Making a mint

17:00, May 30 2014
Rob Jamieson, Orion
ORION: Rob Jamieson stepped in to some big shoes when he became chief executive.

Orion is the jewel in the crown of the city's trading companies.

It's worth the most, and produces year after year more dividends for the city and ratepayers than any of the others.

Since 1993 the electricity networks company has minted about $800 million of dividends for its two council owners.

You may have noticed that in the debate about city's assets to fill the gaping $534m hole in the Christchurch City Council's rebuild finances, few shout sell Orion.

But being a regulated regional monopoly with low debt and a consistent generator of cash for its owners, it would be an appealing investment.

The investment arm of the city council, Christchurch City Holdings, values Orion in its 2013 accounts at $664m. That's for the 89.3 per cent of Orion owned by the city. The remaining 10.3 per cent is owned by the Selwyn District Council.


The chief executive these days is born-and-bred Cantab Rob Jamieson.

He has stepped into the big shoes left by former chief executive Roger Sutton, a bit of a free spirit working now in the constrained atmosphere of a Government department, the Canterbury Earthquake Recovery Authority.

Jamieson is an electrical engineer. Sutton was a mechanical engineer. But Jamieson says the boss does not have to be an engineer to run a power company. It very much depends on the mix of skills in the senior team.

"In my role I don't intervene in the technical design of the network, but I know the questions to ask."

Jamieson's been in the job two and a half years after stepping up from being the commercial manager. Chief executive is a completely different job, he says.

"The buck stops with you."

For that he was paid nearly $550,000 in the March 2013 year. Around 100 people at Orion earn more than $100,000, its 2013 annual report shows.

"Because I come from the company I know the strength of the team," Jamieson says.

"That was one of the key areas that gave me confidence to step into the role."

Jamieson worked with Sutton for 17 years. "I knew I had to be myself. No one could be Roger."

He shares many values with Sutton so the handover was "a largely seamless event", he says.

Sutton was very much about "fronting up", and Jamieson shares that approach.

He worked also under Chris Laurie, the chief executive before Sutton, who he says was a lot quieter and calmer than Sutton, "a bit of an enigma".

Jamieson's decision to toss his name into the ring for the chief executive's job was partly driven by a sense of responsibility and duty.

He recalls thinking that he could "contribute something here".

"I should put my name forward. I have responsibility here. Roger's taken a huge step into the unknown. It's a gutsy call. Am I going to duck?

"It was a key moment for me, not just in my career but personally. I think I should at least put my name in the hat and say I'm prepared to take on this responsibility if you want me."

And the board of Orion did. Now he is leading the company through arguably its biggest project, rebuilding an earthquake-damaged network over the next 10 years.

"The next few years are just about putting things back together again and giving the community hope. I think of it that way."

Orion hands more than $30m of dividends to the council most years. Jamieson says that with nearly $1 billion in assets, "that's the sort of money that we should generate".

And the council has its hand out for even more. Orion's said last year in its statement of intent it would pay its council owners $28.5m in dividends in each of 2015 and 2016. That's been lifted to $46m and $47m.

Jamieson says the higher dividends are the result of the Commerce Commission allowing Orion to raise its prices to recover some, but not all, of the costs of rebuilding its network.

Compared to the early 1990s, when Orion bought North Island gas company Enerco under the advice of the late Lloyd Morrison, and walked away a few years later with a $187m gain, things have been relatively quiet, except for the earthquakes.

Why has Orion not expanded and bought another company in the past decade? Council-owned City Care's been expanding ever since it was formed in 2000. If any of the council companies have the capacity to grow, Orion has.

Jamieson says while Orion looked at the Wellington network when it was put up for sale, it was not seriously interested.

The real advantages come from buying an adjacent network. That's what Powerco in the North Island had done, forming New Zealand's second largest electricity network company behind Auckland's Vector.

None of the adjacent networks - Mainpower, Electricity Ashburton - are for sale.

Jamieson says he is uncomfortable talking about this because these neighbours came to Christchurch's aid after the earthquakes. Orion is not about to storm their borders.

While Orion's debt has been low it will increase by about $200m in the next five years for the network rebuild.

Jamieson says chief executives can too often get distracted by a pot of gold in another direction.

"Beware the profitable distraction. The unprofitable ones take care of themselves. You don't go there. We have plenty to do in the core business and plenty of areas where we can still do better."

He says during one of the interviews for the job he told his interviewers: "The minute I'm not excited about the core business, tell me to move on."

The reason Orion got through the earthquakes so well was because of the work put into the company in the past decade, he says. Orion kept its debt low for 10 years because it wanted the financial flexibility for mergers or acquisitions - but they did not happen. Now it is in a good place to borrow.

"We are not a normal business," Jamieson adds.

The company is highly regulated by competition regulator the Commerce Commission, has a long-term focus and is "a lifelines business".

"Health and safety and resilience are at the top of the list, because if we go wrong it goes wrong for everyone."

Timeliness is critical.

"Ten cents spent a day too late is worse than $10 spent a week too early," he says. "It's something like ‘did you tie down those batteries with a 10c tie, did you bother to bolt down those transformers'. It's the little things, not just the big things, and doing those little things right consistently makes the difference for the community."

For want of a nail the horse was lost?

"Exactly," he says.

Jamieson's early stomping ground was Addington and Spreydon, where his family lived. And like everyone else in Christchurch he has some members of his wider family with property issues. They live in the eastern suburbs. All his siblings - three brothers and two sisters - now live in Christchurch, and his two daughters are at the University of Canterbury.

Despite its demands, the job is not 24 hours a day. Jamieson is a believer in work-life balance and says it's a chief executive's responsibility to make that happen.

"It's about managing time and learning when to say no. You've got to be effective in your job and that doesn't mean being a yes person all the time."

Chris Taylor, a specialist on the electricity industry with PricewaterhouseCoopers, says communities have an emotional attachment to businesses like Orion in New Zealand.

More than a decade ago the electricity industry expected mergers and acquisitions of electricity lines companies to shrink their number but the predictions never came to pass.

Taylor says there are still 29 of them and most are owned by consumer and community trusts.

"It's quite hard to convince them that as a trust for the local community, they should be selling their major asset. It's an employer in the town and it's often seen as key public infrastructure they don't want to get rid of. So it hasn't really happened."

Good luck, then, to any Christchurch councillor who might suggest even partially selling Orion down to 51 per cent say, as the Government did with the state-owned energy companies.

City council finance committee chairman Raf Manji gave an indication of his thinking the day after the Budget when asked about the leak of a draft report from Cameron Partners which is looking at ways the council can extract more cash from its trading companies.

Manji indicated partial sales were palatable.

Selling up full stakes in the companies was "obviously not going to be an option", Manji said. The council would not lose strategic control.

"There's no way we would ever go below 50 per cent of any of them," Manji said.

It's worth noting that Rob Cameron, executive chairman at Cameron Partners, headed a taskforce where one of its key recommendations to the Government was the partial sale of state-owned and local-body-owned businesses.

The sale of shares in Meridian, Mighty River and Genesis, leaving the Government with 51 per cent, followed three years later.