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Helping a Hong Kong billionaire deal with his Wellington losses

by Bill Sheat
It is comforting to know that Wellington Electricity is to spend $31million to prepare the city’s network for earthquakes.

The Commerce Commission has given approval to Wellington Electricity to make us all pay for it. Should we be grateful?

Believe it or not, but Wellington Electricity has run at a loss since 2008.

How could this be? The company is owned by Mr Li Ka-shing. Dubbed “Superman ” by local media in Hong Kong, Mr. Li recently announced his retirement. Do not worry, he is not dependent on loss-making Wellington Electricity for support in his retirement.

According to the Bloomberg Billionaire’s Index, Mr Li has a fortune of US34billion.

He could have financed the required Wellington strengthening work out of his household budget.

Why does Wellington Electricity operate at a loss? So that it does not have to pay income tax on its earnings in New Zealand.

Instead, it uses its surpluses to pay interest to a related company overseas. In other words, it pays interest to its own shareholders.

There is currently a Bill before Parliament which aims to plug the loophole through which the likes of Wellington Electricity siphons off its “profits,” thereby paying no income tax. The Bill is called “Taxation (Neutralising Base Erosion and Profit Shifting) Bill”. The name of the Bill is an indication of the complexity of the amendments required to our tax law.

The billionaire also owns our rubbish collection service
Do they care about Lower Cuba Street in Hong Kong?

8 comments:

  1. TrevorH, 8. April 2018, 9:32

    Yes and we couldn’t keep the trolleybuses because Wellington Electricity apparently wasn’t prepared to upgrade the substations. So how will electric light rail get by? We have little control over a key component of our infrastructure thanks to the privatization of the old MED. Another dumb decision by the Wellington City Council comes back to haunt us.

     
  2. Nora, 8. April 2018, 11:38

    Many thanks Bill. You have reminded me of a few years back when I wanted to voice my concern re local street lights not working and was told by the WCC they would have to ring Hong Kong!!!! Do not bother any more as the same lights are “on and off” regularly.

     
  3. Michael Gibson, 8. April 2018, 13:59

    Bill – your very helpful explanation brings the present mess home to people so well – thank you! It would be fair to calculate the tax which has been ‘stolen’ from us and knock it off the $31,000,000. Mr Li could also come to the rescue and pay the considerable costs which the Council has lumbered us with by its plans to build a ‘Garden of Beneficence’ on our precious waterfront. After all, somebody will have to pay to have its various gates locked up at night.

     
  4. Keith Flinders, 8. April 2018, 14:19

    Trevor H: Wellington Electricity seemingly weren’t paid enough to operate and at the same time update the 1950s electrical rectifiers and circuit breakers in their sub stations. Starting in the mid 1990s this equipment should have been progressively replaced to both maintain the reliability of the trolley bus operation, as well as allowing the system to handle 119 trolley buses as it once did. Wellington Electricity were faced with old equipment that did not meet modern safety requirements, thus presenting their staff with hazards. As to if WEL wanted to continue to provide the service, if given the money to upgrade, is a question you would need to ask of them.

    If one looks at the annual balance sheet of Wellington Cable Car Ltd, 100% owned by the Wellington City Council, one might ask why nearly half of the $5.x million paid by the Wellington Regional Council to WCCL annually to maintain the trolley bus infrastructure went back to the WCC as a dividend. $2 million a year could have upgraded the trolley bus facilities in five substations.

    East – west bus routes are now 100% serviced by diesel buses and set to remain so for the next 10 years. When the new contract starts in July, NZ Bus will be allowed to continue using their existing fleet including Euro 1, and Euro 2 buses until the end of 2018. They will also be permitted to use Euro 3 buses into the foreseeable future. Euro 3 is now outlawed in some cities overseas due to its pollution emissions.

    Hands up those who believed the GRWC when they said that Wellington was going to get a new bus fleet this year. The same organization is in denial about the pollution being less with the “new” buses replacing the trolley buses from later this year. C02 emissions will be substantially higher as noted in the GWRC 2014 commissioned report.

     
  5. Michael Gibson, 8. April 2018, 16:20

    Let me put my hand up re “hands up those who believed the GRWC when they said that Wellington was going to get a new bus fleet this year.” And the new timetables are appalling, especially for Highbury.

     
  6. TrevorH, 8. April 2018, 17:28

    @Keith. Thanks for the information. The use of Euro 1 to 3 buses is an outrage when the far less polluting Euro 5 and 6 technology is widely available. We are being treated like peasants by the GWRC.

     
  7. Andy Foster, 11. April 2018, 10:08

    A saying I sometimes quote is the one paraphrased as ‘A lie is half way round the world while truth is still tying up its bootlaces’.

    We all know that sometimes ‘facts’ in these types of sites aren’t exactly right. One myth that I’ve seen two or three times now is the one Keith has inadvertently picked up: that Wellington Cable Car Ltd (WCCL) has been taking GWRC money for trolley bus overhead maintenance and paying large dividends to Wellington City Council.

    WCCL had two Divisions – the Overhead Division (for trolley wire maintenance) and the Cable Car Division.
    Greater Wellington has paid WCCL for maintaining overhead trolley bus wires. However there has been no surplus from that. Really the only financial gain for WCCL has been that having the Overhead Division has spread the administrative costs of the Cable Car company across both the Cable Car and Overhead Divisions.

    WCCL does not make a surplus of $2 million a year, let alone give that to WCC as a dividend. Going back a few years, a dividend of about $300,000 was the norm – basically all came from the Cable Car Division not the Overhead Division. However the Cable Car as we know needs money for capital investments. So it has more recently been retaining money, and last paid a dividend to WCC of just $94,000 in 2013/14. The intention is not to pay any dividends for the foreseeable future and to reinvest any surpluses back into the business to pay for future capital programmes of work. (the Cable Cars themselves need about $10 million in investment in a few years time). Furthermore the Wellington City Council as owner granted $2,500,000 to WCCL in 2016 towards a $4 million project to replace and refurbish the Cable Car Electric Drive and Control Systems.

    I hope that clarifies the situation.
    Kind regards
    Andy Foster
    City Councillor

     
  8. Sue Kedgley, 11. April 2018, 13:10

    It’s a tragedy that the Wellington City Council sold off Capital Power in the early nineties and so we are left with a key piece of Wellington’s infrastructure, our electricity network, that is in private hands and over which we have no control. I was one of only two Councillors who opposed the sale of Capital Power. Since first being being sold in 1992, it has been unsold to other multinational corporations several times, and millions of dollars of profits have been siphoned off overseas. Meantime our electricity network is severely run down through lack of investment — and this was used as an argument to get rid of the trolley buses. My understanding is that significant chunks of the network are so run down — such as dozens of substations which are so old they don’t meet current regulatory standards — that there is no guarantee the network would function in an earthquake.

     

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