IT’S NOT IN SHAREHOLDERS INTERESTS

This week we saw the announcement that the potential sale of the Liddell Power Station by AGL would most likely not proceed because the sale “was not in shareholders’ interest”.  Surprise, surprise.  Fundamentally why would a business sell an asset that produces its income stream to a competitor that is going to use it to compete in the same market?

The story reminded me of a turnaround I was doing many years ago where the business was a fledgling independent producer of bottled water.  The business had acquired a second hand plant but regrettably it was hopelessly under sized.  Investigations were conducted and it was discovered that an almost perfect plant was to be decommissioned and replaced in Melbourne by one of the major industry players.  Enquiries were made and it was discovered that the dismantler of the plant would potentially be in a position to both sell the plant and in fact install and commission it into its new premises.  A perfect solution.

Alas rumour had got out that the plant potentially had a new home and the major producer suddenly varied its remove/install agreement to effectively say that the old plant was to be removed with oxyacetylene torches and broken into components small enough to be moved in a very small vehicle.  The result being that what was left was both non-operational and unrepairable.

With the destruction of that plant went jobs, lost capital, the destruction of a business (it could not continue as it was) and a significant potential boost to a rural economy.  But for the owner of the plant there was simply the destruction of a competitor; they had achieved their aim.

Purely profit and purely self-interest will do significant damage, not so much to the business, but to society as a whole.  A truly successful economy of the future will be one that focuses more on the whole rather than the components.  It is great to replace all of the workers with robots, but what will those people do.  Failure to appreciate this will see mental health issues, and their related costs escalate exponentially, a communal problem alas.

Someone really needs to take an economy wide look at the disposal of power assets before it’s too late.  If it’s not done then the next potential opportunity will be shutting the system down at peak times so as to induce customers into more costly ‘priority guaranteed’ supply streams that, very profitably, guarantee supply in such situations and are truly in ‘shareholders’ interests’… after all it worked for Enron in California!