State-owned energy companies earmarked for partial sale are generating returns well in excess of the Government's cost of owning them and outperform most similar private sector companies, says a report released just before Christmas.
Labour says the Government delayed the release of the report until after Parliament rose for the holidays because it knew it undermined the economic case for partial privatisation.
The report, by accounting firm Ernst & Young, analysed the "economic profit'' of 19 SOEs, including those earmarked for partial privatisation.
Mighty River Power, which will be the first of the three state-owned electricity generators and retailers to be partially privatised, last year produced an 8.2 percent return on the Crown's $3.48 billion investment.
That rises to 10.9 percent if revaluations of its fixed assets such as power stations during the year are included.
The "weighted average cost of capital'' (WACC) for Mighty River and the two other power companies, which represents the cost to the Crown of owning the companies - including a premium for the risk to the Crown's investment - was 6 percent.
Genesis Energy, likely to be the second company partially privatised, also produced returns above the WACC, at 6.8 percent, or 9.4 percent including revaluations.
New Zealand's largest power company, Meridian, did not produce above-WACC returns, returning just 5 percent because of revaluations associated with the sale of the Tekapo A and B power stations to Mighty River and payment of the proceeds to the Government.
Excluding revaluations, Meridian's return on investment was 11.1 percent.
A year ago, Prime Minister John Key said when announcing his Government's plan to proceed with the part-sales that the companies would "reap the benefits of sharper commercial disciplines, more transparency and greater external oversight''.
But Ernst & Young's report shows the three companies have performed well compared with their private-sector counterparts.
Over the 10-year period that Ernst & Young examined, Mighty River consistently produced a return on investment better than three-quarters of the 27 companies in New Zealand, Australia and the United States that were used as benchmarks.
Meridian outperformed three-quarters of its private sector rivals in nine of the past 10 years, and Genesis matched or bettered three-quarters in eight of the past 10 years.
Labour Party finance spokesman David Parker said the state-owned power companies' strong performance was "no surprise to me''.
"This is further proof that these companies are already well run and profitable and that they're not going to be better run as a consequence of private ownership.
"It further underscores that the only way these companies are going to make more money substantially is by increasing prices.''
The Treasury's crown ownership monitoring unit released the Ernst & Young report on December 22.
Mr Parker said the release before the Christmas break was a deliberate attempt to minimise its impact.
"It could have been released earlier easily so it could have been commented on in Parliament, because it's obviously damaging,'' he said.
New State Owned Enterprises Minister Tony Ryall issued a statement last night, saying the Treasury portfolio report was released in December every year.
- Adam Bennett of the NZ Herald
