Key gets tough on power firms

John Key. Photo / Mark Mitchell

Prime Minister John Key has turned up the heat on taxpayer-owned power generators with a warning they need to reform their businesses to improve performance.

The SOE companies, Meridian, Genesis and Mighty River Power, last week reported a slump in bottom line profit among them for the six months to December 31 after some hefty power price increases during the period.

The chairs of all SOEs have been summoned to a Beehive meeting next month where they face questions over their performance.

Speaking after Cabinet yesterday, Key said it was acknowledged the power generators were operating in a difficult environment but he warned them the answer to increasing dividends to the Government was not just "whacking up" power prices.

"I expect them to go away and look at the structure of their business and operating infrastructure of their business and present better results."

He used Contact Energy - which has suffered a profit slump itself - as an example of a company doing a better job.

"It's about time that the management of those SOEs took a good hard look at their businesses and came to the Crown with a better solution of how they're going to deliver better profits without whacking the poor old homeowner and business owner with higher power prices."

He said reform within the companies would not "necessarily" mean fewer people would work for them.

Over the past five years Meridian, Genesis and Mighty River Power have returned dividends totalling more than $2 billion. During the period from 1999 to 2006, power costs for residential users have increased by 28 per cent.

The group representing big power users also wants the SOEs to take a long hard look at their costs.

The executive director of the Major Electricity Users Group, Ralph Matthes, said he had no problem with anyone making profits but the lack of competition between and within generators was a barrier to service and innovation.

"I just don't think SOEs are as lean and mean as they could possibly be. They have to put pressure on improving the competitive environment. They can do that by improving transparency about their cost structure."

He said there was anecdotal evidence of SOE building work not being as efficient or cost-conscious as that of the private sector. The companies should have to disclose margins around their wholesale and retail businesses.

"It's all very opaque and they hide behind that."

There needed to be more consistent rules for disclosure, even among the listed power companies.

The Government will also push for increased financial transparency, including consideration of a continuous disclosure regime similar to that faced by listed companies.

State owned enterprises minister Simon Power said commercial expertise on SOE boards needed to be improved.

The chairman of Genesis, Brian Corban, and chairwoman of Mighty River Power, Carole Durbin, could not be contacted yesterday. Meridian chairman Wayne Boyd said through a spokeswoman he was "keen to get in front of the minister first and engage with him before talking to others about his perspectives".