaulL (5,774 comments) says:

    Poliwatch – so long as Transpower is borrowing at the same rate as the overall govt. If their borrowing costs are higher than govt, then it is stupid to borrow independently. They would, in that situation, be better for the govt to borrow on their behalf.

    Many govts have a policy that their wholly owned entities aren’t allowed any borrowing, currency hedging or other financial instruments for exactly this reason. They get a much better result with a single competent central entity balancing all the risks and then hedging those that are material in the context of the full govt books. Maybe an amount (say, $70 million) that Transpower thinks is worth hedging might be irrelevant in the context of a government that has huge exposure to currency rates, and what’s more, has the ability to some extent to manipulate those rates.

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  21. Lance (2,309 comments) says:

    toad
    Do you actually have the faintest idea how complex power management is?
    Control rooms can resemble war rooms and stacks of computers are desperately trying to balance systems while Joe (and Janet) public are blissfully clicking on the toaster.

    Fire off a few emails????
    Bloody hell

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  22. Chris2 (703 comments) says:

    A couple of years ago I came across a large pdf file on the Internet that reviewed the Cook Strait cable. It seems the only reason it is in a fragile state today is because it’s worn-out through constant switching (overuse), so electricity companies could get the cheapest spot-price power.

    Apparently before corporatism the flow of power between the the North and South islands only changed direction maybe a dozen times a year, but for the last 20 years its been switched sometimes 5-6 times a week which it was never intended for when it was built – it was for ensuring the country had enough power everywhere, not as a mechanism to maximise profits. Also the spare parts at the substations are no longer made because of their age. What a mess.

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  23. Poliwatch (335 comments) says:

    PaulT – so what you are suggesting is that SOE’s should have an economic advantage over private industry by being ablwe to borrow at government rates, have Treasury operate their treasury function and Cabinet control their Boards directly.

    Sorry but I am not a fan of the economics of socialism. The cost of saving a few dollars in interest will come at the cost of provate enterprise.

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  24. wreck1080 (3,516 comments) says:

    I know someone working at transpower, and they get the best hotels when travelling to wellington.

    When I worked for a private company, they’d always send me (and other employees including senior managers) to the cheapest hotels possible.

    I look upon the govt monopolies with envy :)

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  25. fooman (38 comments) says:

    “I wonder why they borrowed in foreign currency. ”

    Given that it is to cover capex, some of that is likely to be in foreign currency (e.g. USD or HKD) to cover capital items purchased from overseas. So borrowing overseas makes sense – it is in effect a hedge against the currency dropping.

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  26. PaulL (5,774 comments) says:

    Poliwatch: no, not at all. I’m suggesting that no SOEs should compete with the private sector. Transpower doesn’t. If the government is going to own a business, I sure as hell want them to run it as efficiently as possible. Paying extra interest than what they need to, despite their implied govt guarantee, out of my taxpayer dollars, is just stupid.

    If they are competing with private sector, then sell them. If they aren’t then keep them, but this should mean they are a natural monopoly, in which case the aim is to run them as efficiently as possible, as selling them off would expose citizens to monopolistic pricing.

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  27. av8ter (1 comment) says:

    Hello All – Transpower, travel is not the only issue. Currently their contract IT project staff are an issue. In the IS project section alone there are 11 contractors and only 1 permenant member of staff. At aprroximatley $20/hr more than a permenant FTE these contract staff represent in the region of $500K per year of wasted money. Money that comes from YOUR power bill. Given that Transpower has locked in its project spend for the next 5 years it should be able to reasonably forecast FTE numbers for that period. Many of the IT project contractors have been there for at least a couple of years and are likely to remain for the next few years. You can do the maths on that. Somewhere in the region of a couple of million dollars!!! Money better spent on providing more reliable power into Auckland for instance. Multiply this out by several other IT departments utilising long term contractors and the numbers are ridiculous.

    Of course coupled with this are an IS management team who are incompetent, though they believe otherwise, and you are faced with significant financial wastage. Their current thinking. Let’s give the senior management iPods and a in-house wi-fi network. Umm?? Innovation?? Or just the opportunity for the geeks to play. All the while money is being wasted. Money that you are providing through your electricty bill.

    Think about this NZ. This SOE needs to be brought to task. Will Mr Brownlee do it? I’m not so sure.

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