An advantage of listing SOEs
August 24th, 2011 at 11:15 am by David FarrarHamish Rutherford at Stuff reports:
State-owned Meridian Energy has taken a $90 million writedown on some of its niche businesses as part of a “tidy-up” as it prepares for life as a private company.
The National Government has said if it wins the November election it may sell up to 50 per cent of several large state-owned companies.
Announcing a 13 per cent fall in underlying profits at group level, the accounts of the parent company of New Zealand’s largest electricity generator showed tens of millions in writeoffs on loans and investments in subsidiary businesses which the company acknowledges it is unlikely to recover.
This is one of the significant advantages of allowing minority share-holding in SOEs. Being listed on the NZX means the companies have to be more transparent with their finances, and have obligations such as continuous disclosure.
As an SOE it looks like Meridian has been carrying these impaired assets for some years at an unrealistic valuation. You can’t do that so much when you are a publicly listed company.
August 24th, 2011 at 11:21 am
Chief financial officer Paul Chambers said :We’re becoming increasingly commercial in our focus and if we don’t think something’s going to eventuate we’re not going to pretend that it will.”
Welcome to the real world.
It makes you wonder what the Board / Management have been doing up until now…
Vote:August 24th, 2011 at 11:44 am
Interesting, I wonder how that fits into the new laws on Director responsibility. Are they saying that their investments in Right House & Whisper Tech(mostly) evaporated overnight or are they saying that previous Annual Reports over represented their values.
From their Annual Report ( true & fair view of the company & groups financial position, mmm really ).
Responsibilities of the Board of Directors
Vote:The Board of Directors is responsible for preparing financial statements that:
- comply with generally accepted accounting practice in New Zealand; and
- give a true and fair view of the Company and Group’s financial position, financial performance and cash flows
August 24th, 2011 at 11:45 am
I thought that they said they would sell up to 49%. That is a lot different to ‘up to 50%’.
Vote:August 24th, 2011 at 11:46 am
Seriously? We have to sell the assets to get that? What a terrible argument. The govt. could easily amend the SOE laws to make that sort of disclosure mandatory. FFS, you have to try better than that.
Vote:August 24th, 2011 at 11:51 am
In todays paper got a copy of Colin Craig’s new Conservative Party platform.
Vote:He has joined the no sales of assets and I don’t know why. His party seems to be a combination of Labour/NZ First appealing to the financial illiterate.
SOE”s need to become more commercial and more transparent.
August 24th, 2011 at 11:53 am
Meridian has probably been the best managed of the three SOE ‘gentailors’ and in particular probably had the best ‘modelling’ of the whole generation scene, so it could make commercially savvy decisions. This enhanced profitability would have been significantly greater than the investments in other businesses that have turned sour. The issue, I think, is not being prepared to purge sour investments at an early stage. Quite apart from company reporting giving a false impression, the Board and Management are continually distracted from their core business by having to tend to these investments.
IMO I would rank the five ‘gentailors’ as follows:
1. Trustpower
2. Contact (almost tempted to rate this first)
3. Genesis
4. Meridian
5. Mighty River (quite distant from Meridian).
Interestingly Mighty River has had the same CEO since its inception. The others have all had a change of CEO in recent years.
Vote:August 24th, 2011 at 12:04 pm
ha ha how pathetic. Is this serously one of the arguments for selling?
You could quite easily change the rules (remember Parliament has the power to make and change rules. Did you know that Farrar?) to reflect the listed company requirements and at the same time keep ownership.
Suggesting that one of the reasons for selling is to get the advantages of listed company disclosure is just weak weak weak.
The whole idea is getting weaker by the day.
And the entire National party policy platform more pathetic. There is no detailed explanation of anything, just two sentence soundbites. Does anyone know where a full outline of the reasons for wanting to sell these assets is provided by someone like Key or English or even the Nat party itself? I wouldn’t mind reading it. Does it exist? Anyone? serious question
Vote:August 24th, 2011 at 12:13 pm
This sounds like one of those things where you sack all of your technical people, and force them to set up as independent contractors with their own van, equipment etc in the name of greater efficiency and lower overheads??
Doesn’t appear to have worked out too well…
Vote:August 24th, 2011 at 12:20 pm
They have their own hydro scheme on Irishmans Creek Station (home of Hamilton Jet). I wonder if they realise they should be selling it to the Chinks? Perhaps they’re “financially illiterate (derivative debt instruments and all that).
Vote:August 24th, 2011 at 12:31 pm
Does anyone know where a full outline of the reasons for wanting to sell these assets is provided by someone like Key or English or even the Nat party itself?
No such thing exsts, the sole reason for selling SOE’s is Blinglish is a waste of space with no idea how to formulate an effective economic policy.
The National Socialists are idiots, the whole fucking lot of them!
Vote:August 24th, 2011 at 12:42 pm
Hell everyone in NZ is out for what they can get. Just look at the Warehouse, people want it cheap, fuck the NZ producers.
I’ll vote for this so I can purchase shares. Suits me.
Protestations about the greater good are hypocritical, coming from Chardonnay socialists whom own multiple properties.
That’s an equal share of generalizations and gross misdirection as a counter balance to the drivel offered up against listing SOE’s
Vote:August 24th, 2011 at 12:44 pm
http://www.stuff.co.nz/dominion-post/news/local-papers/kapiti-observer/5494735/Asset-sales-to-fund-expressway
Vote:August 24th, 2011 at 1:23 pm
To all the Grandmother sellers,
Vote:Was she so inefficent and a burden to the goverment in hip replacements?
Were her limited horizons and wanting what was best for her grandchildren too much like nepotism in a time of globalisation ?
Is she going to be adopted out to some wide boy frontman who will move her on when he thinks nobody is looking to be used and abused by grubby foreigners who only known avarice?
The arrangement stinks
August 24th, 2011 at 1:30 pm
@minto57
Vote:Is that real argument – strawman and all or are you just taking the piss?
August 24th, 2011 at 2:19 pm
vto and MyNameIsJack
If you are happy to spend some time on “receive” as well as “send” you could go read up on this subject at:
http://www.comu.govt.nz/publications/information-releases/mixed-ownership-model/
In particular you might find the following useful:
http://www.comu.govt.nz/resources/pdfs/mixed-ownership-model/t2011-336.pdf
Incidentally I also went looking for Labour’s statement of policy here and apart from David Cunliffe’s video and the front page of http://www.ownourfuture.co.nz (note the “co” so perhaps the Labour Party’s been recently privatised) I can’t see any detailed analysis supporting Labour’s position whatsoever.
Vote:August 24th, 2011 at 2:25 pm
MNIJ,
“No such thing exsts”
Yes, they do as Simon has pointed out.
“the sole reason for selling SOE’s is Blinglish is a waste of space with no idea how to formulate an effective economic policy.”
The power and depth of your intellectual analysis is truly impressive.
By the way, what are your credentials on economic policy formation?
Vote:August 24th, 2011 at 2:29 pm
Well yes mr smartypants I have read on the subject, that was not the question. The question was, where is the National Partys (or Key or English) written justification for this policy?
And also, Farrar’s dumbarse suggestion that listing disclosure requirements are somehow an argument in favour of privatising. That really worked well for Feltex and finance companies and countless others.
Vote:August 24th, 2011 at 2:39 pm
vto
At the risk of further enhancing your already good opinion of me:
http://www.beehive.govt.nz/release/government-pursue-mixed-ownership-model
where you will note that the government is basing its support on the advice from Treasury which you may or may not have read – your response is delightfully vague on this point.
Vote:August 24th, 2011 at 3:06 pm
Gee CHA that was a big protest turnout, just goes to show the kind of predicament the Government is in.
Vote:August 24th, 2011 at 3:25 pm
Well apropo of the item above on NZX amd wimmin the first thing you need to ensure a good outcome from any organisation what ever is good governance.
Get the governance right and all else will usually follow. After nearly three decades working in governance I have yet to see a business with good governance fail. Sure they have had problems almost always caused by factors they had no direct control over.
So why should the Gumint be involved in non core activities. Surely we have moved on from the 1970s where the Gunmint had to be involved in everything everywhere all of the time.
With the lack of listings on the NZX a growing pool of Kiwisaver funds the logic is to partially or wholey list SOEs and let Kiwisavers buy a slice of the action with their savings.
We also need competition across as many sectors as we can to drive down costs and drive up efficencies.
And it all comes back to good governance. Get that right and the rest will follow.
Vote:August 24th, 2011 at 3:57 pm
I heard a political commentator say (Radio NZ) with regard the hydro dams that “inevitably they end up (partly) foreign owned”.
What sort of “good governance” lets Harcourts sell off $600million of “products” at the Shanghai symposium? Good governence for whom?
Vote:http://www.propertynz.co.nz/
August 24th, 2011 at 5:11 pm
hj
So if you’re selling your home (assuming you own one) you’ll make sure that the buyer is “one of us” rather than “one of them”?
Vote:August 24th, 2011 at 7:02 pm
Simon Arnold (41) Says:
August 24th, 2011 at 5:11 pm
hj
So if you’re selling your home (assuming you own one) you’ll make sure that the buyer is “one of us” rather than “one of them”?
…….
So you agree with Harcourts the revered Real Estate Company:
“Chinese economy we all know about…
Vote:Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
http://static.radionz.net.nz/assets/audio_item/0011/2385074/mnr-20100824-0842-More_than_800-million_dollars_worth_of_property_on_display-m048.asx
August 25th, 2011 at 9:22 am
Some interesting comments and analysis in this series:
http://rogerkerr.wordpress.com/category/series-the-truth-about-privatisation/
..of course if your mind is fixed, don’t bother.
Vote:August 25th, 2011 at 10:26 am
One benefit will be that Super funds and Kiwisaver will have more local solid companies in which to place their funds.
All the investors in those funds will benefit from the income stream from dividends and give many more New Zealanders a vested interest in economic growth and development.
Most importantly, a number of iwi are lining up to invest in these entities and that would give these Iwi a strong interest in promoting economic growth and development. This might provide a counter to the academic elite Maori who presently dominate policy formation and whose preferred modus operandi is to be obstructive ticket clippers.
Vote:August 26th, 2011 at 8:48 pm
# Simon Arnold (41) Says:
August 24th, 2011 at 5:11 pm
“So if you’re selling your home (assuming you own one) you’ll make sure that the buyer is “one of us” rather than “one of them”?
If the buyers are all “them” (whoever “them” are), rather than “us”, you’ve just made us “tenants in our own country”. Even Dear Leader John is against that.
Don’t tell me you’re so blinded by the profit motive that you would rather “they” buy our homes rather than our own children??
Vote: