GAS COMPANY

Dominion, Volume 11, Issue 131, 20 February 1918, Page 4

GAS COMPANY

ANNUAL MEETING

AN INTERESTING ADDRESS

A WORLD COAL SCARCITY

The forty-eighth annual meeting of the Wellington Gas Company, Ltd., was held in the Demonstration Hall of the Company's premises at noon yesterday. The chairman of directors (Dr. C. Prendergast Knight) presided over a fair attendance of shareholders. Tho chairman apologised for the nonattendance of Mr. A. E. Pcnrce.

In moving the adoption o'f tho annual report and balance-sheet (which was taken as read), the chairman, after, a brief reference to the balance-sheet and tho recent strike among the company's employees, said:—

"The board expected that the price of coal would advance very materially during the year, and this anticipation has been fully, realised. Fortunately when the year began we had a very considerablo stock of coal on hand, which had been delivered under existing contracts, at comparatively low rates, and this enabled the gas supply to be continued for , several months without tho board having to consider the necessity of raising the price of gas. In April the price was raised by only sd. per 1000 feet, and no further increase was considered until October, when, on account of the greatly advanced cost of coal, a substantia] advance was found to be no longer avoidable, and tho price was raised from ss. od. to 6s. Bd. per 1000 feet. The necessity of this will bo seen when I tell yoti that, notwithstanding tho fact that we had the approximately large stock of 6500 tons to begin the year with, which had been purchased at a comparatively low price, when tho yew closed we had less than a thousand tons in hand, the cost had increased by upwards of £7500—n0 more coal being carbonised than in 1916 —and, in addition, the gas sold decreased by nearly eight million feet. From these causes tho expenditure for the year has been increased by not less than £8000, which is just about equal to the revenue derived from the increased price of gas. These facts, I think, fully justify the action of the directors in raising ths price. You ■will get some idea in a concrete form of the additional burdens placed upon the company since the advent of the war when I mention that the increased charges of the company with respect to coal, wages,. <:iid taxation for the years 1917-18 amount to not less 'than £32,800. A World Coal Scarcity. "The difficulty of obtaining coal has not been by any means confined to Wellington or to New Zealand. In many other parts of the world tho sanio trouble has been experienced owing to the high cost and heavy rates of freight, and in many.places on account of the , shortage the supply of gas has had to be seriously curtailed, and many gas undertakings have had to resort to the use of wood, and oil nnd peat, and other substitutes for coal in order to keep going. Our freights have gone up to over 30s. per ton, but I read the other day in the newspaper 'Engineering' of a South American gasworks, which, being unable to obtain English coal, was compelled to import coal from the United States, and pay, in addition to tho cost of the coal, 85s. per , ton freight. All over Europe the shortage has been severely felt. In Franco the towns of Brionne, Marseilles, .Voroflay, Chceney, and St. Cyr, have entirely ceased to light the street lamps for want of gas. In Bordeaux not half the number of lamps are in use, and gas is only supplied to consumers from 5 to II o'clock at night. In Paris a short time ago a large suburban gasworks was reduced to a two days' supply ot coal, and other big city works had coal only sufficient to last a week. "It has been the same in Italy. Before the war the cost of coal was from ■255. to 30s. a ton; tho price recently had risen to £10 a ton! In Italy there aro some 200 gasworks, the greater number of which aro privately owned. All these aro in a very precarious condition. Some of them have stopped manufacture altogether, and others, which wore under contract to municipal authorities, havo been unable to fulfil their contracts, and have been compelled to hand the management of their undertakings over to the contractees. Throughout Italy street lighting has been T-educed by half, and in some of the towns the price of gas has been doubled and trebled. In Germany tho condition of things is very bad— perhaps you will say deservedly so. In most of the towns tho use of gas is restricted to an absolute minimum. The street lighting is only just sufficient to. ensure the safety of the traffic. N'o gas is allowed for shop window lichting or advertising purposes. What the prico is T cannot say, but it is probably as hicb. or even higher, than in France or Italy.

War Taxation. "In one other respect, at least, in addition to the cost of coal, the expenditure of tho company has suffered extremely from the circumstances of the war. You will note particularly that tho land and income tax paid last year amounted to tho very large sum of £12.541. This is an increase of £7758 over the sum paid in the year 1916. The Government s taxation proposals did not at first permit of any modification in the incidence of the land and income tax under the Finance Act. Shareholders (no matter how small their holdings) of companies such as this had to pay through their companies at the highest rate of 7s. fid. in tho pound. Tho proposal to tax the income of companies at tho highest rate, and also taxing individuals who, as shareholders, are the ultimate recipients of the same income, was so manifestly unjust that strong representations were made to the Government to grant some redress, especially to small shareholders. Tho position now is that a rebate is made to shareholders whose total income does not exceed £400 per annum, provided that the dividend and rebate does not exceed 6 per cent, of the amount paid upon their shares. Although the relief is not likely to be much in any case, I would advisq shareholders not to fail to make application. "I would liko hero to remark that tho position of gas undertakings so far as taxation is concerned and as compared with '.he position of similar undertakings under municipal control is altogether not merely anomalous; it is Unfair and unjust. Because, and apparently only because, a gasworks is privately owned, it is rated and taxed to tho fullest extent, hut if a corporation happens to be the owner of the undertaking, whether it bo gas or electricity, tho corporation does not pay a single penny to the Government for uxation, and of course pays no rates. Why municipalities should bo exempted in this way is difficult to understand. One would think that the sense of common justice would insist upon both being treated equally. Tiikiny; this company as an example: We paid last year in rates and taxes the large sum of .£13.3-16, which on the gas sold amounts to 8(1. per 1000 cubic" feet. In other words tlic gas consumer in Wellington is taxed to that amount as compared with the consumer of electricity, and tho gas conaiinicr in Dunedin, vhoro the gasworks is corporation property, is presumably able to get his gas at Sd. per 1000 fret cheaper than t}«; consvnier 'm Wellington. It is, ol course, certain that the CWenimpnt would not consent to mitigate Um taxation uaid by the j;as coin-

panics, but in my opinion at least it i.s about timo that corporations should ho made to bear a fair sliaro of the burden. Alruady them is a precedent for this in the recent action of Parliament providing that tho State Fire Oflico is to bo assessed on the same basis as tha» of privately-owned companies. Taxation Reserve for 1918-19. '■You will seo from the report that the directors have- transferred tho sum of £10,000 to tho credit of the taxation reserve fund. This fund at tho enci of 191b' only stood at £1000. It seems probable that this year tho taxation will bo further increased, and in view of this it would havo been unwise and imprudent on the part of the directors not to make some provision for tho contingency. The board therefore dei'iued to provide for the greater part of tin's war tax contingency, and the amount of £10,000 has accordingly been added to tho taxation reserve, which now stands at £11,000. This reserve, I wish to point out, is specifically designed' for the years 191S-19. Nobody can say when tho war will end ; it may breakdown during the next six months; it may continue for another year or two years; but in view of tin , reserve of taxation, which the directors have set aside, 1 do not think it will bo necessary to make any further provision in this respect while tho war lasis, Depreciation of Plant. ''Another matter of importance to which 1 wish to refer is in connection with tho depreciation of the company's plant. Although large sums have from time to time been written off the plant, there has not, at all events until recently, been any .systematic attempt to deal with this important niatte*. Tho erection of an entirely new manufacturing plant at Miramar, however, gave an opportunity to the directors to deal seriously with it. The time was opportune because we were in u position to know exactly the cost of the plant, a thing that had never been possiblo in connection with the old works. It is known that gas works plant—with the exception of meters, mains, and services—is comparatively short lived. No part of it, even under tho most favourable circumstances of extensive- and continuous repairs and renewals, is, by the best authorities, estimated to last for more than forty years, and the averago life is probably not more tlian twenty-live years. It is manifest that no matter how well the plant is kept in repair it will deteriorate, and somo proper provision should therefore be made for its entire replacement within or by the end of the period that experts have laid down as the life of gas plants. Thero is further the possibility that improvement nnd discoveries in gas manufacture may involve the obsolescence of some of tho plant long before the close of its natural life, and this has also to bo taken into consideration in dealing with such an important question as depreciation. The action of the board in finally deciding to set aside tho largo sum of £ILOOO a year was not tome to without long and serious consideration. The amount is the sum arrived at from the valuation of the plant by tho company's engineer and confirmed by tho actual expenditure on the Mirainar works when completed. Tlio amount may seem large—to some shareholders it may seoni unnecessarily large—but I think you will agree, with mo that in the light of the facts I havo stated the action thus taken is not only prudent, but unavoidable. The Company's Shares.

"There is one other point to which I should like to refer, and that is with respect to the position of the shares of the company. The latest market quotation by sellers cum dividend is £12 us. 5d., which is a lower prico than the shares have occupied for maiiy years past. I wish, however, to lay stress upon tho fact that this position is not exceptional so far as Wellington is concerned. The £5 shares of the Christchurch Gas Company are oxM'tly the same figure as Wellington, and for Auckland the shares have declined very considerably. It must riot bo supposed that this falling-otf in market value is due to gae shares becoming intrinsically a bad investment. No doubt their buoyancy has been affected by the prospect of receiving less dividends, but the primary cause is the unfair system of taxation, to which I have already referred. It was seen that the Government's proposals would have a far-reaching effect in forcing down the market price and diminishing dividends, and this has undoubtedly been the case.

The Future, "Although it would be a pleasure to prophecy that the current yea? - is likely to be a successful year for the shareholders, it must be remembered thai, tho constant rising in price of all commodities is entailing higher expenditure to the compauy in its manufacturing operations. The same cause is also operating in tho direction of compelling greater economy in tho use, not only or gas, but of many other conveniences and necessities. From present indications it seems very probable that the gas consumption will not make any further decline. But everything depends upon whether we can rely upon getting adequate coal supplies. The trouble is that tvo cannot consorve any stock. We are dependent upon New Zealand coal, the distribution of which, as you know, is controlled by the Coal Board, who have many applicants. I am, however, glad to say that through the good services of the Hon. A. Myers, Minister of Munitions and Supplies, and tho members of the Munitions and Coal Trades Boards, the position at present is much easier than it has been for some time past. We appreciate this assistance very much, and the thanks of tho company nre also duo to tho State Minos Department, and tie Westport Coal Company, whoso officials have made every effort to meet our difficulties. The gas industry has been declared essential, and rightly so, because as a great public service it ministers to the comfort and well-being of the whole community. In declaring the industry essential, the Government has recognised this, and I think it is, thereforo, upon it that the responsibility rests of seeing that tho gas supply shall not bo ondangered by tho went of ample supplies of coal."

Mr. Harold Beauclnunp seconded tho motion for adoption of tho report.

A. shareholder asked if the remuneration of tho directors was the same as whon the company was more prosperous.

The chairman: The remuneration 1 to directors has not been increased for many years. The report was adopted without further discussion.

Dr. C. P. Knight and Mr. David Nathan wore re-elected directors, and Messrs. 0. S. Watkins and R. Wilberfoss wore reappointed auditors at a remuneration of lOOgns.