aect

Handing my cheque to the teller last weekend made me reflect on the good things about living in central Auckland. In particular,

• There are banks that open on Sundays
• Once a year, the people who run the company that takes my money year round gives some of it back.

And the teller got to add to her growing pile my cheque from the Auckland Energy Consumer's Trust. Well, I'm sure she wasn't that thrilled - it was a big pile, and apparently was even larger the previous weekend. I hope she got one too, and didn't get it stolen.

Also, it's another good reason not to live on the Shore - you don't get a cheque on the Shore. Add that to the list... the roads are laid out in an incredibly stupid way... nobody can drive properly (about as bad as Ponsonby Road drivers) .... peak traffic in Albany South...

I quite like the AECT/Vector model. It's public ownership of a key asset without the political landmines that SOEs can bring, combined with a corporate model that is that maximises the return and value of assets to the owners. This year the trustees of the AECT are up for election.

Matt McCarten writing in the HoS, gives his personal precis of the three candidate blocks. It's unsurprising that he favours the left candidates over the current right wing bloc who sold a quarter of the company. McCarten notes the hypocrisy of those candidates who promised to keep the company in the Trust's hands, before doing the opposite. He predicts that

if the right-wing politicians grab control in this election, it won't be long before Vector assets of nearly $6 billion go on the international auction block. Of course, the corporation that buys Vector then ups the price to a captive customer base to pay off the loan raised to buy it. The new foreign owner makes a bomb, the foreign bank makes a bomb, and the local people pay the bill.

I don't think the decision to sell a quarter of the company was necessarily incorrect - at least from a corporate point of view. Vector is the best placed power company in the country, having the best market helps with that, but also having as your only shareholder a Trust - asking only for a consistent level of profit - has enabled Vector to leverage its revenue to grow. But to grow past a certain point needs money - and the AECT isn't in a position to demand cash from it's beneficiaries. The float helped Vector expand, and that move paid off. The fact that the dividend was significantly larger than what it had been in previous years is testament to that.

However, I don't think more should be sold off. Having more than a quarter of your shares floating in the market is a risk from governance point of view. In fact, I think it folly for the dividend to be so large. The AECT not only has a responsibility to deliver short term dividends to its beneficiaries, but a long term obligation to retain the company in public ownership and grow its profitability over time. Part of that money could have been used to reinvest in the company, in exchange for more shares, or to buy back some of the shares in the market to increase its asset base.

McCarten's article is a must read for everyone in who is eligible to vote for the trustee election - even if you are on the right of the spectrum. I don't think we're going to see another article that summarises what's at stake. Most importantly, everyone who can vote should. You can't whinge if you didn't.