Shale Chambers: City must retain ownership of lines

COMMENT

Herald articles have noted John Collinge's firing from the board of Vector and his revelations about the possible privatisation of the powerlines company by the Auckland Energy Consumer Trust.

But despite Mr Collinge's "whistle-blowing", it is a matter of record that Auckland Citizens and Ratepayers Now candidates had the privatisation of Vector as their stated objective. He and his colleagues always said they were prepared to float up to 24.9 per cent of Vector in certain circumstances. AC&RN's slogan of "Keeping Vector Public" was deliberately designed to fudge that plan in the public mind.

Despite being chairman of AC&RN at the time, it appears Mr Collinge may have overlooked asking whether his trust team-mate, Warren Kyd, agreed. What did he expect? Mr Kyd, when a National Party MP, chaired the parliamentary select committee responsible for the Bradford electricity industry reforms of the early 1990s.

Mr Collinge is now arguing with his team colleagues over whether selling more than 24.9 per cent of Vector's shares is acceptable, and in what circumstances - not the principle of whether less than 100 per cent ownership offers any control of Vector at all.

Of course, Aucklanders need look no further than the example of the 80 per cent community-owned Ports of Auckland, and the measure of control that afforded with the sale of the Westhaven Marina to see that Mr Collinge's arguments are a nonsense.

It needs to be noted that Mr Collinge was not removed as a director of Vector because he blew the whistle on the proposed privatisation. He is a seasoned political operator, and already knew he had been removed when he went public.

Further, Mr Collinge was removed as a director for reasons of good governance. The trust was honouring a 1998 undertaking - given in the wake of the central city blackout - not to appoint trustee directors to Vector, to avoid possible conflicts of interest in the dual roles. Mr Collinge elected not to resign in the face of that decision.

Mr Collinge was given the option of remaining a trustee or a director. He elected to stay a trustee.

The main privatisation proposal suggested to Mr Collinge by Mr Kyd or Vector - the buy-out of councils' "interests" in the trust assets - is a proposal conceived by Mr Collinge's own AC&RN party. It is designed to produce a pot of gold from a non-existent interest in the assets of the Auckland Energy Consumer Trust for Auckland territorial councils as part of the funding proposals for the ill-conceived and uneconomic eastern highway.

The council privatisation proposal, which would also involve a part share or cash giveaway to account-holders, has never been discussed by Vector with the trust, whether formally or informally. Mr Collinge has merely pulled the plug on his colleagues' ludicrous proposal.

The Auckland Energy Consumer Trust is a consumer trust, not a community trust like the Rotorua Trust, as was suggested in a Sunday newspaper. A community trust, such as the ASB Trust, distributes profits to worthy community projects. The Auckland Energy Consumer Trust, like most other consumer trusts, can only distribute Vector profits by way of power account discounts to its consumers.

All trust deeds, which establish the environment under which trustees must work, are different and, unfortunately, another Bradford reform restriction.

Anything less than 100 per cent ownership where equity is raised on the New Zealand Stock Exchange effectively surrenders any control of a company to the market. The culture of a company changes, and management and the board measure success by the needs of the market - not the views of its majority shareholder, if those differ.

Even a majority shareholder in an exchange-listed company tends to become a mere investor, important to the company no doubt, but essentially no different to Vector's other shareholding investors. The language of investment among trustees and their advisers, rather than that of ownership, begins to overwhelm talk of the community good, and intergenerational ownership and control of essential Auckland infrastructure.

The trust will soon no longer consider itself an owner with a long-term hold policy and philosophy, and essential stakeholder in the energy industry for the public good. And the controlling shareholder will no longer be entitled to information from its company that is not generally available to other company stakeholders and investors in the market.

The language of investment returns wins over a short time. Corporate memory is fickle and transient, and not valued. Once a mere investor, trustees begin asking whether a diversified portfolio of investments, producing a higher return, would not be more prudent.

The purpose of owning Auckland's lines infrastructure is quickly lost, and 75.1 per cent ownership becomes an argument for a lesser 51.1 per cent necessary to protect its interests (so that the trust can continue to appoint the board).

Then, inevitably, an ever lesser percentage as the market produces an enticing controlling interest premium, justifying in trustees' minds selling out in the best interests of beneficiaries, forgetting of course (because it is no longer relevant) the original purpose of the company infrastructure ownership.

The powerlines assets built up over generations of Aucklanders for the greater community good is then lost. Remember the ASB Community Trust that once owned the ASB Bank? Auckland and North Shore cities and their Auckland International Airport shares? The Hutt Mana Trust recently effectively wound itself up after selling out its shareholding in its lines company.

Powerco's two minority share-owning community trusts in Taranaki and Wanganui may soon go the same way if they sell their shares.

That would mean goodbye to an aggressive undergrounding programme which did not meet economic return criteria, and hello to ugly black overhead lines, as Vector justified partnerships with compatible telecommunication companies.

Privatisation or the sell-off of Vector is not inevitable. The company has a number of growth options. The people of Auckland, Manukau and Papakura should decide; they, after all, are the real owners of Vector.

We all want higher dividends, but owners get to choose the growth path. That is the privilege of 100 per cent ownership.

* Shale Chambers is the sole Powerlynk trustee on the Auckland Energy Consumer Trust.