National devalueing our assets | The Jackal

25 Jul 2012

National devalueing our assets

Today, the NZ Herald reported:

Prime Minister John Key yesterday dismissed claims the loyalty scheme to attract New Zealanders to invest in partially privatised state assets could cost the taxpayer hundreds of millions of dollars and suggested it may even increase sale proceeds.


Mr Key suggested the cost of the scheme may be around $60 million to $80 million across the whole programme. Later he said he'd seen reports from sharebrokers "saying that far from being a cost, actually there may be a gain to the Crown from doing this because it encourages others to potentially pay more, namely institutions".

This is simply a gimmick to get people talking about investing. Giving free shares away to so-called mum and dad investors isn't going to encourage others to pay more... The shares will be worth whatever the government decides they are worth, and there will not be a separate pricing system. Giving shares away will not be an economic gain to the Crown either, it will be a loss.

John Key is showing his financial illiteracy here, being that such a scheme would cost between $250 to $500 million according to Treasury, and perhaps even exceed $1 billion. What information Key is basing his assertion on has not been made public, probably because it doesn't exist.

To compound the problem, National hasn't informed the public about exactly how much they're going to sell our assets for nor the share price. In fact they've been decidedly cagy about this side of the process, and have excessively downplayed the profit these enterprises make:

Meridian Energy made an after tax profit of $303 million in 2011... Mighty River Power made $127 million, Genesis Energy made $266 million, Solid Energy made $96 million, and Air New Zealand made $85 million for a grand Total of $877 million, the public should expect top dollar. After all, 49% of the net profit for 2011 is over $429 million in lost revenue.

And what about the actual worth of those assets? According to a recent Crown Ownership Monitoring Unit report (PDF), the five assets on the chopping block are valued at:

Air NZ $904 million

Genesis Energy $2,120 million

Meridian Energy $6,500 million

Mighty River Power $3,719 million

Solid Energy $2,773 million

Totaling just over $16 billion. 49% of that is $7,848 million... So why is National saying they expect to only get around $6 billion, more than $1.8 billion less than the actual value? To answer my own question: Because along with the looters bonus, National is undervaluing our assets so they can all sell their shares for a profit to foreigners in three years time.

The Crown has already forgone approximately $40 billion in revenue from previous asset sales, worsening our debt position, reducing spending on infrastructure and ensuring budget cuts to essential services. Therefore there's no doubt that privatisation has and will be a complete disaster for New Zealand, especially when it's overseen by a bunch of idiots!