Budget 2011: Govt announces it will contest election on selling 49% of SOE power companies, Air NZ shares down to 51% holdings

Budget 2011: Govt announces it will contest election on selling 49% of SOE power companies, Air NZ shares down to 51% holdings

The National Party has decided it will campaign on extending a mixed ownership model for state owned power companies when it contests the November 26 election.

Finance Minister Bill English made the announcement when releasing Budget 2011. Until now National has said it would look at the possibility of selling down stakes in Mighty River Power, Genesis, Solid Energy and Meridian, as well as selling down its stake in Air New Zealand.

English, and Minister for State Owned Enterprises Tony Ryall, made it official today, saying, if re-elected, government would sell down its stakes in the companies to as low as 51%.

The sell downs would happen over a three to five year period starting in 2012. Treasury estimated implementation of the mixed ownership model would free up between NZ$5-NZ$7 billion of capital, which would be put toward other areas of government spending.

New Zealanders would be at the front of the queue for shares, English and Ryall said.

“It will help reduce Government debt, increase investment opportunities for mum and dad investors and improve the companies’ financial performance,” they said.

“The Government will be a substantial net acquirer of assets in the five years to 2015. Its total assets are expected to rise by NZ$34.3 billion to NZ$257.7 billion in 2015. About NZ$21 billion of this increase is funded directly from within core Crown finances.

“Rather than simply borrow this amount, the Government will use proceeds from the mixed ownership model to recycle existing capital towards high priority future investment in assets like schools, hospitals and broadband. The proceeds will fund about a third of the Government’s new investment in core social infrastructure,”English and Ryall said.

No decisions hadbeen taken on precisely how much of each company wouldbe sold or when – other than the Government wouldretain a majority shareholding.

The Treasury wouldnow prepare a mixed ownership model work programme for 2012 – although this wouldnot commit the Government to proceeding before it receiveda mandate at the election later this year, English said.

Iwi wouldalso be consulted before the programme is finalised.

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Yes , they must look very seriouly at doing this . It makes no sense to hold onto assets that could be sold to free up capital for the rebuilding of Chch and reducung debt.

Air New Zealand  is a dog , and it has been a constant drain on the fiscus ( read Kiwi Taxpayers) . Let someone else run it . 

The Energy Companies are good businesses , but should be 100% commercialised , not run as SOE's . The NZ Super can acquire a majority stake so it will still be Kiwi owned .

National should also pursue a mining agenda . We will never grow our economy by being reliant on Dairy farmers who profit at our expense , and pay no tax . 

What happened to John Key's idea of establishing NZ as a base for interrnational Funds Management ? This would increase our profile internationally as an investment destination , create high paying jobs and widen the tax base. 

Only if it increases productivity. Otherwise it will just be like a family buying a big sreen TV, and become an expense with no benefit. 

Boatman -  The only thing you get right is Air NZ - which won't be worth anything at some point in the mid-term.

Energy is with water and food - an essential. Inevitably we will buy it back to control it, or (more likely, given what society will look like) take it back. Easier to eliminate both steps.

It makes perect sense to hold onto good assets....Energy SOE's make a profit which is fed back into the Govn and seem very well run and we have some say in them, we need them long term.

AirNZ, yes its dead.....peak oil will kill it...sell it now and do a Yellow pages while the private equity are stupid enough to part with their cash.

Mining is a one shot thing....ruining our countryside for a short term gain when in fact we can raise taxes a bit instead makes no sense. So we grow our economy for a bit until the mining runs out...there is a god reason so many of the developed countries are in deep poo now, they have exhausted their raw materials base....importing is crippling them.

Farmers paying tax is easy, just introduce a CGT....farmers then wont have an incentive to get over indebted to dodge tax and delay paying tax...

IFM....it creates a few jobs and makes us look like the next caymen islands.....it doesnt widen the tax base either from what I can see, why do you think it can?...its just a huge tax con.

regards

 

The Energy Companies are good businesses , but should be 100% commercialised , not run as SOE's . The NZ Super can acquire a majority stake so it will still be Kiwi owned

Sensible comment, but they need to be independant of Govt political interference, otherwise you end up with what has happened here    www.palmerston-north.info    not a good look for MRP as they gear up to be sold off, though. 

Such shortsighted decision making, I can only hope National get turfed out at the election. Only the rich and international investors stand to gain from this BS.

Got Kiwisaver?

Yep its the same orthodoxy that has been discredited by the GFC. Sad. 

Treasury expects losses to Govt income of $300m from this ($200m in dividend, $100m in retained) yet that the debt servicing bill to reduce by $400m.  At a basic level that means the power companies, Solid Energy and AirNZ currently aren't even covering the cost of capital at the expected valuation.

So why would people buy them again (especially given that Govt must have one of the best costs of capital around)? Is there that much SOE fat that can only be excised by a private owner?

"fat" is often there to give resiliance....it can be removed like in say california where brownouts and balackout are not that uncommon.......suddenly you find taht to protect your PCs etc you need to spend $ on UPSs.....soon removes any savings...

regards

 

They will provide a lot of Kiwis with the opportunity to buy shares (which collectively we already own), and as soon as the share price goes up, many average Kiwsi will sell off the shares for a capital gain(tax free) and shares will get snapped up by overseas interests and then divident flow will go off-shore thereafter.  Absolutely brilliant, not.

Exactly....or worse the shares will be over-priced/subscribed and plumet losing a wad of cash....

Its the same thing again....they are either think we are stupid or we really are.....sadly I suspect both!

On the good side JK is setting up to make it a voting issue....so ppl have the choice.....that at least is pretty fair.

regards

 

Thinking outside the box.

Merge all the power companies into one, eliminating many management salaries.  Run them at breakeven so consumers pay less and have more money to spend.

In addition, set up a manufacturing plant to make solar panels for both domestic and export markets.  Installing solar power will further reduce the need to invest in additional electricity generation and the manufacturing plant creates jobs.

Sounds good to me.

Why can't we get politicians who think this way?

If I knew how to organise a political party and find backers I could be the first. :)

Kate.

Think?

Ay, there's the rub.

LOL.

Of course!

...now that's a plan meh!

lol thats how the NZ energy use to run before Max Bradford came along....

His famous last words were "watch my lips power prices will not go up"

Who voted for that guy Bradford?

I hear he got some revolving door job at one of the terrorist organisations like the IMF or World Bank...Bradford passed his financial terrorist certificate with that one...

Speaking of power prices, it has recently been suggested to us when considering the ROI on capital outlay for a microhydro installation, that we should calculate the consumption offset based on a 12% per annum increase in the cost of electricity.

Yikes.  Not sure what that was based on but scary indeed if the projection ever came to fruition.

lol sounds complicated I say if it makes money or saves money  its worth doing. One thing is for sure power is off to the moon in price. The stuff sold will be financed by debt + interest so that will be passed down to the consumer....

the rest is easy to work out....theres examples galore

Cue Bono...?

that 12% is based on the assumption that powerco's will be privatised and the price jacked up and the profits go offshore while our productivity is crippled......but you knew that already

Indeed, I doubt thats an assumption about prices jacked up Vanderlei it will be reality...and thats exactly how it will play out....

Yes he did, so I wonder just how many of such moves as Max, Helen, Palmer, Moore etc will have to happen before the public finally wake to the fact that NZ is not run for NZ'ers. It is run for the globalists. These asset sales are payback to the Tory paymasters, and will in no way benefit the country or its people. We should all be very used to this by now, and continue to take with, thinking that a vote for the other main party will change our course. Decades now and still no chanege, do we get the picture yet or what !!!!

This is a monumental problem. The difficulty is that it will not become apparent until the deed is well and truly done. Looking at the experience of privatisation's in the UK it does not look good for New Zealand. Privatisation of monopoly assets does not work. Privatising Power Co.'s will cost us all dearly and we cannot afford it. Former currency trader John Key is placing bets for his political future using New Zealand's future as collateral. One upside is that he is getting English to front it so he can still walk away from it if we all kick up enough fuss.

1. Power is a political decision - where to build, what to build.

2. Partial privatisation's will mean that these decisions will be taken from government completely. If government wants to build more power stations to lower the cost of electricity, then the minority owners of the existing Powers Co.'s can take them to court to stop them as it will impact there profits. We will be tied up in legal arguments till far into the future.

3. The economic arguement does not stake up- BH wen through the numbers ina complling way in a previous post

Does Keys the currency trader know or care about any of this. who knows. What we do know is that:

Partial Privatisation's of Power Co.'s will

1. greatly remove government i.e. us from decision process

2. Increase dramatically the price of electricity

3. Stop any remaining chance of major developments in power production (even rebnewables)- if you own power production you would fight very hard to stop anything more production as hat would mean that the value of your company would go down.

4. Provide major windfall revenues to Bankers/brokers- say 900-million plus

5. Long term work for Expensive lawyers

6. Short term capital gains free profits for all those Mums and dads investors at the front of the queue

7. Further reduce New Zealand's competitiveness across all sectors

Keys cannot be trusted on this issue. Even a Currency Trader must have some sort of awareness of how all of these sorts of manoeuvres have played out around the world. Once you let the financial terrorists and lets face it rapists in, then it is game over for the rest of us. The kind of people that will be calling the shots when it comes to power in NZ (you must get out of your head that 50% means anything- it doesn't) are not not very nice. They will do what ever it takes to make as much money as possible out of New Zealand. They have no long term stake in New Zealand only short term gain. They are richer than us, they will buy the shares off the Mums and dads- in Russia they paid for the shares in Vodka, here they will probably be more subtle and pay in rapidly depreciating money instead. (maybe vodka would be better). Once they have the shares - it won't take much, they will start to exert control.

Oh and the current managers of the power cos will all be made into multi millionares through staff share issues- great.

Everyone wins!! Not really.