Every weekday morning just after 6.50 am I talk with Marcus Lush on Radio Live about the latest news in business, markets, economics and personal finance.
I usually send through suggestions the night before or earlier in the morning. Sometimes we veer off into other areas or pick up on things that happen overnight.
But here's my suggestions as of 7.30 pm the night before. I'll update later with a link to the audio.
Marcus,
1. The government's estimate of its earthquake costs has blown out by NZ$4 billion to NZ$7.1 bln. This means we'll now run a budget deficit of NZ$18 billion this year, up from the NZ$16.7 billion originally estimated. But the government is sticking to its forecast of a surplus in 2014/15 and keeping the debt below 30% of GDP. This will be much tougher now, particularly because of a slowing global economy and the latest market ructions. See more here from Alex Tarrant and Gareth Vaughan.
2. I quite like Gareth Morgan's Big Kahuna idea for tax and welfare reform. There would be some big losers, including rich land owners and single parents (although some transitional arrangements could be made). It includes a single 30% tax rate on all income, including income from capital. It also replaces all benefits with a universal basic income. See more here.
3. Mighty River Power increased its underlying profit by 35% this year to NZ$443.1 million, in part due to increasing its electricity prices by 7.7%. This is just plain wrong. One of the reasons it could raise prices was because it revalued its assets up by NZ$412 million. This is nuts. Power companies say their costs are up and need to charge more to pay for more generation capacity. Then they proceed to arbitrarily increase the value of their existing assets to justify the higher prices. We better not sell this state owned asset, as much because its dividends are at least currently going back to the government. It paid total dividends of NZ$110 million this year, up 28% from last year. See more here at Scoop.
cheers
Bernard
Click here to see all the frequencies for Radio Live in your area. Scroll to the bottom of the page. Auckland is 100.6 FM, Wellington is 98.9 FM and Christchurch is 99.3 FM.
(Updated with link to Audio)
9 Comments
Re MRP
As a journalist/commentator you should try at least to get your facts right.
You quote a huge profit figure for MRP and call it the "underlying profit" and then use the large profit to make suggestions of overcharging.
In fact you quote the EBITDAF which happens to be over 3 times higher than the actual profit.
MRP has very high depreciation due to its large physical asset base, large interest cost, large tax cost.
You are one of those people who has strong opinions and then tries to shape/distort the facts to support your opinion. Rather than just rpeorting the facts.
Cheers
PS I'm not involved with MRP in anyway.
Bernard and knowledge once gain prove difficult to put in one place at the same time.
MRP reported increased production of 17% driven by geothermal and hydro, bet his had an impact on making more money. Yes it had higher consumer prices, but this has nothing to do with its asset revaluation. It is not a regulated utility like a lines company such as Vector. It is required by Crown Accounitng Policy to revalue its assets.
You can have cash through time or sell an assets at a point in time. The value of the asset is the present value of the future cashflows it will generate.
Dutyfree
Have a look at Geoff Bertram's academic work on power company asset revaluations, profits and power prices.
http://www.geoffbertram.com/fileadmin/publications/Price-Cost%20Margins…
Arbitrary moves by monopolies that create self-reinforcing increases in asset values and prices.
There is no other way to view the obscene increases in power prices, certainly for retail customers, in the last decade.
cheers
Bernard
Hi Bernard, and I rest my case having actually looked at Geoff's work on electricity lines companies that you referenced. As you will probably not be aware, electricity retailers and generators are not allowed to own lines companies and are not line companies.
So if you want to have a go at Vector, use Geoff's work, Mighty River Power no can do.
Have a chat to Geoff. His views cover the power generation companies too.
Here's more info http://www.geoffbertram.com/fileadmin/Energy%20Studies%20Review%20Sprin…
cheers
Bernard
You keep providing links to work on network companies (which I don't dispute). You have yet to provide a basis for your assertion that the revaluations of generation assets required by Crown Accounting Policy (and probably IFRS) push up prices in generation and retailing.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.