By Alex Tarrant
A state-owned company that is partially privatised can't just raise prices because of the ownership change, Meridian Energy CEO Mark Binns says.
Answering questions from Labour Party MPs in Parliament's Commerce Select Committee on Thursday, Binns said the market would dictate power prices, whether private capital was involved in the company or not.
Meridian Energy is one of four state-owned energy companies on the block for partial privatisation, along with Mighty River Power, Genesis Energy, and Solid Energy.
Mighty River is the first of the four to have up to a 49% stake sold off to private interests in the third quarter this year, and it is between Meridian and Genesis as to which is second off the rank.
Binns told the Commerce Select Committee that Meridian had done no planning in terms of "changing our modus operandi if we change ownership whatsoever".
“We’re having discussions, constantly about how we could be more efficient, but those initiatives will be rolled out whether we are owned by the government or partially owned by private capital,” Binns said.
“We will always try to do our best under whatever ownership regime we operate under,” he said.
'Gratuitious advice from analysts'
Given his experience of spending more than 20 years at Fletcher Building, Binns was asked by Labour MPs what benefits there might be for a company which was partially privatised.
“My only comment would be, in a private environment a significant amount of time is always addressed to questions from fund managers and analysts who provide a high level of criticism, critique of your investment decisions, where you are spending the money, and gratuitously give you advice as to where you could perhaps be more profitable," Binns told the select committee.
“That is something that does come with private sector involvement,” he said.
Meridian would operate in a manner it thought was right, and was going to have to maintain its market share regardless of ownership.
“If prices are going down, we are going to have to follow the market down. That’s just a dynamic of the market place, whether we are owned by the government or we’re owned by private ownership. We just have to make the right decisions,” Binns said.
"Operations is an area where in my experience, you have fund managers and analysts looking over your shoulder the whole time saying to you, ‘look, your cost to serve is ‘x’ in the New Zealand market place, it is ‘y’, which is less, in Australia or the US.’
“There is always constant pressure...as to the explanation of why these numbers might not be as good as ‘best practice’ – whatever that might be. So there is import at that level. I think it is very arrogant of managers to think that they know everything, and if you can take on board some information from outside, it’s always helpful,” Binns said.
“Changing price point is going to be a market dynamic. You just can’t say, ‘oops, I’m private now, I’m going to jack up prices,’" he said.