Councillors. As you contemplate the single most important decision you have ever had to make in your collective times as our Dunedin city representatives — the decision as to whether you sell Aurora Energy, almost certainly to a foreign investment fund — I would ask you to heed the advice of arguably the most successful investor in the world, Warren Buffett.
He might well have been talking directly to all of you when he outlined his investment strategy in these six words: "Our favourite holding period is forever."
These six words encapsulate Buffett’s belief in the importance of holding on to valuable, irreplaceable assets, especially those with strong fundamentals, rather than selling them for short-term gains.
Buffett consistently emphasises the importance of his long-term investment in high-quality, non-repeatable assets. High-quality, non- repeatable assets like Aurora.
Aurora is arguably the only asset that we, the people of Dunedin, currently have in our portfolio of businesses that fits Buffett’s description of a "forever" investment and any decision to sell this key asset requires far more transparency than has currently been the case with the potential sale of Aurora.
It is for this reason that I had no hesitation whatsoever in joining those who recently signed the open letter to you all asking that you vote to retain Aurora, at least until we have had the opportunity to openly and transparently explore all the opportunities that the fast-changing world of energy provision has opened up.
Electricity is going to be the oil of the future and currently, in Aurora, we own the distribution network that will distribute that energy across Dunedin and Central Otago.
In the past few weeks, we have seen the role that the price of electricity has played in the closure of major industries, not to mention the impact it is having on our own household bills.
Surely, this growing cost of electricity, and the impact it has on our cost of living, is not something we can, in all conscience, place in the hands of a foreign private equity company whose sole purpose is to pass on ever-increasing dividends to its foreign shareholders.
I understand that as part of your considerations on the sale of Aurora you took advice from Neil Holdom, the owner of consultancy firm TX1 Insight and, currently, the Mayor of New Plymouth District Council — the council that, in 2004, sold its 38% share of energy distribution company Powerco for $256 million and invested that money in a diversified fund, similar to what you are considering here.
Twenty years on, that diversified fund set up by the New Plymouth District Council is worth just $368m. That is a return on investment that has fallen far short of the rate of inflation.
However, earlier this year, the foreign company that acquired the 38% stake in Powerco sold it on to an Australian pension fund for $2 billion.
Are you confident that councillors of the future will do any better than your New Plymouth counterparts have done? Are you prepared to forgo the potential upside of this "high-quality, non-repeatable asset"?
Once you sell Aurora there is no going back.
The benefits of owning an asset like Aurora are passed on to the foreign investors who have little interest in what we, or our children, or grandchildren, will have to pay for energy in the future. Retaining Aurora will retain our options for the future — a future that is being highlighted by people like Mike Casey from ReWiring Aotearoa and Rod Drury, who recently argued that New Zealand could have the cheapest electricity in the world, and that we should make that one of our key priorities for the future of our tamariki, our young people.
By voting to retain ownership of Aurora, you can ensure that we remain part of this exciting energy future that is on our horizon.
There is a Māori proverb which reads: "The footsteps laid down by our ancestors in the past provide the paving stones upon which we stand today.".
Over 100 years ago, the city council, in this city of firsts, created one of the first large scale hydro-electric power systems in New Zealand, providing clean, renewable energy directly to the citizens of Dunedin.
That initiative, laid down by those visionary leaders more than a century ago, still provides the city with a significant proportion (84MW) of its renewable electricity supply.
Oh. But we sold it and replaced that with an investment fund which, like the one in New Plymouth, has not even managed to match the rate of inflation over the past 20 years.
Well short of the optimistic 8% those wanting to sell Aurora have targeted for their proposed investment fund.
Let’s learn from those footsteps laid down in our past, and explore all options before you take this step which we can never take back.
— Sir Ian Taylor is founder and managing director of Dunedin company Animation Research.
