THE CITY'S GAS

Evening Post, Volume XCV, Issue 43, 19 February 1918, Page 7

THE CITY'S GAS

WORLD SHORTAGE OF COAL

INCREASED PRICE AND

THE REASONS

MEETING OP COMPANY'S SHAREHOLDERS

Dr. C. Prendergast Knight presided at the meeting of shareholders in the Wellington Gas Company to-Ay.

In presenting a statement of the accounts of the company for last year, he remarked that shareholders would note in' perusing tho directors' report accompanying tho balance-sheet that the' salient features which had affected the company's working and financial results were all concisely set out. These had, no doubt, been fully comprehended by the shareholders, and it would therefore be unnecessary for him to deal at any length' with them. It was, however, necessary that he should briefly refer to, one or two .of the matters contained in the report as being perhaps of more than usual importance at this time. The first was with respect to the conditions under which the working operations of the company had been carried out. . LABOUR TROUBLES. "At the beginning of the year it was, of course," said Dr. Knight, "quite anticipated that the conditions under which we were carrying on in 1916 would not only contiue in 1917, but would probably be much intensified. It was known, for instance,! that the price of coal would 6teadily ailvance as time went on, and that the price of other materials would also be much higher. These things were obvious, and could,, if necessary, be provided 'against, b.ut it was not foreseen— nobody probably^ could foresee—that within a few month's an industrial dispute would arise at the instance of the company's gas employees, which would havp the serious effects on the business of the company, which we. now know has been the result. It would be futile at this time' to discuss the details of the trouble, which originated in a demand for higher, wages. The board recognised, as most other commercial industries have recognised,, that we are living in the midst of a great war, and that the- industrial relationship between employed and employer is in many respects vastly different to what it can possibly be under normal circumstances. The board has, consequently, never refused to consider ariy reasonable demand from the men for higher rates of pay. The demands of the men were, however, at the time the demands were made, such as, in the opinion of the directors, could not be conceded, and ,as the men declined to accept the .legal facilities placed at their disposal by the provisions of the Industrial and Conciliation Act to refei; the dispute to arbitration, the dispute came to a deadlock, and by reason of the men ceasing work, the gas supply to a large centre of population like Wellington was seriously curtailed and jeopardised for many weeks. I may, however, state that the trouble has now been, it is hoped, amicably and happily settled. An agreement on all the points in the dispute has been come to between the company and the stokers, and as the agreement extends for a period of two years, it is not anticipated that there will be a recurrence of any similar trouble. / COAL AND PRICE OF GAS. "I have just stated that 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 considerable 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 the board having to consider the necessity of raising >the price of gas. In April the price was raised only Sd per 1000 feet, and no further increase was considered until October, when, on account of the greatly advanced cost of coal, a substantial 'advance was found to be no longer avoidable, and the price v/as raised from 5s 5d to 6s 8d per 1000 feet. The necessity of this w'.ll be seen when I tell you that notwithstanding the fact that we bad the approximately large stock of 6500 tons to begin the year with, which had been purchased at a comparatively low prioe, when the year closed we had less than a thousand tons in hand, th© cost had increased by upwards of £7500—n0 more coal being carbonised than in 1916— and, in addition, the gas sold decreased by nearly 8,000,000 feet. From these causes the 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 tho action of the directors in raising the price. You will get some idea in a concrete form of ths additional burdens placed upon the company since the ( advent ci the war when I mention that th?. increased charges of thi company with respect to coal, wages, and taxation for the years 1917 and 1918 amount to £32,800. 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 the same 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 and 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 the cost of the coal, 85s per ton freight. All over Europe, the shortage has been severely felt. In France the towns of Brionne, Marseilles, Voroflay, Chesnoy, 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 11 o'clock at night. In Paris a short time ago a large suburban gasworks was reduced to a two-days' supply of coal, and other big city works had coal only sufficient to last a week. It has- been the same in Italy. Before the war tho cost of coal was from 25s to 30s a ton; the price recently had sisen to £10' a ton! In Italy there are some 200 gosworks, the 1 greater number of which are privately owned. AH these are in a vyy precarious condition. Some of thorn hfve stopped manufacture altogether, and others, which were under contract to municipal authorities, have' 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 lias been reduced by half, and in some of the towns the price of gas has been doubled and trebled. In Germany the condition of things is - very bad—perhaps you will say deservedly

so.« In most of the towns the use of gal is restricted to an absolute minimum.The street lighting is only just sufficient! to ensure the safety of the traffic. No gas is allowed for shop window lighting or advertising purposes. What tho price is 1 cannot say, but it is probably as high, or even higher, than in Franco or Italy, . ■ - ' WAB TAXATION. "In one other respect, at least, in( addition to the cost of coal, tho expendi-: ture of the company has suffered 6xtremely from, tho circumstances ofitha war. You will note particularly that iha land and income tax paid last year amounted to the very large sum of £12,541. This is an increase of £7158 over the sum paid in the year 1916. The Government's taxation proposals did ilot 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 o£ 7s 6d in "■the pound.' The proposal to tax the income of companies at the highest rate, and also taxing individuals, who,> as shareholders, are the ultimate reci-; > ! pients of the same income, was so mani-i I festly unjust that strong representations were made to the Government to grant some redress, especially to small-share-, holders. The position 1 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 riot 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 advise shareholders not to fail to make application. "UNFAIR AND UNJUST." I would like here to remark that th« position of gas /undertakings ■co far a» taxation is concerned, and as compared, with the 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 the fullest t extent, but if a corporation happens to be the owner of the undertaking, whether it be gas or electricity, the Corporation does not pay a single penny to.the Government for taxation, and of course 1 'pays no rates. Wh.* municipalities should be exempted in this way ia- difficult to understand. One woul/i tliink that the sense of common justice would insist upon both, being treated equally. Taking this company as an example: We paid last yeav in rates and taxes the large sum of £13,346, which on 'the gas cold amounts to 8d per 1000 cubic feet. In other words, the gas consumer in Wellington is taxed- to that amount- as compared with the consumer of electricity, and the gas consumer inDunedin, where the gasworks is Corporation property, is presumably able to get his gas at 8d per 1000 feet choaper than thp consumer can in. Wellington. It Is, of course, certain that the Government would not consent, to mitigate the taxation paid by tho gas companies, but, in my opinion at least, it is about time that corporations ehould be made to bear a fair snare of the burden. Already there is a precedent for this in the recent action of Parliament providing , that'the State Fire Office is to be assessed on the same basis as that.of pri-vately-owned companies. « TAXATION RESERVE. "You will see from the report that* the directors have transferred the sum of £10,000 to the credit of the taxation; reserve fund. This fund at the end of 1916 only stood at £1000. It seems probable, that this year the taxation will be further increased., and in view of this it would have been unwise andimprudent on the part of the directors not to make some provision for the contingency. The board therefore decided to provide for the greater part of this war tax and the amount of £10,000 has accordingly been aded to the taxation reserve,- which now stands at £11,000. This reserve,. I wish to point out, is specifically designed for the years 1918-1919. Nobody can. say when the war will end; it may brealr down during the next six months; it may continue for another year or two years; but in view of the reserve of taxation, which the directors have set aside, I do not think it will be necessary to make any further provision in. this respect .while the wax 1 lasts. » DEPRECIATION OP PLANT. ' "Another matter of importance tc which I wish to refer is in connection with the 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 matter. The erection of an entirely new manufacturing plant at Mirainar, however, gave an opportunity to the directors to deal seriously with it. The time was opportune, because we were in a position to know exactly the cost of. the plant, a thing that had never been possible- 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 the 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 average life 13 probably not more than twenty-five years. It is manifest that no matter how well the plant is kept in repair it will deteriorate, and some proper provision should therefore be made for its entiro. replacement within or by the end of tho period that experts have laid down ns the life of gas plants. There is, further, the possibility that improvement and discoveries in gas manufacture may iuvolve the obsolescence of some of the plant long before the cjoss of its natural fife, and this has also to be taken intoconsideration in dealing with such an important question as depreciation. The action of the board in. finally deciding to set aside the large sum of £lljOO* a year was not come to without long and serious consideration. The amount is the sum arrived at from the valuation of'the plant by the company's engineer, and confirmed- by the.'actual expenditure on the Miramai' works-when completed. The amount may seem large—to some share? holders it may seem unnecessarily large —btft 1 think you will agree with me that - iin the light of the facts I have stated the action thus taken. 13 not only prudent but unavoidable.' ' THE COMPANY'S SHARES.', "There is one other point to which I would like ,to refer, and that is with' respect to the position of the shares of the company. The latest market quotation by sailers cum dividend is £12 56, whicJLi is a lower price than the shares ■ have occupied, for many years past. I ■'■ wish, however, to .lay stress upon the.; ,- fact that 1 this position is not exceptional;,. so far as Wellington it, concerned. The " £5 shares of the Chrigtchurch Gas Coin-. . pany are exactly at the same figure as Wellington, and for Auckland the sharps ■'■ have declined very considerably. . It ;'■ miißt not bo supposed that this falling-off^ 1. in the -market value is due to gas chares''--.' becoming intrinsically a. bad investment. No'doubt their buoyancy has been affect-. od by the prospect of receiving less divi-. dends, but the primary cause is the unfair system of taxation, to which I have already referred. It whs 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 prophesy that the current year: is likely; to 08 a successful year-for tho shared

[holders, it m.ust .be remembered that the constant rising in» price of all comtenodities is entailing higher expenditure sto,.the „■ company . in., its. manufacturing 'operations. Ti»Jsame cause is also op'eratLng in the directjjau of compelling greater economy in thß «3e, not only of 1 gas, but of many other conveniences and ! necessities. From, present indications id 'seems;, probable that the gas consumption will not make any further decline. itßut everything depends upon whether kwe can rely upon getting adequate coal supplies.' The trouble is that we cannot any stock. We are dependent ,-upon New Zealand coal, the distribution iof ■vyhich, as you know, is controlled by Ithe Coal Board, who have many appli■cants. „ I am, however, glad to say that (through the good services of tho Hon. !A* Myers, Minister of Munitions' and {Supplies, and the members of the Muniftions arid Coal Trades Boards, the position 'afc.present is much easier than it has been jjfor' some time past. We appreciate this [assistance very much, and the. thanks I of the company are also due to the State (Mines : Department and the Westport 'Coal Company, whose officials have made 1 every effort to meet our difficulties. The hgas industry .has been declared essenftiaJ, and rightly so, because, as a great fpublic service, it ministers to.the com-j iiifort and well-being of the whole comtmunity.' In declaring the industry! i,essential the" Government has recognised j.fthis, and I think it is therefore upon t'them that the responsibility rests of seetang that the gas supply shall not be en- j Tdangered by tho want of ample supplies ! '■©f coal." . j Mr. Harold Beauchamp (director) sec>»nded the adoption of the report and [ (balance-sheet, which. was agreed to ,-iwithoivfc- discussion. The Chairman apologised for the non--1 'attendance of Mr. A. E. Pearce, un- : avoidably absent. Replying to a shareholder, the Chairman said the remuneration of the directors had not been increased for many '■'years. j I Dr. C. P. Knight and Mr. D. J. j INathan were re-elected directors. | Messrs. 0. Watkins and R. Wilber;lfoss were re-elected auditors.