The constraints of MMP

Radio NZ reports:

The company said it would raise $400 million in a sale of new shares, with $100m to new investors and a $300m renounceable rights offer for existing shareholders.

The government confirmed it would invest up to $198m to maintain its 51 percent stake.

“Genesis’ proposed investments will directly contribute to enhancing energy security, including through enabling Genesis to bring more flexible capacity to the market which can be used to address dry-year risk,” Finance Minister Nicola Willis said.

Generator companies should be able to fund new projects through capital, rather than debt. I’m one of those planning to buy more shares in Genesis.

My preference would be that the Government does not spend $198 million on more Genesis shares. I’d rather Government spent money on capital projects that are not commercial, such as hospitals and schools.

However NZ First would not support having the Government share of Genesis go lower than 51%. This means that either Genesis is stopped from being able to fund new generation, or the Government allows them to do so by buying 51% of new shares issued.

It is important we get more generation in NZ. So out of two sub-optimal options, this is the best one. But the even better one would be to allow the shareholding to drop below 51%. I actually don’t think taxpayers need to own any shares in commercial companies. In fact we would probably get better competition if three of the four big energy companies were not majority owned by the Government, but all had different competing owners.

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