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Have your say: Should government judge State Owned Enterprises by financial measures
State Owned Enterprises Minister Simon Power has announced a new set of financial performance measures for State Owned Enterprises, which own NZ$25 billion of assets.
"These companies represent a $25 billion investment on behalf of the taxpayer, and shareholding ministers have a duty to ensure that this investment delivers an appropriate return," Power said.
Ministers had asked officials to develop financial performance measures for each SOE, he said.
"Following consultation with the SOEs, 11 measures have been agreed, and I expect these to be included in each company’s Statement of Corporate Intent from 2010/11. This is another step towards providing taxpayers with the tools to assess how their investment in this portfolio is performing. The financial performance measures cover shareholder returns, profitability and efficiency, and leverage and solvency."
The full list of measures is attached here.
Your view? What's your view on how SOE performance should be measured and whether they're shaping up. We welcome your comments below.
7 Comments
All very well, these
All very well, these measures. Most commercial enterprises would have these running in a dashboard, and know fairly much during the year what the trends were. So far, so yawn.
Given that some SOE's are there to actually deliver stuff, what aboot a raft of Physical Performance KPI's: availability, quality, on time, etc, depending of course in what area of the economy these shows are operating.
Stuff like the pure financials can be rigged straight out of a well-tended Statement of Financial Poistion, using software like Tableau.
It's much harder to do 'real' KPI's.
I conclude this is a really, really soft target....
I agree with Waymad - SOE's
I agree with Waymad - SOE's that actually deliver a good service to their users and don't cause blackouts or rort their monopoly position are rather more important than profiotability. Thats why they are SOE's and not just flat-out private companies.
I'm interested in the traget for the generator efficiency KPI though:
"Generator efficiency = The efficiency and profitability of the company’s electricity generation (Units = EBITDAF/MWh)."
So is the government going to set a target for a high generator effeiciency (ie high prices, bad for consumers, good for shareholder) or a low generator efficiency (ie low prices, good for consumers and the energy intensive economy)?
I bet I know which Mr Power wants....
The only way they can score
The only way they can score well in most of these measures, is by screwing the NZ consumer. Will you see it back in tax cuts? Dream on dudes.
Asset values in the
Asset values in the electricity have been increased not by investment but by revaluation.
I think a return on investment is fair but on tax free revaluation is ripping off consumers
A brilliant plan to confuse
A brilliant plan to confuse the peasants and a great tool to include in the box of tricks with the govt spin and BS spanners.
Sir Humphrey Applebee would be as proud as can be. You done well Simon.
Careful, Ian. Asset
Careful, Ian. Asset valuation in the utility sector (electricity, airports, f'rinstance) is a highly technical, expensive and fraught business. Most semi-commercial State enterprises use some variant of Optimised Deprival Valuation (ODV, a good primer here), and the obligatory money quote from that MED doc is:
2.2 The aim of applying the ODV methodology is to value the assets at the level at which they can be commercially sustained in the long term, and no more. The resulting value should be equal to the loss to the owner if they were deprived of the assets and then took action to minimise their loss.
2.3 The value of the assets derived in this way may differ from their current book value. Book value is typically based on expenditures made over the years and may bear little resemblance to the ODV value.
So a revaluation (debit asset, credit reval reserve) on the books is non-cash, and is only taken into account on the P&L via depreciation on the resulting changed asset value. Depreciation counts in determining net taxable income, for sure, but it would be a brave person indeed who argued that ODV provides tax perks to undeserving recipients, or that an ROI based on historic cost (which is what your statement actually means) is in any way 'commercially sustainable'.
Sustainability, after all, is a tricky beast.
One always has to ask: 'sustainable - at what level?'
Hmmm - I rather think you've
Hmmm - I rather think you've proved Ian's point here. ROI is ROI - you tot up the real net cost of the asset and then you work out your actual annual return on that actual capital expenditure.
Making up random valuations is just fantasy accounting that could be used to prove the sky is pink and Bernard is a parakeet if so desired.
In this case the end result is that the Electricity SOEs can justify inflated electricity costs to subsidise the stealth tax dividends the government is demanding (I wouldn't mind so much if they were reinvesting the profits in infrastructure - but no its just disappearing into the maw of governemnt never to be seen again....).