KEY POINTS:
It's hardly surprising that the Auckland Energy Consumer Trust's trustees believe they have the best qualifications to control power infrastructure firm Vector.
The AECT is promoting a New Zealand Institute of Economic Research (NZIER) report as the last word in why power over Vector should continue to be
vested in its own hands. The alternatives are handing it over to the Auckland councils which are the trust's capital beneficiaries, professional trustee management, distributed ownership among income beneficiaries or a special purpose infrastructure investment body.
The September report, which was clearly commissioned to ward off a renewed challenge from the councils as well as provide a retort to candidates for trustee jobs who want to disband the trust, rests on the notion that maintaining AECT ownership is the only way to ensure that the councils don't expropriate the current property rights enjoyed by the trust's income beneficiaries - electricity consumers in Auckland City, Manukau and Papakura. The trust distributes dividends from its Vector shares to electricity users who fall within the boundaries of the old Auckland Electric Power Board.
This is the guts of the report and marks the ideological battleground over which the AECT trustees and the councils will fight when this ongoing war resumes.
Only two of the four options that the NZIER comments on have any rational prospect of being on the table: distributed ownership, or establishing a special purpose infrastructure investment body.
The NZIER says that a distributed ownership - a one-third split of the Vector stake between the councils, the income beneficiaries and the Auckland regional council - would expropriate two-thirds of the income beneficiaries' current property rights and give them less say than under current trust control arrangements.
The argument is far-fetched.
It rests on the notion that a fair valuation cannot be placed on the respective interests of the income beneficiaries and the capital beneficiaries.
Investment banks make a living doing just that using discounted cash flow analyses, among other tools.
Given the above you would have to question whether this sponsored report is sufficiently independent and impartial in its assessment of the various options before making the surprise assessment that the current arrangements are superior.
It also introduces the regional council as a prospective owner when it is not a trust beneficiary in the first case but fails to mention that this would also expropriate the property rights of the three councils that are the capital beneficiaries as well as the income beneficiaries'.
The special purpose infrastructure company, which is likely to be a regional holding company, would more likely arise as part of the proposed changes to Auckland's overall governance.
Under this option the income beneficiaries could expect a cash payout, not the outright expropriation of their property rights mentioned in the report.
This concentration on the income beneficiaries' property rights to the total exclusion of the capital beneficiaries' interests meets the underlying interests of the trust's elected members.
They are elected by the income beneficiaries, not the capital beneficiaries although they owe a duty of care to both.
The report also predates the recent shambles in the Vector boardroom when three independent directors resigned in protest against the leadership of chair Michael Stiassny after trustee directors started flexing their muscles by pushing independents like top businessman John Goulter off the chairmanship of a key board committee.
Documents released this week under the Official Information Act confirmed the councils are set to lobby the Government for a law change to unwind the trust and put control of its 75.1 per cent Vector stake in their hands - as tipped in my December 24 column.
The councils, which inherit ownership of the Vector stake in 2073, have already lost one court battle on this score. Nothing will move unless the Government unwinds the trust as part of a broader reshuffle of the structures by which Auckland is governed and alters ownership arrangements for various utilities.
Welcome aboard Richard Branson
Air NZ showed what market imperatives (aka Richard Branson) can achieve by announcing it would slash its cheapest domestic fares by up to 26 per cent to preserve market share.
Rob Fyfe's airline has been facing quite a bit of stick since management refused to give travellers a slice of the action by reducing the oil surcharge part of its fare in line with declining fuel prices.
Fyfe could only have been dismayed by the pasting Air NZ has taken from people's comments on media websites and blogs.
The suggestion, which is all that it is at this stage, that Branson's Pacific Blue airline might set up a cut-price competitor on domestic New Zealand routes has wrought the change of attitude at Air NZ HQ that mere consumer dissatisfaction couldn't.
It also once again reinforces the value of competition in keeping prices down and the quality of service up. The key issue will be whether Branson's possible move on to the domestic front will exclude Virgin from the list of those the Government is considering to ultimately take a cornerstone airline stake in Air NZ itself.
Getting Branson on board would do wonders for Air NZ's own image and quite a bit as well for this country's branding, given the business star's ability to plug countries where he operates.
Expect a potential selldown of the Government's Air NZ stake to occupy quite a bit of Finance Minister Michael Cullen's time when he gets back to the Beehive next week.
