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New Zealand

Too Big to Fail – Asks Government to Guarantee Three Waters Debts

summer newsroom

Continue with 12 questions about Three Waters. Consultants Castalia, Phil Goff, and other mayors asked the government to insure Three Waters’ debt. Realistically, is water infrastructure too important to be allowed to fail?

Tasmania Water does not have a government guarantee, and the New Zealand government is equally reluctant to provide a guarantee.

However, Treasurer Grant Robertson has agreed to provide at least $500 million in liquidity facilities that water utilities can call upon in extreme and strictly limited circumstances.

That’s the official position. Informally, or rightly so, as a lifeline service, the water network is too big and too important to fail.

This government is trying to bail out ski resort operators. Of course, the large public utilities that provide safe drinking water and sanitation services to the public cannot be allowed to go bankrupt.

Who will pay for the three waters?
* 1/
Three Waters Pays: Local Pukeko vs Imported Partridge
* 2/ Who actually manages the borrowing of Three Waters infrastructure?
* 3/ Magical Kete at Three Waters can afford to rent
* Four/ Fourth day of Christmas, what’s so good about the four water companies?
* Five/ Achieving the Gold Standard for Balance Sheet Separation
* 6/ Promoting Water Quality Reform for New Special Purpose Vehicles
* 7/ Why are governments sticking to the ‘bottom line’ of balance sheet separation?
* 8/ If the City Council retains Three Waters, how much will it take to raise the fees?
* 9/ Stupid Ministry of Water and Its Serious Side
* Ten/ Should Three Waters be two on the tenth day of Christmas?
* 11/ Too Big to Fail – Calls on Government to Guarantee Three Waters’ Debt
* 12/ Paying for Three Waters: “It will definitely come back to you in the end”

Investors believe that such government support is all but certain. Rating agencies certainly think it’s likely.

Fitch Ratings’ Paul Norris said: Focus on a number of specific factors, not just the type of asset or service. ”

“There is always an unknowable line that the King will not cross, so guessing about the level of implicit support is ultimately a fool’s game.”
– Josh Cairns

And that potential is why the new water company can be leveraged to a greater extent. Security for what people depend on for life is relentless.

But that’s why Taumata Arowai strictly regulates water quality, and the Commission of Commerce, how it operates as a business and the fees it charges consumers.

Josh Cairns of Simpson Grierson warns:

“There have been cases in the past where investors have funded on the basis of implied royal backing, but it didn’t turn out the way investors expected it to. Solid Energy is an example.

“Things may be different for water, but there is always an unknown line that the Crown doesn’t want to cross, so guessing about the level of implicit support is ultimately a silly game.”

Investment adviser Bevan Wallace says the royal family’s intervention to help Kainga Ora reinforces the “implicit assumption” that the royal family assumes the debt.

“The provision of explicit guarantees should lead to a reduction in the premium on government borrowing rates paid by Three Waters Agency, but due to its lower liquidity compared to government bonds, [entity] Despite some guarantees, whether implicit or explicit, the cost of debt can exceed the government’s interest rate. ”

https://www.newsroom.co.nz/paying-for-three-waters-on-the-11th-day-of-christmas Too Big to Fail – Asks Government to Guarantee Three Waters Debts

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