possibly three, state-owned enterprises scheduled for partial
listing on the NZX this year, the focus from the point of
both investors and opponents to the sale will be on what
dividends the companies pay. Business editor Dene Mackenzie
Presuming the Government wins its next court case, Mighty
River Power, Meridian Energy and Genesis are likely to be
floated on the NZX this year.
Opponents, including the Maori Council, which is taking the
Government to the Supreme Court over the issue, say the
dividends from those energy companies will be lost to
taxpayers, who already own the assets.
Investors are likely to be queuing up for a slice of the
companies, but they will be more interested in what dividends
can be earned from their investments.
While the three energy companies are the highest-profile
state-owned enterprises, there are nine other SOEs in the
Crown's portfolio, only some of which pay dividends to the
The Treasury's Crown ownership monitoring unit recently
released a 10-year analysis of the 12 companies but excluded
others owned by the Crown.
Unit deputy-secretary Andrew Turner said the 10-year analysis
showed significant variance in behaviour and suggested
further work in that area was warranted.
KiwiRail was excluded because of the significant changes in
its scope and balance sheet and because it relied heavily on
government financial support.
NZ Post was excluded because Kiwibank's significant financial
assets and liabilities distorted the analysis.
Transpower was excluded because it was a regulated monopoly,
capital spending and revenue being scrutinised by a
Mr Turner said the 12 SOEs covered by the analysis had
generated more than $10 billion of net operating cash flow in
the 10 financial years from 2002-03 to 2011-12 and just below
$5 billion of reported profits after tax.
''These seem like large figures but they are over a 10-year
period and the companies currently have $21.5 billion of
assets and $11.6 billion of equity.''
In round terms, that represented $1 billion a year in
operating cash flows and $500 million a year of reported
Of the $10 billion of net operating cash flow, 45%, or $4.5
billion, had been paid to the Crown as dividends -
representing 91% of the reported profits.
Mr Turner said the aggregate figure for the 12 companies
disguised significant variations between them.
Meridian was the largest SOE, with a commercial value of
about $6.6 billion - more than 1000 times larger than Animal
Control Products (ACP), the smallest SOE with a commercial
value of $5.7 million.
Despite the difference in size, the two companies had both
paid a significantly larger proportion of their operating
cash flows as dividends than any other SOE, he said.
In the past 10 years, Meridian had paid $3 billion in
dividends, 79% of its net operating cash flow, although its
cash inflows had been augmented by the sale of the southern
hydro subsidiary in 2006 and the Tekapo transfer in 2011.
When taking those into account, and associated special
dividends, Meridian's dividends still represented about 50%
of net operating cash flows plus cash from asset sales. Even
when adjusted, Meridian's percentage was greater than all
other SOEs except ACP. ACP had paid $7.8 million in
dividends, 74% of its cash flow.
The average of the other 10 companies out of the 12 analysed
was only 24% of operating cash flows paid out as dividends.
Those 10 companies paid a total of $1.5 billion in dividends,
half the total paid by Meridian.
''To put this in context, the combined commercial value for
the other 10 companies is $10.6 billion. So Meridian is less
than two-thirds of the size of the other 10 companies but has
paid twice as much in dividends,'' Mr Turner said.
Genesis had paid no dividends over the past two financial
years as a result of the Tekapo transfer and also had a
period without paying dividends in the mid-2000s.
As well as generating more than $10 billion of operating cash
flow, the 12 SOEs had increased their borrowing by $3.3
billion in the past decade, he said.
The increase was matched by the growth in their assets and
Collectively, the 12 SOEs had a gearing ratio of 30% in 2003.
That dropped to about 15% by 2007 but had increased to 28% -
almost the same as it was 10 years earlier.
Of the $10.2 billion of operating cash flow and the $3.3
billion of increased borrowing by the companies, $4.5 billion
was paid to the Crown as dividends. The remaining $9 billon
had been invested by the companies in the purchase of
physical assets. Some of that would have been for capital
spending on existing assets rather than new investments and
it was not possible to separate that information out, Mr
Analysis of the results of the investment showed there had
been only a marginal improvement in the reported
profitability of the 12 companies, despite the significant
investment in new and existing assets. At the same time,
there had been a significant increase in operating cash flows
The Crown ownership monitoring unit noted the changes in
accounting standards over the period under analysis,
particularly around the fair value of assets which needed to
be reflected in the profit and loss statements. In his
conclusion, Mr Turner said the analysis, on the surface, was
not encouraging for a shareholder with a preference for
''At this stage, we have only compared internally across SOEs
and have not benchmarked against NZX-listed companies.
Consequently, the Treasury may expand upon this analysis.
Irrespective, the broad range of results in respect of
dividend priority suggests scope for dividend yield
improvements,'' he said.
• Energy: Mighty River Power, Genesis, Meridian, Solid
• Others: Animal Control Products, Airways,
AssureQuality, Landcorp, Learning Media, MetService, Kordia,
• Excluded: KiwiRail, New Zealand Post, Transpower.