Debate on Crown Entities, Public Organisations, and State Enterprises — Genesis Power Ltd

At the Press South Island forum last month the Prime Minister made a very interesting comment that if National were to go down the privatisation path, the most likely candidates for part sale would be State-owned energy companies. It is very interesting. The alibi that the National Government has used when raising this issue—firstly, when Bill English spilt his guts and let the cat out of the bag over State-owned enterprises in respect of Kiwibank the day after the Budget—is that for a number of assets there will need to be further capitalisation. National says in respect of further capitalisations that there is not enough money or enough cookies in the jar, and it is reluctant to use taxpayers’ money, so these assets should go on the block.

It is interesting to look at Genesis Power. In February 2010 Genesis Power announced a $64.6 million half-year profit. Given that demand for electricity is already on the rise, and is expected to continue to be, even as we move out of the recession, it is likely on projections that Genesis Power will continue to expect large profits in the coming year and in the future. It dampens down, if not negates, the National Government’s alibi that it wants to get rid of either in part or in whole those particular assets, especially as the Prime Minister said it would be energy assets because they will require further capital. In the case of this particular asset, and others that I am sure my colleagues will deal with later, it does not require—certainly not at the mid-point—further capitalisation.

It is very, very telling that in the Press forum the Prime Minister made specific reference to the partial privatisation of energy companies. He essentially said that they will be the ones on the block, the first cabs off the rank, if National was to win next year’s election.

Let us look at all the State-owned enterprises and at the ethos and ideas around selling energy companies and entities like Genesis Power. The Minister of Finance has said that mum and dad Kiwis will be able to buy a slice of assets like Genesis Power, and that this will be great as it will put a great injection into our capital markets. The only problem with that argument—and mum and dad Kiwis all around are not silly—is that they already own Genesis Power, Meridian Energy, and others such as Kiwibank, Solid Energy, and the like. Kiwis already own those and they have already paid for them. In some cases, Kiwis have paid for them twice as the previous Government had to buy back assets that were on their knees, thanks to the National Government of the 1990s selling them. Mum and dad Kiwis already own those assets. Mr English, Mr Power, and Mr Brownlee are challenging mum and dad New Zealanders to put up for a second time or shut up—put up money they have already spent in purchasing these assets through their taxes, and somehow feel good that they can buy them back again.

Then there is the issue of who would purchase a percentage of a State-owned asset like Genesis Power. In a recession where 70-odd percent—through the electorates it ranges from about 67 percent to 76 percent—of New Zealanders earn $40,000 or less per year. Once they get their little, measly tax cut, and they take into account that it is negated by a 2.5 percent rise in GST and 5.9 percent inflation, they are $30 to $50 a week worse off. Somebody who earns $1 million a year—like some of the mates of members on the other side of the Chamber—will receive $1,000 a week as a result of the tax cuts. I think we can work out that Kiwi mums and dads in most of the communities will not be able to afford to buy a slice of an energy asset like Genesis Power.

It will not be the 70-odd percent of New Zealanders who earn $40,000 or less per year, who are $30 to $50 a week worse off. They will not have the discretionary spending power to amble down to the stock exchange, have a chat to their broker, and spend $1,000 to grab a slice of Genesis Power, as Mr English—generous fellow that he is—said to. It will not be those people, because they will not have the discretionary spending power, thanks to that crew over there; it will be many of Mr Brownlee’s mates, including one of his best ones, Mr Henderson of Christchurch, although he is in a bit of shtook at the moment. It will be Mr Brownlee’s mates who are earning $1,000,000 a year, and who, thanks to Mr Brownlee, will get $1,000 a week back in tax cuts. That sort of person will be able to mosey on down in the Daimler to the stockbroker and say that they will have a chunk of that asset, thank you very much. I suspect it will more likely be some of the people that Mr Brownlee and others deal with on a daily basis. Those large financial overseas institutions will be, as they were in the 1990s, licking their lips to see whether they can grab hold of a slice of a Crown entity or a State-owned enterprise like Genesis Power, Kiwibank, or Solid Energy.

💬 Hon Steve Chadwick: Like a fire sale.

As my colleague says, it will be like a fire sale. I think Mr Brownlee served for a time in the Bolger Government, and we remember what Mr Bolger did in respect of KiwiRail. Mr Brownlee was part of a fire-sale Government in the 1990s—

💬 Hon Trevor Mallard: I don’t think he was in that Government.

Oh, he was not there; he was a latecomer. He is a member of a party that has a legacy of fire sales in respect of the 9 years it was in Government. Those large, foreign financial institutions will be involved.

Then we have the point that National is extremely fond of saying that it listens to the people, is engaged with the people, and is connected with the people. Mr Brownlee does not like it, and all his fingers and toes are used to recalculate it when he sees it on TV at night, but we have had an opinion poll in which 80 percent of New Zealanders said they did not want their remaining assets such as Crown entities like Genesis Power sold—full stop, end of story, game over.

I make a prediction that two things will happen. The Government will quieten down about this policy. Mr English will have been gaffer-taped at this point and told to not talk about sales. It was interesting to note what happened in a select committee hearing with Mr Power, the Minister for State Owned Enterprises. I asked him whether he had ever talked to his Cabinet colleagues, such as Mr Brownlee or Mr English, about Mr English’s articulation of his position on sales of various State-owned enterprises. He said no. I asked him whether he had ever dreamt about it, passed Mr English a note about it at Cabinet over a cup of tea, done semaphore between the offices, made a phone call, written a letter, or ever discussed it in Cabinet. He said no. He had never even dreamt about it, never even seen a psychic to predict what Mr English might want to do after an election. That lacks credibility to a high degree; there is no credibility in the assertion that the Minister for State Owned Enterprises has not had a wee chat with the Minister of Finance after Mr English spilt his guts the day after the Budget, talking about a policy that the Government did not really want to talk about.

Assets like Genesis Power are being readied for sale now under the guise of economic efficiency. If the Government wants to sell them the day after the next election, which it will if it wins, it cannot flick a switch and in 24 hours prepare a State-owned asset for sale. It will be very interesting to watch over the coming months whether the Government goes silent on that issue. The undeniable truth is that 80 percent of New Zealanders have wised up. They know that they already own Genesis Power. They know that it was a con when Mr English said they could have a wee slice of it back. They know who will buy it if it is put on the block: not the Kiwi mums and dads but the big end of town, the foreign end of town—those foreign institutions. Eighty percent of New Zealanders have, when asked by scientific pollsters, turned round and rejected the policy. The Government would be very, very wise to listen to the 80 percent of New Zealanders who have said “no way”. The public have learnt; they have seen it time and again. They have seen what happens when State-owned assets are put on the block, and they say no.

It will be very interesting if Mr Brownlee, in this debate or in the debates on the other Crown entities responsible for energy that follow, gets on his feet and tells us, after all the bluff and bluster, what he will do to help New Zealanders this winter in respect of their power prices, and in respect of their ability to heat their homes in a basic way. We know that Mr Brownlee, the great believer in insulation—anatomical and otherwise—has gone to great lengths to stomp around the country and say that he will sort it out. He says that he will ensure that Kiwis are looked after, and that he will demand that power prices are not elevated to a point where they become unaffordable.

There was a man, the Hon Clayton Cosgrove, speaking with all the power, conviction, and passion of a reformed smoker. I say that because he is a reformed asset salesman. Everyone knows that this country’s assets were put on the block at ridiculously low prices by the Roger Douglas - led Government of the 1990s. They also know that the National Government, and John Key, the Prime Minister, have said there will be no asset sales in this term of Government, and that if there is a change in policy we will tell people before we go into a general election, unlike our political opponents, who just cannot trust themselves to stay away from such a policy. So what we see is Mr Cosgrove practically unable to give a speech—and he practically would not have a speech if I did not come to Parliament each day, because that is the only thing he can talk about—because he, by and large, just wants to get in there and do it. He wants to get in there and have a cigarette—I am sorry, he wants to get in there and sell some assets, but he cannot, so he accuses everybody else of doing exactly what he wants to do.

The issue is a straw man, as far as this Government is concerned. We could not have made our position clearer. What we know is that when John Key says something will happen, it happens, and when he says something will not happen, it does not happen.

I will now turn to the issue Mr Cosgrove spoke about: New Zealanders’ power prices under the State-owned enterprise model. During the period from 2000 right through to 2008 the retail electricity price for New Zealanders rose by 73 percent, or three times the rate of inflation. Over the last short time we have been in Government, we have constructed a proper review of the structure of the electricity market and of the way electricity is sold in this country. Then we constructed a bill, which has been through a select committee and is currently awaiting its second reading in the House. During that process we have seen a significant change in behaviour from retailers in the electricity sector, with the real price-rise for electricity being just below that of inflation in the term of this Government, unlike the rampant increase of three times the rate of inflation under the previous Labour Government.

It is also worth noting that this Government has been concerned about how warm New Zealanders are in their homes, and it has made a commitment to provide insulation and clean heating for New Zealanders, with very substantial grants. The previous Government said it would divert State-owned enterprise profits for that purpose. Well, it talked about it, but never quite got around to doing it.

One other point on which I would like to congratulate the Minister for State Owned Enterprises is that, particularly in the electricity sector, while prices have been stable, profitability has been high, and he has been insistent that the performance of the businesses themselves should not be measured simply by how much they can charge their consumers. One of the things we are seeing is that we have genuine pressure on prices to remain low, along with genuine commitment inside the State-owned enterprises to increase their performance and thus their profitability. In the end, that is a revenue stream that all New Zealanders benefit from.

I worry about Mr Cosgrove and some of his ridiculous claims. They tend to deny the fact that is clear and evident to everyone—that State-owned enterprises are performing extremely well at the moment. State-owned enterprises are dynamic organisations, and formulate their own planning as to how they might move forward. When Trevor Mallard was Minister for State Owned Enterprises it seems it was OK for New Zealand Post to enter into some very interesting sort of arrangements, or for the Kordia Group to engage in some very interesting and quite big loss-making arrangements. Mr Cosgrove comes into the Chamber and wants to make a case that everything is all doom and gloom and bad and sad because the National Government is now overseeing this particular portfolio, this particular suite of investments. I think that the taxpayers and residents of this country should be very, very satisfied with the work of the Minister. They should be satisfied with the progress of State-owned enterprises in making a greater contribution to this country’s economy.