National referendum (2013): Asset sales

### ODT Online Mon, 30 Sep 2013
Asset sales referendum dates revealed
By Adam Bennett – NZ Herald
Prime Minister John Key has confirmed the Citizens Initiated Referendum over asset sales will take place in late November and early December this year.
Mr Key said the referendum would take by postal ballot, opening on November 22 and closing on December 13. The referendum would cost $9m.
The referendum will ask whether New Zealanders support the Government’s sale of up to 49 per cent of Meridian, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand. It is not binding on the Government. APNZ
Read more

Meanwhile closer to home at DCC and DCHL . . .

Fire Sale [jtmartin.net] 2

Related Post and Comments:
17.10.12 The only thing up…. (for sale)
16.8.12 Dunedin water assets
29.5.12 Asset sales (would Dave’s council sell us up)
17.1.12 DCC living beyond its means [all spending and debt not declared]
23.11.11 You (New Zealanders) already own the state assets. Why sell…
21.9.11 DScene: Cull & Co planning asset sales

Posted by Elizabeth Kerr

*Image: jtmartin.net – Fire Sale

52 Comments

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52 responses to “National referendum (2013): Asset sales

  1. ### NZ Herald Online 8:35 PM Friday Dec 13, 2013
    Resounding vote against asset sales in referendum
    By Adam Bennett
    Preliminary results of referendum show of more than 1.3m valid votes cast, 67.2 per cent voted against, 32.5 per cent in favour of asset sales. Voters have given the Government’s flagship asset sales policy an emphatic thumbs down, ratcheting up pressure for the sale of Genesis Energy – the remaining asset in the programme – to be shelved.
    Read more

    ****

    TVNZ: Referendum voters reject asset sales
    http://tvnz.co.nz/politics-news/referendum-voters-reject-asset-sales-5777428

  2. David

    What would the referendum answer be if the question was “Should the government keep the assets then totally destroy their value with a new power plan that decimates the returns to the point where they are less if we only owned 51%”?

    Effectively the sale of 49% of assets means the income from them drops from 1/2 of a percent of govt income to 1/4 of a percent of government income, and we bank $4-5 billion to spend on debt reduction, building schools and a new hospital for Christchurch.

    The Labour Greens power plan means the income drops to much less than 1/4 of a percent, and we throw $4-5 billion down the toilet, don’t pay off debt, don’t build schools, don’t build Chch a new hospital, and have a much smaller income from the assets than we do by just owning 51%.

    And how many people realise that even if we sold 100%, the govt still receives 90% of the benefit of the power companies, because they still receive 100% of the income tax, 100% of the company tax, and 100% of the gst, which combined is worth many times more than the after tax profit.

  3. David; you have got it ‘sussed’ just as an accountant would. No argument on that score. But if the 49% was eventually owned by the conglomerates (see Contact for instance) as the ‘mum and dads’ over time sell out, as they normally do, the dividends applicable exit the country. A loss there no argument. Then if the 49% holding exerts its muscles, and make no mistake (as governments are a proven ‘fickle straw man’) it will influence the operations of the company in order to maximise profits. That usually results from increasing revenue which in turn comes from price increases. We’ve seen it all before, so why would we not expect it here? “Rogernomics” proved that point over and over, and if anyone still believes in selling state owned strategic assets such as power, roading and rail, then they can only know that the public are always the loser. David, you know that too, but your conservative anti socialists leanings, like those of John Key, rail against them despite the logic. I think the outcome of the referendum indicates that the people have more ‘nous’ than the government credit them with. Next November might just get them the message.

    • David

      Calvin – you say mum and dad investors sell out to overseas interests, yet a higher percentage of companies on the NZX are now owned by New Zealanders than at any time in the last two decades.

      The percentage in NZ ownership is going UP, and has been for years.

      Unfortunately we have some political parties doing everything they can to scare people off investing in the future of NZ, while at the same time saying we need to shift investment from housing to the productive sector.

      • David; that a “higher percentage of companies on the NZX are now owned by New Zealanders than at any time in the last two decades”, has little to do with the asset sale issue, but rather that the cyclical urge is running at present. This brings the small investor running, but as always they are last in and first burnt when the tide turns. Don’t say it is not so, as history proves it over and over again. Think 1987 when tens of thousands of little investors got cleaned out by the collapse, not only of the share market but by the total demise of many glamour companies. Some of the prime movers ended up in jail.
        Power companies like Mighty River and Meridian are established producers with capital plant of very long duration. The energy source of water is essentially free – subject to nature – and the profitability is and has been affected, due in large part by political interference and probably slack management. Also they have been deluded into diversifying into extremely expensive producers like wind turbines in order to placate the dopey “AGW” zealots. This is being shown around the world for the fraud that it is. Then of course there is the Meridian loss leader selling off a large chunk of its generation to subsidise an overseas company smelting aluminium. That is purely a political decision aimed at buying Invercargill jobs. No, David, left to good management, and in the New Zealand ownership it could do as well as any corporate overseas conglomerates can do, without the huge export of dividend money. As I have said, show me one past public asset which has been sold off that hasn’t been a disaster to New Zealand. Think NZ Railways, Telecom, Contact Energy, NZ Iron & Steel, to name but a few. Social assets are different to the standard type of companies on the NZX which are fair game for the individuals to speculate in without jeopardising the people’s welfare.

        • David

          Calvin – you’re wrong on several counts.

          – The increase in NZ ownership in the NZ sharemarket is not some recent blip. NZ. The percentage of NZ ownership has been going up, and the percentage of foreign ownership going down, for the last 16 years

          – Wind turbines are not “extremely expensive producers” of power. For the last few years they have been one of the CHEAPEST ways to build new generation, which is why almost all the new generation in recent years has been wind farms.

          – NZ Railways was a disaster BEFORE the govt sold it – it was bankrupt. The only reason they managed to get a few hundred million for it, was by paying off many times that (over a billion) in debt.

          – Telecom was a disaster under govt management. Just to get a phone you had apply for it and to go on a waiting list. To get a phone jack put in could take months. Service was appalling. Toll calls cost a fortune. Upon privatisation, toll calls went down 60% and service massively improved. You could get a phone and a jack straight away. And there was massive investment in new infrastructure which had been severely run down under govt ownership.

  4. Anonymous

    The sale of Otago Power was just that. Mum and Dad bought up some shares and thought it was quite nice. Then the big boys came in with their offers and Mum and Dad sold up. And thought that was quite nice too. And then everyone rejoiced for a couple of years. And then the power went up. Then it went up some more. Then up some more. And some more. And then some more. It’s still going up. Ask anyone in Otago/Central Otago if you want a horror story or two. Don’t ask the bureaucrats and the Grady’s of the executive world – they’ll just say it’s your fault for selling and you deserve everything you get. Of course they deserve everything they get on their bloated and outrageous salary packages. Which makes paying their own power bills a minor issue for their accountant to write down.

  5. A company wholly owned by the people – and overseen and in a “buck-stops-here way” managed by whatever government is in power – can operate with social good ahead of the balance sheet, from time to time according to what is best for the country.

    In a company in which the government is only one of the shareholders devolves this responsibility to a board >> a CEO. Returns to shareholders become the priority.

    This is not in the best long-term interests of us the people of NZ who currently “own” these businesses which were built by the money and toil of our forebears for the good of NZ as a whole, not for a minority.

    Short-term thinking: a dollar in “my” hand today is better than $100 in other NZers’ hands after the next 1, 5, 10 elections, is symptomatic of the failure of NZ to build on the investment culture that we used to have. It is a culture that has been steadily eroded with energetic enthusiasm by recent governments and the banks promoting the money-culture that has proved such a curse, world-wide.

    Forget about the “save, superannuation” etc publicity messages, they are nothing but brightly patterned wallpaper over the policy structure that is (perhaps not even maliciously, perhaps down to tunnel visioned view of what Good consists of) the cultural walls imprisoning all but a few into meaner narrower life-opportunities.

    • Jock strap

      Hype: Do you actually believe the crap that you write here.

      • Not sure Hype offended, truth hurts?
        Doubling the corporate cow population is National’s ‘key’ idea for our future.

        • ODT editorial today: A timely reminder

          [excerpt] “Dairying is a heavily indebted sector. Dairying debt is about $32 billion of a total of about $50 billion in agriculture. One only has to look at what has happened with the housing market – escalating prices, people borrowing more (which dairy farmers are also doing to expand their operations) – to wonder what would happen if the bubble burst?”

  6. David

    Power prices have certainly gone up significantly faster than inflation for the last one or two decades, but the myth that it’s because power companies are raking off huge profits is just that – a myth.

    The dividends they give out to their shareholders have not often averaged much more than 5% over the last decade.

    I sold Contact Energy shares for $9.10 about five years ago partly because of a low dividend. If I still owned them today they’d be worth just $5.

    Total profits from the “big 5” generators for 2012 were $488m, which compares to $519m way back in 2004. In fact the average annual profit in the last five years is 27% less than the previous five years.

    The reasons for the large power increases are because –
    1/ We used to have a very low price – lower than it actually cost to produce.
    2/ Power companies have had to invest significantly to increase generation. Hence we now have a lot of new wind farms, new geothermal, new gas peaking plants etc.
    3/ Transpower has had to significantly increase charges to power companies (which are obviously passed on) to do upgrades to the national grid, Cook Strait cable etc, which were largely neglected for much of the 90s and 2000s.

  7. David; you say that the percentage of NZ investors have been increasing over the last 16 years. So what? I don’t know how old you are but the same could have been said in the 1980s up until 1987. That is 26 years ago so the ten years it took to recover their confidence is about right. See how much more than the 16 years it is before the next major correction? Don’t say “it can’t happen” because that too has been said before, right through history. If you don’t believe that then so be it. One day you might well say, “by jeez, the old codger was right and I got caught good and proper”.
    Agreed, wind power is efficient and economical, “when the wind is blowing”. When it is not, they are just statues. Ditto for “Solar” except when the Sun is in bed, or behind cloud. Hydro, geothermal and fossil fuel is still the most reliable.
    Profitability? Well I would agree that private control gets the profits going, albeit in ‘fits and starts’ often. But surely David that is all down to efficient management. So why should management not be as efficient just because its boss is a government instead of demanding shareholders? Aren’t we the taxpayers also shareholders? So it really gets down to the director quality, and governments are notoriously poor at that. But it needn’t be so.
    I notice you didn’t mention the ‘sweetheart’ deal with the smelter. Take that out and apply the generation capacity to the national grid and it would be win win all round for the people and Meridian.
    The government again handicapped NZ Railways, by bleeding its cash flow away leaving it almost broke. The ‘private’ American owners did even worse, stripping it to the point of almost death then flogging it off again to Toll who immediately called for a bail out by government which Michael Cullen agreed to, taking the tracks off Toll’s hands and dropping it back onto the taxpayer. Then Toll put the pistol to the government’s head and said we will keep the road transport side of the business and you either take the rail back or we shut it down. We now know the outcome of that.
    Ditto with Telecom, except it was on the way to getting its act together by the appointment of that Welsh CEO I think his name was ‘Mounter’ or some such. He had instituted the upgrading and turn around but Douglas sold it anyway, again to American conglomerates who immediately set about repatriating huge dividends out of the poor company and loading it with debt till it again was on its knees then simply dropped it and walked away. All the while our two national stalwarts messrs Faye and Richwhite were busy clipping the tickets and walked all the way to Switzerland with their duffel bags full to overflowing.
    So David, either your memory is short or you are much younger than I, but I disagree with you on almost all counts. The main point of the whole thing is that governments do the wrong thing at the wrong time, so frequently that the mind boggles. Indeed, think Bank of New Zealand to witness the biggest ‘boondoggle’ in history. That was Mr Bolger’s main claim to fame. Again, a lack of management oversight in the mad ‘halcyon’ years of the eighties allowed the bank to go ballistic and technically bankrupt. So what did he do? He used the taxpayer to re-capitalise the BNZ and then “gave” it to Australia’s NAB for a pittance. Another example of government incompetence. Result? huge dividends from a restructured bank going off shore to Aussie. And you are still in favour of asset sales of strategic infrastructure?

    • David

      – For the power produced, it’s currently cheaper to build wind over hydro – not much more expensive as you claim.

      – None of the private owners of NZ Rail ever, at any stage in the ownership, had it in such a bad condition that it was over a billion dollars in debt, like when the govt ran it.

      – Some private owners of Telecom made good money, but some have not. That’s why the likes of Telecom and Contact Energy are effectively worth no more in inflation adjusted terms now than when they were sold in the 1990s.

      The govt is not particularly good at running a lot of businesses. Unlike private companies they usually fail to invest the required capital to make them successful (i.e. Telecom, National Grid, Railways etc) because there is always huge pressure to spend the money elsewhere on education, benefits, health etc.

      Then there’s political motivation to do one thing, then after the next election to do the opposite thing – there’s no clear-headed long term direction.

      Then there’s the workers. Overall, there’s simply not the same motivation for govt workers as there is for private workers, as shown in statistics like in NZ, govt workers take 50% more sick days every year than workers in private companies – 50% more!!!!

      • If wind power is so ‘profitable’ in N.Z. how is it that in the U.K. providers of wind energy requires such large subsidies to remain economically viable when:
        The UK is one of the best locations for wind power in the world. Wind power delivers a growing fraction of the energy in the United Kingdom. The United Kingdom is ranked as the world’s sixth largest producer of wind power, having recently overtaken France and Italy.

        Yet wind farms are made profitable by subsidies through Renewable Obligation Certificates which provide over half of wind farm revenue. The total annual cost of the Renewables Obligation topped £1 billion in 2009 and is expected to reach £5 billion by 2020, of which about 40% is for wind power. This cost is added to end-user electricity bills. Sir David King has warned that this could increase UK levels of fuel poverty.

        So I ask again ….If the U.K. openly subsidies wind generated electricity what is the magic formula that N.Z. has to make its wind power profitable? Could it be that the cost is added to our fuel bills?

        • David

          The “magic” formula in NZ, is that wind farms are used in conjunction with hydro. When the wind blows, dams can “save” water for later.

          In places without significant hydro, wind farms effectively have to have additional generation of another type built with a similar output, to cover all the time when there is no wind. If you build wind, you also need to build cover generation.

          In NZ we don’t have to do this because we have huge hydro storage.

          With the drop in price of wind generators, and the increase in efficiency, wind is the fastest growing generation sector in NZ because it’s currently the cheapest form of generation.

        • Mike

          David: I completely agree – the big problem we have now is that there’s no incentive for the people who own the wind farms to cooperate with those who own the hydro, they make most of their money when the spot price is high, it’s in their interest for there to be minor power shortages to push up the price – really we need some genuine system-wide (ie government) planning of our energy infrastructure, the alternative is an uncoordinated system ripe for exploitation for short term profit (like Enron’s faux California ‘energy crisis’).

          For example it would be different if Genesis owned a large wind farm near the Clyde dam for example – not only can they trade off on generation but they can share the same transmission infrastructure.

          Clyde’s an interesting structure, it seems to have room for a couple more penstocks – having extra water storage traded off with wind isn’t much use if you can generate larger peaks when the wind stops blowing, add in 2 more penstocks and turbines to the existing dam without raising it might be a sensible addition to support wind power … then again toss the smelter and we’re going to be rolling in cheap energy, it will change the equation for wind power at least in the short term.

        • David

          Mike – you’re right that wind generation need to be better managed. Trustpower’s Mahinerangi wind farm makes good sense because if significantly compliments their own Waipori hydro generation, and piggybacks some of the infrastructure.

          But the Meridian’s Project Hayes would have taken over transmission capacity and meant opposition Contact Energy would have had to spill water from Clyde and Roxburgh unless whole new transmission lines were built.

          So we can have complimentary wind farms which save on water supply, but others which would do the opposite.

        • Mike

          Yes to my mind this is the worst result of asset sales – competition will likely mean paradoxically a less efficient electricity supply and more expensive power

  8. David; read my lips. I didn’t say wind was more expensive to build. I said “if the wind blows”. (if it doesn’t then they are just statues. If you care to look at the wind/power equation in Europe and UK you will find that it is a disaster and only gets by with enormous subsidies and horrendously high power costs to the consumer. As we speak Germany is in the process of cranking up its “brown coal (lignite) industry” so the nation can rely on sufficient power. Watch this space for nuclear to come back once the shock of ‘Fukushima’ fades. Modern nuclear using thorium in place of uranium will see it come back into favour in a big way. Wind will be seen as the folly that it is, due to its total unpredictability / reliability.
    While we are on the subject of wind, let’s talk about the financial position. When Thatcher and Regan took control and went on the ‘sell everything’ the people owned they also decided that the best way to grease the wheels was to take the brakes off the financial world. Deregulation opened the way for all the excesses that happened in the ‘eighties’ and then into the 2000s resulting in the ‘sub prime’ global financial crisis (GFC). The neo conservative “devil take the hindmost” has worked its way continuously with the ‘banksters’ still manipulating on a life saving exercise as we speak. Just look at the meltdowns over the last 40 plus years, since Nixon removed the dollar from the ‘gold standard’. It has been nothing but crisis after crisis with NZ getting blown about as well. Watch this space David, it might just not be to your liking when the dam bursts.

    • David
      December 16, 2013 at 9:23 am

      David says …”In places without significant hydro, wind farms effectively have to have additional generation of another type built with a similar output, to cover all the time when there is no wind. If you build wind, you also need to build cover generation. In NZ we don’t have to do this because we have huge hydro storage.”

      None the less, this back up is still required all the time for this intermittent supply. Whether we had this backup previously or not, is immaterial. The cost of providing both forms of that infrastructure remains.

      Notwithstanding that, New Zealand power consumers have dealt with some of the sharpest price rises in the world over the past 20 years.

      Over the past 20 years, New Zealand’s average annual power prices have increased more than 15c per kilowatt hour (kwh), from 9.2c per kwh in 1990 to 25.5 at the end of 2010. That’s compared with an increase of less than 2c per kwh in Australia and about 3c per kwh in the United States.

      New Zealanders pay substantially more for power than our neighbours. The US price was at 16.04c but Britain’s prices were similar to New Zealand’s, at 27.58c. Since that comparison was made, New Zealand prices have risen even further.

      A report for the Renewable Energy Foundation by Prof Gordon Hughes, a former senior energy adviser to the World Bank, showed that we have now been building turbines long enough to see that, due to wear and tear on their mechanisms and blades, the amount of electricity they generate very dramatically falls over the years; so that a turbine that initially produces on average at 25 per cent of its “capacity” can degrade over 15 years to produce less than 5 per cent.

      So the replacement cost for these inefficient wind turbines will likely occur much sooner than previously thought with a diminishing return in output over their short life. Economical?

      But we know that the British cost includes a subsidy of about 40% for wind power. I therefore reiterate my initial question: Could it be that the cost is added to our fuel bills? The evidence that I see is that the much vaunted ‘cheap’ energy provided by wind power in NZ is a chimera. It is comparable to the UK which is heavily subsidised and dearer than our nearest neighbour Australia.

      • David

        There are two reasons why our power prices have gone up.

        First, we used to pay LESS than what the power cost to produce. We still paid for the power, but with our taxes rather than a direct cost.

        Secondly, after the new dams built in the 70s and 80s, we didn’t need to build new generation for quite a while. When we did, suddenly the cost of new builds (and much needed transmission upgrades) got added to our bills.

        As for the “average” power price of 25 or 27c a Kw – I’ve always found those claims hard to believe.

        My current bill is for 19c a Kw, and the 20% prompt payment discount takes that down to around 15c a Kw. (+gst) meaning I pay around 17.5 cents.

        • @David
          December 16, 2013 at 12:35 pm

          David said “As for the “average” power price of 25 or 27c a Kw – I’ve always found those claims hard to believe”

          I have monitored my electricity accounts over the last 15 years. My data confirms this statement concerning both the rate and the increase in rates over this period.

        • My household power usage since January 1990 (for two similar sunny upstairs apartments, walls of double brick cavity construction, insulated roof cavity) has been a constant across all years and all seasons – however, the cost to me has clearly escalated in the way Mick mentions:

          “Over the past 20 years, New Zealand’s average annual power prices have increased more than 15c per kilowatt hour (kwh), from 9.2c per kwh in 1990 to 25.5 at the end of 2010. That’s compared with an increase of less than 2c per kwh in Australia and about 3c per kwh in the United States.”

          But ask social services agency budget services for their reality check, the effect of power increases is horrendous.

        • David

          Mick – you and Elizabeth state there’s been a 15c a Kw rise in power prices.

          I ONLY PAY 15c a Kw (+ about 2 cents gst).

          So why on earth would you complain about power prices, but chose to pay 60% more than you need to?

        • @David
          December 16, 2013 at 1:45 pm

          So why on earth would you complain about power prices, but chose to pay 60% more than you need to?”

          David. Both Elizabeth and I were confirming the veracity of the information provided which you queried. What either Elizabeth or I actually pay for our power is both beside the point and our individual business.

        • David

          Elizabeth and Mick – your quote that claims that power prices in Australia only rose 2c in 20 years, is nonsense..

          The Guardian reports “Average Australian electricity prices for households have risen by around 80% over the past decade, even after adjusting for general inflation.”

          And that’s just in 10 years – not 20.

          Victoria’s power went up 170% from 1995-2012.

          Statistics Australia says electricity prices for went up by 171% for Australian households between 1981 and 2001, and a further 137% from 2001-2012.

          So the claim that electricity prices went up just 2c Kw over 20 years in Australia (quite widely repeated after publication) has since been shown to be little more than fabricated nonsense.

  9. David

    Calvin, If you take off your rose tinted glasses, you’d see Telecom was a complete mess when the govt ran it.

    Ditto with the Railways.

    It’s ludicrous to point to the private ownership as a failure, while turning a blind eye to the fact that it was ten times worse previously under govt ownership.

    The Electricity department wasn’t much better. It built dams with so little control over build costs that they’d end up being hundreds of percent more than their viable cost. Even today with much higher power prices, the Clyde Dam still isn’t worth anything like what it cost the taxpayer to build 2-3 decades ago. If you take inflation into account, it is an even bigger white elephant.

  10. David; Yep, you are right. The Clyde dam was Muldoon’s ‘think big’ baby meant to supply the Aramoana smelter. So what do you suggest, blow it up? If one followed your reasoning you would. How do you actually quantify the fact that NZED built hopelessly expensive projects when the Benmore earth dam was / is lauded around the engineering world as being super cost effective? In fact, the whole Waitaki Basin complex is the ultimate in river exploitation. I think it takes about seven or more bites at the water on its way to the ocean.

    I have taken off my rose tinted glasses and Telecom still looks a complete mess after how many years of private ownership? It still gets back to management at the end of the day, regardless of who owns it. Look at some of the salary scales in private to see what I mean.

    Wind power is a cost effective fallacy. Sure, you can use it when the wind blows as a water conservation factor, but the effective use of the capital involved has been assessed as something between 15 and 20 per cent at best. Nothing “magic” there. That is not a very efficient use of said capital. You are right about the hydro, but fossil fuel (there goes that dirty word again) back up generation is far more cost effective and reliable. Most of the imbalance in NZ’s power is due to the predominance of hydro being in the south with the bulk of the demand being in the north. The Cook Strait cable is the choke point. This is in the process of being rectified. Fix that and we are away laughing, or should I say the privately owned generators will be laughing because they very cunningly are happy to leave the distribution (freight) side alone. That, of course can never be a revenue earner so best leave that with the taxpayer.

    Railways are no better for the public in private ownership. It is a management shambles with next to no service available to the said public. Public strategic services often are never meant to be profitable in the capitalistic sense else there would be next to no facilities. Imagine if the nations’ roading infrastructure had only toll paying private ownership. Think about that as you commute to and fro from work and pleasure, paying at the gate to Mr Goldman Sachs each time you venture out.

    Sorry David, but there is a place for private and there is a place for public. Theoretically there should be no difference in efficiencies, it is all down to management. You cite the public service workers, again that is down to management, not ownership. I think you would really find that humans left to their own devices will do what they need to provide the life style they aspire to. It may not measure up to your expectation always, but then it wouldn’t do to be all alike would it?

  11. David

    Calvin – the problem with thermal generation is companies are at the whim of volatile prices. If the price goes too high, all of a sudden your whole generation plant becomes a useless white elephant.

    NZ generates quite a bit through gas fired generation, but the Maui gas field is coming to an end. Will smaller fields be enough to replace it, and if so, for how long.

    If wind energy is so inefficient, why do private companies keep building it AND keep making reasonable profits from it?

  12. David

    Calvin – you state there should be no difference between govt or privately run businesses, however there is often a huge culture and attitude difference.

    – when the railways was still govt run, it was common culture for people on the rail gangs to do as little as possible. Pilfering and stealing customers goods was so common it was part of the culture.
    – when the post office was still government run, every weekend tradesmen worked in the workshops on their own projects, used company materials, but charged for the overtime.
    – family who work for the government in Wellington have even in recent years been criticized for not using their full budget in overseas travel, by colleagues not worried about value to the taxpayer, but worried about missing out of future travel.
    – in NZ today, public servants take 50% more sick leave every year than private workers.

    There’s certainly a place for public services, monopolies and regulated industries. But government run companies often face several problems, including –
    – poor culture and attitude
    – lack of funding because there’s a chorus of loud voices who want the money spent everywhere else.
    – funding often has to come from debt, meaning additional interest and capital repayment costs have to be recovered (compared to private investors directly investing capital). This can mean less efficiency/higher costs or prices.
    – the government is often poorly qualified and experienced to manage or oversee new builds – be it dams, software systems, or pay systems.
    – the reasons for spending are sometimes politically driven, rather than what is good use of taxpayers money (or ratepayers money). i.e. Clyde Dam, Dunedin stadium etc

  13. David: Why do private companies keep building wind power systems and make reasonable profits from it? Answer, SUBSIDIES. Both direct from taxpayer / government and power prices. As a matter of interest have a look at today’s ODT business & money section. Pulse Utilities and Windflow Technology reports put the whole electricity industry into perspective. Windflow is following the UK assisted scheme for sustenance which makes a paper feasibility study attractive by comparison with installations in New Zealand where there are no subsidies. So there we are, the only way it can stand up here is by inflating the overall power price.

    • David

      Calvin, you state there are “no subsidies” in NZ, after claiming we keep building wind farms because of subsidies.

      Building thermal generation is a risk because if fuel prices go up significantly, it can become uneconomic to run the stations overnight.

      And the Maui gas field is coming to an end, as the Chinese economy improves coal prices will increase significantly again, and then there’s the debate that we’ve reached peak oil so oil prices will only go up.

      And of course then you have to compare the ongoing significant cost of buying gas, coal or oil, compared to the ongoing cost of buying wind.

      Which is of course nothing.

      • Let’s make films instead.

        ### NZ Herald Online Updated 12:21 PM Monday Dec 16, 2013
        Three new Avatar films to be made in NZ
        By Claire Trevett
        The next three Avatar films will be made in New Zealand, the Prime Minister has announced at a press conference with the film’s director James Cameron. Mr Key announced this morning that the Government had signed a memorandum of understanding with the film’s makers to secure the multi-film deal. He said investment would be “significant” – a minimum of $500 million for the three films. Producer John Landau and 20th Century Fox’s Paul Hanneman were also at the announcement, where Mr Key also set out further incentives for the film industry.
        Read more

      • David; you misrepresent what I said again. I quoted Windflow Technologiy Ltd as chasing the UK subsidies. I did not say NZ subsidies. NZ just uses wind to satisfy the ‘greenies’ faction and prices the total power prices to cover the true position. It is all hidden in the mysterious “Spot Market”. If NZ really wanted, it could be self sufficient just with hydro and geothermal alone. But just try to dam another river and all hell breaks loose. There is the West Coast situation where a scheme to flood a gorse filled gorge was prevented by the ‘twigs and twitters’, which would have supplied all the Coasts’ requirements with surplus to export over the Alps to Canterbury. Again if we lost the (heavily subsidised Smelter) NZ would have a surplus right there and then. But the down side is Invercargill jobs. Now that would not have caused a blink in the board rooms of private, so there is the rub.

        You mention “peak oil and gas”. and price rises as a consequence. That has been put out to pasture as an argument with the recent technology developments being able to exploit ‘shale gas/oil extraction’ plus ‘fracking’ and horizontal drilling techniques to extend oil/gas as a competitive fuel into the next century. Then of course there is always nuclear power’s revival as I have already mentioned.

        • David

          Calvin, if you have a look into any of the big five NZ generators, the reason they are building wind is because it’s the most financially viable – it doesn’t have the huge ongoing cost of fuel that thermal generation has. It’s got nothing to do with pleasing the greenies.

  14. Chorus $1b shortfall confirmed.

    ### NZ Herald Online 5:30 AM Monday Dec 16, 2013
    Analyst sees drop in service from Chorus
    By Claire Trevett
    An EY (Ernst & Young) report into Chorus has warned the payoff for changes to cover a funding shortfall include a drop in services, high prices for new connections, network congestion and an increase in faults on the network, prompting Telecom to express concern about the erosion of services for consumers.

    Communications Minister Amy Adams released the EY report on Saturday, including proposals to try to address the estimated $1 billion shortfall resulting from the Commerce Commission pricing decision on copper-based broadband services.

    The report said measures could be taken to reduce that shortfall to about $250 million, including a package of operations and capital savings proposed by Chorus. It listed the risks of Chorus’ proposals, including lower service levels, more unhappy customers, congestion on networks, and new customers being charged the full costs for installing new connections.
    Read more

  15. David; Efficiencies vis a vis private over public? MANAGEMENT! You can cite the public service as much as you like and you will get no argument from me. But you or Mike mentioned ENRON, and I would also toss in Telecom, Chorus, Equiticorp, Chasecorp, NZ Steel, South Canterbury Finance, Feltex, Anderson & CO into the pot just to show that public don’t have it on their own at being ‘bum operators’ Don’t mention Solid Energy or Pike River Coal. We could toss this one back and forward as long as we like, but there is no argument but it gets back to management. Good management will trump good intentions and bum business plans every time. We only have to look at our own DCHL stable to see where management led them astray.

  16. David; show me the figures separately of the Wind power cost of generation over a twelve month period. If the UK and Europe are forced to subsidise heavily as well as having power costs going through the roof, what magic wand do we have here? We sure as hell can’t claim more advanced technology nor economy of scale, so what else but power prices subsidised by hydro but still rising incrementally way above inflation? Think about it.
    Thermal back up I’ve already mentioned as not being cost frightening that you imply.

    • David

      Calvin – being in the roaring 40s, we are one of the best countries in the world for wind generation.

      Combine that with our hydro dams, meaning unlike other places, we simply store water instead of having to duplicate wind generation for when the wind isn’t blowing.

      Thermal generation has by far the most expensive running costs.

      As explained earlier, power prices have gone up because we used to pay LESS than what it cost to make, then had to pay to build new generation after years of not paying for any new builds.

      It’s certainly not because of massively increasing profits.

  17. David; as I asked, show me the true figures/profit per unit generated by wind power over a twelve month period. You must be able to do that seeing you are so convinced that we here in NZ can do what the UK and Europe can’t.

    • David

      Calvin, in the past I’ve seen reports from electricity generators on the comparative cost of various types of generation, and wind was cheapest in the last few years.

      And the cost is usually calculated over the life of the project – not an artificially short period of 1 year, which may be less than 2% of the life of say a hydro dam.

      As the Wind Association says, New Zealand is so good for wind generation it’s just about the only country in the world where it’s financially feasible without subsidies.

      And if you think thermal generation is cheaper, can you explain why it always shut down first when there is enough power from the (free) wind and (free) water and (free) steam?

      • @David
        December 16, 2013 at 3:55 pm

        David said….“Elizabeth and Mick – your quote that claims that power prices in Australia only rose 2c in 20 years, is nonsense..

        The Guardian reports…..”
        David. Sadly you lost all credibility with this opening statement. I needed to go no further than this last phrase above. Bye bye.

        • David

          Mick – I didn’t realise you were so closed minded.

          But then you are backing an obvious, blatant and anonymous fabrication of just a 2c rise in the price of Aussie power over 20 years, which has been shown to be total nonsense,

          Australian Bureau of Statistics says
          ” In the two decades up to and including 2001, electricity prices for households and business rose 171% and 94% respectively, representing an average annual growth rate of 5% for households and 4% for the manufacturing industry in over the period. Since then, electricity prices paid by households and manufacturing have increased at a higher rate over the last 11 years (137% for households and 109% for manufacturing businesses).”

          From
          http://www.abs.gov.au/ausstats/abs@.nsf/Products/4655.0.55.002~2013~Main+Features~Chapter+3+Energy?OpenDocument

        • Sorry folks, a bit busy to be following this thread blow by blow – interesting though. It may be true to say, after doing accounts all afternoon in wind up of an Estate, that my maths is better for the Estate than it might possibly be for electricity… However, I’m more worried about household power pricing in NZ than anywhere else and yes I see the difference I’m paying between 1990 and 2013 – a lot less bang for the buck. I’d be happier off the grid, if I win Lotto.

        • David

          Elizabeth – I’m not saying prices haven’t gone up – just that the reasons prices have gone up are fully justifiable.

          And that the increases are not because of profits as many people falsely claim – in fact the profits the last few years have been quite a bit lower on average than in previous years.

          i.e. Total average profits from the big five generators were $545m in the last five years, compared to $743m average for the five years prior to that.

          That’s certainly not excessive for around $15 billion of assets, and very difficult to see how the Labour/Greens plan will introduce a middle man, shave $750m off the $545 profit, and still leave a “reasonable profit”.

          It’s barely reasonable now.

    • David

      Calvin, a graph from Infratil in 2011 showed thermal costs significantly more than either geothermal or wind –
      Thermal (coal or gas) 12.5c/Kwh
      Geothermal 7.5c/Kwh
      Wind (best NI sites) 9.5c/Kwh

      See page 13
      http://www.infratil.com/assets/Uploads/PDF/update_march2011.pdf

  18. David; again you misquote me. I didn’t say thermal was cheaper. I just said it is more reliable as compared with wind. Not sure how one can calculate power production by wind over the life of the installation. Sure, you can calculate for operational maintenance and depreciation as well as operational people input, but there is no way that the volume and frequency of the wind over that period can be calculated other than in retrospect. If so, then why can’t it be done on an annual basis in retrospect. Unless of course the answer is not favourable. That is my contention all along, it is a nonsense to state its costs when they are plainly not assessable. A hydro dam has as you say maybe 100 years plus. A wind tower? Probably the generation part 5 to 10 years perhaps, while the aerofoils is anybody’s guess, but again 5 to 10 years. The towers, probably 20 to 30 years. Who knows, but that is all part of the unit production cost. So, one way or another, I doubt that there is anything but anecdotal evidence of any true costs at all.At least with hydro and thermal there is history to refer to. If as you say you have seen reports from electricity generators on comparative costs then why aren’t they available to the public? Is it because wind is the cheapest per unit, but is totally unable to be quantified due to the intense variability in both supply and intensity of the wind. I would suspect that there is an optimum at say X wind speed which is promoted as the lowest cost, whilst there is a reducing output/ to wind speed down to nothing. It seems certain to me that true median return would be about as predictable as the weather, and we all know about that.

    • David

      Calvin says “If as you say you have seen reports from electricity generators on comparative costs then why aren’t they available to the public? ”

      They are – I linked to one.

      Like hydro, wind can change year to year, but usually several years worth of wind data are collected from a site BEFORE wind farms are built.

      Thermal is probably even worse to predict. As it’s so expensive to run, it’s closed down first when there is sufficient generation elsewhere, so effectively it is also just as affected by not only rain but also wind, in the opposite way to hydro and wind farms.

      That’s why many of our thermal stations are only “peaking plants” – redundant much of the time and only run at peak times.

  19. Put bluntly, the referendum was a waste of money and time – a political stunt which took the country nowhere. –ODT

    ### ODT Online Tue, 17 Dec 2013
    Editorial: Providing an alternative
    Opposition MPs were understandably crowing about the results of last week’s referendum result, which they claimed was an emphatic win against the Government proceeding with its partial sale of state assets. The programme, although well signalled before the last election (one which saw National receive more than one million votes), does not sit well with the Labour and Green parties.
    Read more

  20. Not much doubt who the ODT are rooting for. Couldn’t be more blatant. Except of course, the constant support of ‘Greater Dunedin’.

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