Gordon Campbell on the Genesis share float debacle

In one sense at least, Finance Minister Bill English has done everyone a favour with the way the Genesis share float has been structured. So the shares have been set at an especially low price, the dividend yield has been set at an especially high level and buyers will be given bonus shares for every 15 shares they purchase. Such generosity, with something that belongs to taxpayers. A large chunk of the energy companies they own have been given away just as ordinary people head into winter, and are already facing rising power bills for the electricity they need to warm their homes. Now, thanks to Bill English, they have just seen wealthy investors handed a fresh incentive to jack up power prices, and to maximise the return on their new investment.

How is this doing everyone a favour? Well, it means that during the election campaign…whenever the Key government tries to scare us about the prospect of a Labour/Greens cabal running the economy, or with Russel Norman being a heartbeat away from the Finance portfolio or whatever else the Crosby/Textor crew come up with to try and stampede voters into the arms of the centre-right, such tactics can be rebutted with three simple words: “Genesis share float.” At a stroke, this should vaporise any claims that National is a better, more responsible manager of the economy, and a better steward of public assets. (Just think of how many family arguments about who-knows-more-about-economics will now be won, hands down, by the centre-left.) Because what National has done with the state’s energy assets goes well beyond the worst “tax and spend” nightmares peddled about the Opposition.

From the outset of the Great Asset Selldown, critics warned National that it would be foolhardy to try and sell down four energy companies in quick succession into a sharemarket that already contained energy company options. That criticism has been vindicated. Despite all the preparatory spin, the Mighty River share float tanked, and its been downhill from there. The Genesis share offer has now had to be sweetened so comprehensively that is amounts to a virtual giveaway. English, who is an old hand at poker-faced wit, has depicted this process as one of responding to the realities of the market. Love that ‘free’ market when it needs a sugar fix to even get out of bed.

Here’s what responsible economic management – National style – now looks like. You sell down state assets and forego the full flow of returns in perpetuity, when it would have been demonstrably cheaper to borrow the money involved, and pay it back. That’s even before you count the transaction costs of the selldown process, which are now running in the hundreds of millions of dollars. Only a small segment of the wealthiest New Zealanders have benefitted from this process – and even they have got to the point where they need to be gifted with all kinds of inducements to participate. As a consequence, the new investors in our energy sector have been gifted with a lever to extract ever higher returns from ordinary puinters, by jacking up their power prices even faster…As indicated above, this debacle really needs to be remembered and recounted in full, come election time.