Sunday, April 03, 2011
Lights out on Gov’t’s PPP plan
Not even 24 hours after Keys announcement on Jan 25 for the partial privization of state assests, investment and buinessess blogs could hardly contain their excitement for inevitable ‘death by a thousand cuts’ of SOEs, notably Meridan, Genisis and Mighty River power. They spoke like farmers were to speak of prized pigs ready for the slaughter and I supposes that’s how they probably view those few prized key assests that only through enourmous political struggle did we manage to keep hold of NZ’s most important assest – the energy industry.
It is our energy companies that attract the most interest for simple reason that they are biggest and most profitable. Meridan Energy for example is said be valued at $6.3 – $6.5 billion thus making it the most valubable firm in NZ. 
With a so-called moderate right Gov’t we are to believe that this is moderate policy. And since it is only offering minority shares on to NZX to what Key/English refer to as “Mom and Pop’ investors, in order to pay off NZ’s inflating defeicny and overseas debt, how could we disagree?
Of course this is usual façade of ‘chips are down’ economics to hide a much more subtle but complete privaitsation compared to bull-headed ‘hack and slash’ of SOE’s of previous Gov’ts. Rather than sell companies straight off, Key is attempting slice away the value of these SOE’s, by selling off bonds to private investors, meaning that profit streams are privitized and being denied to the tax-payer. Likewise, Gerry Brownlee last year, forced Genisis to sell off powers stations to competitors and has developed plans to sell off the Whirinaki emergency generator, all part of a punitve act to cut away the effectivness of these SOEs’. It’s the classic case of protecting the investor ant the expense of the consumer.
Despite pledges from Key that partial privtisation would not push prices up, the reality is investors will push for greater returns given scarcity issues thereby squaring the circle of underinvestment leading to power failures, increased pricing leading to higher consumer costs, and a ruthless corporate structure that leads to cutting off power to future Folole Muliagas because they are too poor to pay their bill.
Fortunately, NZ’ders (despite their notorious selective memories) remember the punishing price rises from the two decades of repeated breaking and dividing up of firms and sub-firms that saw Contact Energy sold off and key electric infastructure privatised such as emergency generators and transmission lines. Since then, the electrcity industry is still as monolpolitic as before and where SOE power prices have doubled since 1998, private firms have tribeled their prices.
Of course, shortages in hydro power due to dry lakes and needed reinvestment into infrastucture has seen forced supply prices to go up..
However two points need to be made.
Firstly, inexplicably consumer prices have disproportionately risen. In 2009 Commerce Commisson reported consumers were overcharged $4.3 billion during dry-lake years . 
Secondly, conclusions from the Final Report into the Auckland 1998 power blackout found fault with the profit driven corporate structure of Mecrucy Energy that lead to deficent maintenance and operations practises . 
Given this the lack of pricing regulation within NZ we are once again expected to wait upon a
system John Key expects to regulate itself. John Key is more than aware of value the energy industry but as he says “The question they have to ask themselves is, do they need to own 100 per cent?"  He just doesn’t believe value exists without making some quick cash for the Gov’t, desperate investment junkies and assest-stripping vulture M-NC’s .
- Martin Graham, SA Auckland
1. "Partially privatized state power firm has potential to be biggest
listed firm in New Zealand" Invest in NZ 2011
2. Why power firms shouldn't be sold", Dom Post Melhuish, Molly 2011
3. Final Report, Ministerial Inquiry into the Auckland Power Supply
4. "Power price fears if Govt stakes go" - NZ Herald, Trevitt, Claire 2011