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Assets returning record dividends - Greens

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Thu, 22 Dec 2011 4:32p.m.

Green Party co-leader Russel Norman says the government is about to repeat the mistakes surrounding the sale of Telecom in 1990

Green Party co-leader Russel Norman says the government is about to repeat the mistakes surrounding the sale of Telecom in 1990

State-owned enterprises are returning record dividends as the Government gets ready to partially sell four power companies, the Green Party says.

The Greens strongly oppose asset sales and co-leader Russel Norman says the Government is about to repeat the worst mistakes surrounding the sale of Telecom in 1990.

"Treasury's annual portfolio report shows SOEs returned record dividends for the past five years while total shareholder returns averaged 14.5 per cent," he said.

"It has found our SOEs are in excellent shape and they're anticipating high future dividend payments."

Treasury released the portfolio report today.

The Government's intention to sell 49 percent of the shares in four state-owned power companies was confirmed in the speech from the throne at the state opening of Parliament on Wednesday.

Prime Minister John Key has said several times the government is not going to back off because it needs the $7 billion it expects from the sales for infrastructure investment.

The Greens and Labour says lost dividends will quickly outweigh the financial gain.

Dr Norman says taxpayers funded a state of the art phone network and when Telecom was sold the dividends went to its new foreign owners.

"Following Telecom's privatisation dividend streams doubled, then tripled, within six years," he said.

"History now seems to be repeating itself with our energy SOEs."

NZN

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Comments

07 Jan 2012 12:12a.m.

Dan wrote:

Definitely an interesting discussion John, I remain sceptical but I guess we shall have to wait and see how this plays out. Perhaps the govt will also find a way to invest the capital gain more productively.

03 Jan 2012 05:40p.m.

John wrote:

Dan, An interesting discussion, however here is another thing to consider. Every time the same individuals opposing asset sales book a holiday overseas flying with an overseas airline all spending relating to that holiday means an overseas interest makes a profit which is taken out of NZ. Likewise the same applies when products are bought on line from overseas. Of course the opposite applies eg. when tourists visit us and we sell our products overseas. As far as the potential asset ownership is concerned our capital markets are so small that we really need to increase that to give NZers the option to invest in more places than the overseas owned banks which are not only taking profits out of NZ by loaning us money but also from using our NZ depositors money. I for one will be removing some money from one of these banks and investing in these asset shares. And so will many of the KiwiSaver schemes. So I wouldn't be worried about these sales I repeat that it i'm sure at least 85% ownership will remain with NZers.

03 Jan 2012 03:00p.m.

Dan wrote:

Thanks for clarifying your points John. I understand that foreign banks make profits from the interest they charge on our money and I see what you mean about the general ignorance to this fact. However, I do not accept that this is an argument in support of partially privatising state assets so that even MORE money is shipped offshore. I do agree that we appear to pay too much for our power and I think the consumer needs to be aware of their freedom to switch power companies to encourage competition. However, power prices would have increased under labour due to inflation anyway so small changes are acceptable and virtually inevitable when the supply and demand is constant. BTW I understand the increase was more like 63% over 9 years and 47% the 9 years before that. Does that mean the SOEs are producing artificially inflated profits? Perhaps some of it is but in the end it still puts us in a better position than allowing more profits to be shipped overseas. This indirect tax can be cured by regulating power prices but once profits are shipped offshore we can't regulate them straight back here.

01 Jan 2012 04:28p.m.

John wrote:

Dan, You miss the point, the discussion is not about ownership as that cannot happen if only 49% of each asset is to be sold. We are discussing concerns about the profits being repatriated overseas and that happens when you pay the interest on your mortgage to an overseas bank whether you like it or not. As far as supply and demand relating to these particular assets, it doesn't seem to be working, power prices increased 78% under Labour over a period when supply and demand have been pretty constant. All major suppliers are very close in their pricing now, except it seems Nova which incidently want $834.00 /year more for my power than I currently pay Mercury (Mighty River) the 1st asset to be sold. Unfortunately the logical discussion re partial asset sales has been hijacked by emotional claptrap generally by people who are lacking in fundamental economic knowledge.

27 Dec 2011 11:27p.m.

Dan wrote:

@ John: In terms of the amount invested by foreigners why wouldn't you invest in something that returns 14.5% however that is being achieved? Your whole bank argument is not analogous at all. It is unfortunate we do not have more locally owned banks but the land does not go to the banks, even if the mortgagor defaults, since they are not permitted by the Property Law Act 2007 to gain legal title from a default. You also conveniently seem to forget foreign companies here (like the banks you mention) pay for their power too and assume that simply raising the price automatically creates a proportionally greater profit. Guess you haven't heard of supply and demand.. There are privately owned power companies like Nova Energy that would destroy the State-owned companies if the prices were set too high. So what was your point again?

27 Dec 2011 11:26p.m.

Dan wrote:

@ John: In terms of the amount invested by foreigners why wouldn't you invest in something that returns 14.5% however that is being achieved? Your whole bank argument is not analogous at all. It is unfortunate we do not have more locally owned banks but the land does not go to the banks, even if the mortgagor defaults, since they are not permitted by the Property Law Act 2007 to gain legal title from a default. You also conveniently seem to forget foreign companies here (like the banks you mention) pay for their power too and assume that simply raising the price automatically creates a proportionally greater profit. Guess you haven't heard of supply and demand.. There are privately owned power companies like Nova Energy that would destroy the State-owned companies if the prices were set too high. So what was your point again?

24 Dec 2011 11:42p.m.

John wrote:

Dan, In my experience having owned shares for many years including those from other countries as do many NZers ( profits on which incidently come back to NZ) the Govts retention of 51% will likely put off many overseas investors particularly hedge funds as the shares will only provide a dividend stream and no chance of potential takeover etc. I agree with Key at least 85% will remain in NZ hands. Also perhaps you should consider this - most Nzers who have bought a house are most likely to have their mortgage with a Bank and, in NZ, most likely an overseas owned Bank. As well, this Bank will have borrowed much of it's money to on lend to the NZ home buyer from overseas. In essence then, many Nzers who oppose 49% Govt asset sales are quite prepared to have their own biggest asset mostly owned directly and indirectly by overseas interests. Of course both the profits made by the Bank and it's overseas money suppliers go out of NZ. As far as assets making a large return, that is the same argument as a person saving more money running home behind a taxi instead of a bus. Why not put the charges up another 50 % then instead of making 14.5% return these assets will make 64.5%!!! Profit extracted from Nzers on assets already owned by NZers is simply tax.

23 Dec 2011 08:45p.m.

Dan wrote:

Firstly to John; the money remains in the country rather than being taken to an overseas country which is what is going to happen once foreigners start purchasing shares. Secondly; it is nonsensical to sell an asset that is creating such a high rate of return UNLESS you are going to use the money gained by selling the asset on something more productive. What other investment creates a 14.5% return on average?

23 Dec 2011 03:27p.m.

Daman wrote:

It was Labour that sold Telecom.......not National....it is strategic that Nat. govt is selling 49% of the assets.... if they dont sell the partial assets, we have to borrow more money and the country would be in deeper in debt. That's the Labour strategy to borrow more and to give more to non-workers......

23 Dec 2011 01:27p.m.

Chrisalso wrote:

The best dividends have come about because the raw material for hydro power is water, and it is still free. As fossil fuels continue to rise in price, the amount we the public pay for eelctricity will continue to rise, and hydro producers will continue to make windfall profits. It would be better that these huge profits stay where they are (in our public ownership), rather than being sent eventually overseas.