Deregulation as Land Grab Signal

"This was a huge deal. The government believed that going private would introduce market competition and therefore reduce costs and improve quality for Kiwis. It would also encourage foreign investment, the theory went, and free up some of the government’s cash flow. But it would also lead to job losses and loss of government control over a massive asset. The controversy had sparked debate for months."

"During my time racing, I had learnt about the importance of looking up and further ahead. In a race car, you are going so fast that even when something is happening 200 metres up the road, you are going to be upon it in fractions of a second. You have to be ready to respond. The problem with the Empower business, however, was that we had next to no visibility out the front windscreen. We couldn’t anticipate all the knocks that were in store for us, because we were doing something so entirely new, pioneering a space that no one had before, and certainly not in New Zealand. That would prove an important lesson on why sometimes you need to leap before you look. Prior to the industry being deregulated, power companies were what I would call ‘fully integrated’. They would own some dams, and own some power poles and power lines, and then they had customers that they would bill each month. Yet with that integration came monopoly. The deregulation of the industry aimed to change that. Instead, it became the rule that if you owned the lines, you couldn’t also directly bill customers – you had to lease those lines to someone else who had the relationship with the customer. It was a big shift for the monopolies who had had it all up until this point. And while we weren’t the reason for the disruption, we were certainly playing a part in upsetting the model that those legacy companies had relied on. One of the lines companies in Auckland at the time came to us. It said that the new deal was that if we were using its lines, we would have to put a bond up. The company wanted retailers to indemnify the lines. It argued that if we were running power down its lines and something went wrong, then we should be responsible. We (rightly) thought this was ludicrous. We pointed out that we weren’t actually touching its lines, but rather we were hiring them from the company as a service. Surely it was the company’s responsibility to ensure it could continue to provide us with that service. It was anti-competitive behaviour, to say the least, but we didn’t have a lot of choice. The company wanted a $6 million bond for running power through its lines."

"I told him about Empower. Paul predicted a land grab. The way he saw it, it was also only a matter of time before others entered the market in the same way that we were, so his advice was to go really big, really quickly. Get ahead of everyone else. ‘Don’t muck around with this,’ he cautioned. Right now, there was very little opposition – only the legacy power companies – so we had a chance to get market share off them. Paul thought we could become a major player in the industry, but it would all come down to acting fast. ‘You need to go really hard,’ he added. If we didn’t, we risked never achieving scale and, in future, being swallowed. I could see Paul had a point. I countered that we didn’t have the money to scale that aggressively. ‘I’d be keen,’ he replied, suggesting that he round up some other investors and pull a small consortium together. He did, and we sold 20 percent of the company to Paul’s group of investors, which gave us an injection of capital to really get stuck in and grow things fast. Leaning on my ‘speed hiring’ experience at Telecom, we quickly installed 100 salespeople into the business and had them get to work. We had teams in malls, others door knocking – all backed up by television advertising to support what we were doing. TV had worked well for us over at Netco, after all. For over a year, I had a foot in both camps –…"