November 3, 2009

Superfund bets against the International Energy Agency

Investing New Zealanders’ retirement savings in a risky retail business is a poor first attempt at investment in the local market, said Green Party Co-Leader Russel Norman today.

“The New Zealand Superannuation Fund needs to invest for the long term in assets that will provide returns out to 2020 and beyond. Investing in the retail side of an oil industry that is going to face severe external shocks within ten years is simply irresponsible,” said Dr Norman.

Dr Norman was responding to news today that the New Zealand Superannuation Fund plans to invest in Shell New Zealand’s investments: a 17 per cent stake in the New Zealand Refining Company, holdings in Fly Buys, Shell's supply and distribution infrastructure, and its 229 petrol stations.

The International Energy Agency has predicted that global oil prices will start to spiral within ten years.

“Retailing petrol is not going to be a profitable business in 2020 as people leave their cars in their garages,” said Dr Norman.

“All the risks on profit margins in the petroleum retail industry are on the downside. Shell recognises this, hence their decision to divest from these assets. There are way better investments for the Superfund locally that are not exposed to the same downside.”

Dr Norman also questioned the strategy of investing in consumer retailing like Fly Buys when there was a critical shortfall of investment in core infrastructure assets.

“How can the Government add value to retail businesses like petrol stations and Fly Buys? The Superannuation Fund should invest in core infrastructure assets like broadband infrastructure, renewable energy generation and transmission, or the expansion of light rail. These are assets with good prospects for solid returns over the medium-to-long term,” added Dr Norman.

Link to IEA report on the likely shocks to oil production and prices:
http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

ENDS

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