By Gareth Vaughan
The taxpayer funding the government put in place for New Zealand Post last year to help maintain its credit rating and subsidiary Kiwibank's growth, which is to be called only in an emergency, is worth NZ$300 million.
The so-called uncalled capital facility was revealed in August last year by Finance Minister Bill English, SOEs Minister Simon Power and NZ Post CEO Brian Roche. However, its specific value was kept secret, with Roche merely saying it was valued in the low hundreds of millions of dollars.
However, NZ Post's financial statements for the year to June 2011 disclose that the facility, on commercial terms which can be drawn in response to a "significant unforeseen event," is worth NZ$300 million.
English and Power said last year provision of the facility came after a request from the NZ Post board for support to enable the company to maintain its AA- Standard & Poor's credit rating while Kiwibank continues with a growth-focused business plan. The ministers said the move complemented other government measures such as allowing Kiwibank to retain profits and requiring a lower dividend from NZ Post.
Kiwibank recently said its June year profit more than halved to NZ$21.2 million as provisions for bad debt surged NZ$67.6 million to NZ$87.1 million. However, the bank's CEO Paul Brock predicted better times ahead for the state owned bank which grew annual lending by 10%, or by NZ$1.08 billion, way ahead of the 2.6% growth achieved by the fastest growing of the Australian owned banks, BNZ.
Meanwhile, NZ Post recorded a NZ$35.6 million June year loss, versus a previous year profit of NZ$1.3 million. It said the Canterbury earthquakes cost it NZ$29.1 million. NZ Post will pay the government NZ$2.5 million in annual dividends, down from NZ$5.7 million the previous year.
NZ Post can call on the uncalled capital facility only in certain defined circumstances, such as Kiwibank experiencing a substantial shock event beyond its own resources and beyond the resources of its parent. It says the facility is vital in helping maintain a credit rating that helps Kiwibank compete with Australian owned rivals ANZ, ASB, BNZ and Westpac.
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6 Comments
Articles, here and in the MSM, should stop stating "The Government will pay for/subsidise/arrange for/bail out/guarantee... or whatever..." and instead start printing "TheTaxpayer will pay for/subsidise/arrange for/bail out/guarantee...". That might get across the message that we will all have to pay for whatever it is.
Nicholas, this story does that and I always endeavour to do that. In fact the reason I wrote this article was specifically because the government wouldn't tell us precisely how much of our money they had earmarked for this backstop facility last year which I thought was scandalous.
Thanks Gareth for the update ... this SOE can now perform as poorly as it desires without risking it's artificially stacked credit rating bankrolled by you and me. Once his RWC commitments are fulfilled, is it possible to have Roche's salary paid by reality cheque?
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