GAS COMPANY

Dominion, Volume 14, Issue 121, 15 February 1921, Page 6

GAS COMPANY

YEAR’S WORK REVIEWED LABOUR DIFFICULTIES TAXATION AND OTHER PROBLEMS In moving the adoption of the report and balance-sheet at yesterday's meeting of the Wellington Gas Company, the chairman of directors (Dr. C. Prendergast Knight) said that when ho had the opportunity of addressing shareholders twelve months ago he had referred to difficulties in respect to the disturbed conditions under which the company was carrying on its operations. lie regretted that there had been no amelioration of these difficulties during the year just closed. At the beginning of the year the directors fully expected that further changes—changes by .no means inconsiderable —might bo looked for in connection with the manufacturing and financial matters. “I may say that this anticipation has been fully realised,” Dr. Knight, proceeded. “Prices of coal and other raw materials, (and wages of labour have again materially increased, and, a,s was expected, the company has not escaped its share of labour troubles. One at least of these recurring disorders was sufficiently acute to necessitate the closing down of the carbonising plant at Miramar for a number of days, thereby completely dislocating '-the gas supply, and causing intense inconvenience to the large gas-consuming public, in addition to entailing cosiderablo financial loss to the company. “Notwithstanding these occurrences, 1 am pleased to say that the result for the year’s working has been reasonably satisfactory, and tile sales of gas show a distinct improvement over 1919. “The coal difficulty has been, and unfortunately still is, a constant menace to a full and continuous supply of gas. On sore than one occasion the stock in the Miramar yard has been reduced to a few tons, and it has been most difficult to keep the works going. Even with the greatest economy and carefulness the pressure has had to be reduced niani" times in order to maintain the supply. The board has made every possible endeavour to bring about more satisfactory conditions, but so far, I regret to say, without much success. Some months ago the company’s engineer paid a special visit to Australia, and conclud ed a large contract, for Newcastle coal; but it is one thing to arrange contracts; it is quite a different matter to get the coal delivered. Up to the present only one shipment has been received, and, strange to say, that was due to the stewards’ strike, which had the effect of laying up the coastal and intercolonial steamers, and thus releasing coal which would otherwise have been secured for their requirements. Then there is the question of the quality of the gas. which isjiot of the standard the company desires it should be. It is quite obvious ■ that good gas cannot be produced from inferior coal, and New' Zealand coal alone is not' equal to producing gas of high standard calorific value; to do this it must be mixed with a proportion of Newcastle coal, and I am afraid that until we can rely upon regular and largo Supplies from the Newcastle 'mines our consumers, both domestic and industrial, will not be ilble to get the efficient senvice in this respect ('hat they arc entitled to, and which the company is only too anxious to 'give. The Price of Gas. “In the light of these difficulties it has been no small concern to the directors to math fain the finances of the company in sound order. However some people may regard it, the company is not a philanthropic institution—its operations cannot lye carried on at a loss to the" shareholders. Our business is fb sell gas, and io sell it at a reasonable profit. Consequently, when coal and other materials advance in price, and labour demands for higher wages have to lie acceded do. they can lie met in one way only—the price of gas must bo raised. It is ths>i fact particularly that the directors' have had ic give much attention to during"Mhe last twelve months. You will realise what I mean when I say that the cost of gas manufacture—that is, the cost of coals, carlionising, and purification only—has ekeoeded t'hat of 1919 by upwards of .X'19,000; or, stating it in another way, 'he cost of the manu-factui-e of gas sold last year was 10d. per thousand feet more than it was in 1919. To meet this increased cost the price of gas has been advanced on two occasions —first to Bs. 4d. per thousand feet, and then to Ss. 9d., the present price. As the separate advances have been in operation for comparatively small portions of the year, it is difficult to say exactly what effect each has had on the gas revenue, but the net return is an increase of 7d. on the gas sold, by which you will note there I.V still a difference of 3d. per thousand feet wit'h the increased cost. The real effect of the higher price on the revenue and consumption will, however, be realised during vhe present year,—when it will, of course, operate throughout tho full twelve months.” 'The chairman said tho Board of Trade had thoroughly investigated the various advances in the price of gas which the company had made from time to time. The fullest information had been afforded the board, and the directors are of opinion that in view of the fact that so many difficulties had to lie met, in regard to supplies, labour, and other troubles (not the least of which was the granting of retrospective increases of wages by the Arbitration Court), if was almost impossible to fix prices without some- margin being provided for, and that for this reason the advances were fully justified. “Consumers may rest assured that it is the desire of the directors to sell gas at the cheapest possible rate, but they must recognise that th? compartively high price now charged is due io causes over which the company has no control.” Value of Residuals. Although the increase in gas revenue from the advanced prices had not been equal to increased cost of gas manufacture, this inequality had been more than liquidated by the increased sales of residual products. The sales of coke and tar had, in fact, been the largest the company has ever had. The large demand for coke—which has often exceeded 'the supply available —had been, and still was, attributable to tho coal shortage, and so long ns this continued, a good price would be obtainable. Tn many industries proprietors were more and more recognising the value of coke as a fuel, especially for steam-raising purposes. The education they had received —compulsorily perhaps in recent '-cars was bound to be of considerable and permanent benefit to the company. \s to tar, there need be no fear as to the future. This valuable product was becoming more than ever necessary for many purposes both in town and coun.iy districts, in the latter principally because of the. enterprise of Restar, Ltd., which was now taking the whole of the company’s output. Shareholders had specially no ed the statement in the directors’ repent that in order to meet th? rapidly-increasing demand for gas, it had become imperative to provide large additions to .he gas-manufacturing plant, and ‘that the work of installing the new extensions was --"W i-1 : -”4 further, that in order to meet this and other important works expenditure, considerable new capital would rcouire to bo raised in the rn-nr future. The reason for this is that (ho demand for gas will rapidly overtake tho capacity of production. 'I ho earbonising plant nt Miramar. which had bean in full operation since 1911, had an

output capacity for 1,500,000 to 2,000,000 cubic, foet of gas per day. Last year tho gas manufactured averaged upwards of 1,100,000 cubic feet per day for the whole twelve months. On one occasion tho output exceeded 2,000,000. v\t this rapid rate of increase before tho present year has elapsed Ihe carbonising plant would bo unable to meet the demand. Increased Output. Tile directors fully realised the position, with the result that, upon careful and detailed estimates of requirements and cost furnished by the engineer, they have authorised the installing of fresh carbonising plant, and a now coalhandling plant that would practically double the capacity of tho existing gas output. It was estimated that the cost of these extensions would not be less than .£110,990. The work of installing was now well in progress, and it was expected that tho new plant would bo in operation before the end of tho present year. These extensions wore only part of whn*. the company required to carry on its business. Tho trunk main, which carries the gas from tho works to tho city would shortly need duplication. The engineer had also reported that a new gas-holder would be required at no distant date. In addition to this, (ho erection of new workshop, storeroom, and fitting shops was now proceeding at Miramar. Altogether, these now works would absorb an expenditure of. approximately, .£250,001). Some portion of this was being realised from the sale of the company's Wellington land, hut by far (he larger part would have to be raised either by the issue of further capital or in some other way. Stringent Money Market.

"The stringency of the money market at the present, time very acute—probably V will become more acute as time goes on." added Dr. Knight, "and it is very apparent that, the company cannot hope to raise the money it needs at. the low rates of interest obtainable even a short limo ago. What course tho directors will determine upon to secure the requisite! funds I cannot at ihe moment say, but this will b? definitely settled and placed before shareholders within the next, few months. “I have previously had occasion to refer to the heavy taxation to which the company has been subjected. For the rear iu=t closed tho income tax amount's to .£2,699 2s. 6d.. the assessment being at the rate of 7s. fid. in the pound, and is almost exactly a shilling per thousand feet on the (total gas sold, or over ten per cent, on tho paid-up ordinary share capital of the company. For ihe present year the rate of assessment will be at the rate of Bs. 9d. in the pound. You will thus see lihe “tremendous disadvantage under which gas companies have to labojir ns compmed with municipal undertakings of a like nature.' Taxation and Dividends. "So far there has been no hope of redress, and whilst under municipal control the supply of a public necessity Is recognised as a fit object of ta.x exemtion" under private management a great public service like gas seems to bo neither more nor less than a fortunate and easy means of extracting the last penny in the way of taxation. “The directors are continuing tho undoubtedly sound and prudent, policy of writing-off a. considerable sum from the Property and Plant Account,” Dr. Knight, continued, “and transferring Io the depreciation reserve on amount fully commensurate with ihe. growing value of tho company’s asstHs. “The directors have this year decided to recommend the payment c£ a higher rate of dividend than has been the case for romo time. Tn view of (he fact that many, if not. most, of 'the present shareholders have paid high premiums for their shares, th? directors have long felt that they were entitled to a heifer return than 5 nor cent on the nnid capital; but they also felt that until .adequate provision hod been made for the depreciation of tho plant by a fixed’ annual charge on the profits, tho finances might at some time in the future become seriously embarrassed, and they have, therefore, they believe with tho approval of the shareholders, considered that the best interests of tho company would be served bv maintaining a compaiatiiely low rate of dividend until such time as the finances justified more liberal provision. On the prices which have bee.n paid for shares by many holders the return on their capital at 5 per is less than 2 per cent, per annum. The finances this year justify a higher rate, and, although the board cannot guarantee that the present' rate will bo permanently maintained, you may be assured that they will do their utmost to moot the desires of tho shareholders in this respect." The chairman then formally moved the adoption of the report and balancesheet. which was seconded by Mr. H. Beauchamp. The report and balance-sheet were adopted without discussion. The payment of a further dividend of 51 per cent, for the six months ended December 31 was approved. ' Dr. C. P. Knight and Mr. Harold Beauchamp were re-elected directors, and returned thanks. Messrs. H. A.. Gold and E. R. Dymoek were re-elected auditors at a remuneration of fifty guineas each. Mr. Helliwell’s Retirement. Mr. Frank Dyer, as a shareholder, referred to Mr. Helliwell, retiring secretary, in most, complimentary terms, acknowledging, as a shareholder, the great services rendered by Mr. Helliwell to ihe company. Mr. Dyer also congratulated shareholders on the appointment o£ Mr. Kennedy, who, he was sure, would make good as general manager. Mr. Knowles strongly endorsed Mr. Dyer’s complimentary remarks ou Mr. Helliwell, and felt sure all shareholders would, wish him well. Mr. Beauchamp referred to the early days of Air. Helliwell’s services. During the long period of his connection with the company he had been actuated by the highest motives in his work for the com pany—a pleasing feature .in these days of “go-slow.” & Mr. Helliwell, in responding, .reviewed the growth of the company since his association with it in 1884. Then its nominal capital was .£50,090; to-day it was .£550.000. In 1883 the gas sold was 50,000,000 feet, for 1929 it was 466,000,000 feet; the mains laid in 1883 were 23 miles, in 1920 they were 140 miles. The consumers numbered 2000, now they were 150,000. The gas revenue in 1884 was .£24,000; for 1920 it was XlBl.OOO. lie referred to the directors of Ills early days. All but Colonel Pearce, residing in England, had passed away. He had taken tho same interest in the. growth and development of tho company as many had taken in the progress of the country and of the City of Wellington. His own connection with the company had been of the happiest character. Mr. M. J. Kennedy, general manager, returned thanks for the complimentary remarks made by Messrs. Dyer and Knowles, and readily acknowledged the assistance he had received from Mr. Helliwell.