1. Who are the REAL Beneficiaries?

An author of the original Trust Deed, a prominent lawyer in Hawkes Bay, made a very interesting submission to the 2018 "Ownership Review". He stated . . .

"There is a lamentable lack of understanding of the distinction between consumers and community. It is important that the Trustees emphasise and clarify that the sole beneficiaries of the Trust are consumers connected to the HB network of UNL, and that the terms of the Trust Deed clearly require the distribution of shares directly to the "consumers of the day" and for no other purpose. The Trustees of HBPCT have a fiduciary duty to uphold and comply with the specific provisions of the Trust Deed”.

Surely the current Trustees ought to understand this.

2. What is the value of Unison shares?

We have asked this question many times in the past year or so, and we have also made our own assessment. The standard answer, usually from the Trust Chair, has been that our view is "speculation", and that it would require a formal [and expensive] review to establish the real value of the Unison shares.

We have never sought such a review. There is sufficient information in the Unison financial reports, and from informed comments from well connected people to make our own assessment.

We have frequently asked for the Trustees "view, or opinion or estimate" of the value. That does not require a formal and expensive review. Recently the Trust Secretary advised as follows:

"The Trustees do have an understanding of the potential benefit to the consumers. The book value of Unison Networks Limited as at 31 March 2023 was just over $500m which equates to around $8000 per consumer. Book value doesn't necessarily reflect market value but even if market value was up to 50% more, the financial benefit to consumers would be in the $8000 to $12000 range.”

That is an important statement from the Trustees. Why have they been so reluctant to tell the Consumers?

If they really do understand the potential benefit to Consumers, then a number of other questions follow . . .

3. Trustee Obligations?

The Trustees are tasked, in quite precise terms in the Trust Deed, to receive shares in the “company”, and to “hold such shares on trust for the benefit of the consumers”. They also have a mandatory duty, as set out in the Trusts Act 2019, to . . “deal with trust property and act for the benefit of beneficiaries following the terms of the trust deed.”

An important question then, is "what is the Trust property"?

Clearly, the Trust property in this case is the shares in Unison that the Trustees hold on behalf of all the Consumers.

The Trustees are then bound by law, and by the terms of the Trust Deed, to manage those shares and to act for the benefit of the Consumers. Further, it is inconceivable that they could exercise their mandatory duty without understanding the value of the Trust property.

Where is the evidence that they are doing that?

4. Benefits to the Consumer?

As evidence of the "benefits" the Trustees frequently point to the large sum of money that they have returned to the Consumers since 1998. The Trust website repeats this claim . . "Since 1998 more than $250 million has been distributed to the beneficiaries of the Hawke's Bay Power Consumers' Trust via their dividend".

That sounds like a big number. But, what does it actually mean? It actually means that the Trustees have distributed an amount of money that represents only a 3% [before tax] return on shareholder funds over that time. The after tax return would be about 2%.

That is also true for the last dividend payment, in 2023. i.e. 2% after tax. Compare that return with the possible returns from banks and other institutions for term deposits. 6% is available, representing at least 4% after tax. Doesn't that show that theTrustees are short-changing the Consumers, and not dealing with the Trust property particularly well.

5. Do the Trustees benefit too?

We think the Trustees are paid very handsomely. During 2022 they voted themselves a 5% increase in their remuneration. The only mention of this is the amount recorded the 2023 financial statements, a sum of $147,385 for Trustees remuneration.

Our estimate of the payment to the Chair of the Trust over the last 10 years is well over $400,000, and perhaps as much as $600,000. Is that reasonable?

Compare that to the total dividend payment to Consumers over that time, of just $2,225.

6. Will dividends continue at the same level?

Well, that is a very interesting question. The issue is that Unison is projecting very significant capital requirements over the next 10 years, and into the future. Unison's 10 Year Plan [published on their website] projects $100M in the 2025 financial year, $94M in the following year, and then continuing to ramp up in subsequent years. How is that going to be funded? It would be reasonable to assume that a significant proportion of the trading profit in future years might contribute to the capital requirements, and hence we might expect the declared dividend to shareholders to be reduced. Of course that would create a dilemma for the Trustees. How would they react to having to tell Consumers that the annual dividend was actually reduced, and likely to remain lower for some years?

Unison's financial results should be available toward the end of July, and the Trust figures will follow shortly after that. They will make interesting reading.