National sees 85-90% of shares in floated SOEs to be owned by NZers and eyes 10% cap on stakes in SOEs. Your view?

National sees 85-90% of shares in floated SOEs to be owned by NZers and eyes 10% cap on stakes in SOEs. Your view?

By Alex Tarrant

Prime Minister John Key says the public should trust his government’s word it will not sell more than 49% of five State Owned Enterprises, although there will be no legislation to stop future governments from doing so.

Meanwhile, there was no guarantee those stakes sold off would not enter foreign ownership, although Key was confident New Zealand investors and institutions would look to hold the shares as long-term investments.

His comments follow an announcement from Finance Minister Bill English that the government expected New Zealanders would initially own at least 85-90% of the companies being sold in any National Government floats of SOEs after the November 26 election.

This would mean if the government retained a 51% stake and sold 49% in an initial public offering in a share market float, then about 30% of the shares could go to foreign-owned funds or individuals.

English said in a speech delivered by SOE Minister Tony Ryall that any National government would look to set an ownership cap of 10% for any stake in the floated SOEs.

New Zealand investors would be first in the queue when it came to allocation of shares, although foreign investors would be invited to participate in initial bidding so the government could get the best sale price for the shares, and hence value for taxpayers, Ryall said.

That would mean Kiwi investors would not be in line for purchasing the shares at a reduced price, something that had been considered to promote local ownership. 

See more here in our June 30 article on Treasury advice on using the SOE sale process. Treasury had looked at incentives to keep shares in local hands, but advised against it because it would lower the likely sale proceeds.

Labour Leader Phil Goff attacked the government's announcement, saying it was little more than a shallow con job (see his comments in the video below).

'Trust us'

Key said it would take a brave future government to sell down State ownership in the SOEs further than the shares a National-led government would sell if it won the November 26 election.

The government was giving a guarantee that majority stakes in the SOEs would be held by the government. There was no technical guarantee though that the 49% stakes sold off would remain in Kiwi hands.

“There’s no particular reason for, all of a sudden, every New Zealand investor to decide that’s not a good idea to hold their shares," Key told media in Parliament on Wednesday afternoon.

“If you think about KiwiSaver accounts, they’re often investing for a 30 year horizon. We know Iwi are going to invest for a very long horizon, we know the New Zealand Super Fund and ACC will be long-term investors," Key said.

“So it’s just not credible to believe that every single shareholder is going to sell all their shares. Actually if you go and have a look at the Contact [Energy] share registry, that’s a good example of how in fact it’s been widespread, and held by New Zealanders over a long period of time,” he said.

“In reality I think we live in the real world, and in the real world every New Zealander is not going to sell. Why would they?  They’re liquid long-term companies.”

The government would not be legislating to ensure State ownership of the companies could fall below 51%.

“I think the feeling is we don’t need that. But look, we have built up over the last three years, I think, a very strong sense of trust with the New Zealand public. When I say I’m going to maintain 51%, or [not] sell more than 49%, I think New Zealanders will take me at my word," Key said.

“I can’t bind future Parliaments, but my view is it would be highly contentious for any future government to want to sell down the majority stake," he said.

'NZers will own 85-90%'

Earlier on Wednesday, English said there was a large and growing pool of New Zealand investment funds to ensure strong local demand for any National Government sale of NZ$5 billion to NZ$7 billion worth of shares in the four state owned energy companies (Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy) and more of the already listed Air New Zealand, which the government holds a 76% stake in.

"As a result, ministers expect New Zealanders to own at least 85 to 90 per cent of the companies in the mixed ownership programme, including the Government’s majority shareholding," English said.

English said the Government would spend around NZ$78 billion to build up other state owned assets over the next five years, on top of the NZ$220 billion of assets it currently owned.

“The mixed ownership model is a win-win. New Zealand savers get to invest in good Kiwi companies. And the Government frees up NZ$5 to NZ$7 billion over three to five years to buy new assets like schools, hospitals and ultra-fast broadband, without having to borrow from overseas lenders and increase our debt," he said.

“We would rather pay dividends to New Zealanders than interest on rising debt to foreigners," he said.

“We have also promised that New Zealanders will be at the front of the queue for shares."

English said New Zealand investors currently had more than NZ$300 billion invested in assets, excluding their own homes. These included money in bank term deposits, bonds and rental property.

"The 34 registered KiwiSaver providers have about NZ$9 billion invested and will double in size over the next four years," English added.

New Zealand fund managers currently had about NZ$59 billion in funds under management, with government-owned fund managers including the NZ Super Fund, the ACC and the Government Superannuation Fund (the state servant pension fund manager) having almost NZ$40 billion under management.

Iwi are also estimated to have over NZ$10 billion of assets under management.

“So the mixed ownership model, spread over three to five years, is small compared with the size of the local capital pool,” English said.

“New Zealanders are also telling us that they are hungry for other investment options, particularly with the shine having come off the investment property and finance company sectors," he said.

Final arrangements for the SOE share sales would be made next year after the election.

“But it’s the Government’s intention to impose a maximum shareholding cap on the mixed ownership companies. That cap is most likely to be 10 per cent.”

Kiwis will take the price that's set

Ryall said a price would be set for the shares in the companies by investors and institutions first indicating to the government what they thought the prices should be.

“Then a price is set, that’s the offer price that is then set across the request of all the shareholders," Ryall told media after giving the speech.

"For example, Kiwi mums and dads, as we found with the last floats, they take the price that’s set, and that’s being set by the tension of, really, the institutional investors – the super funds and the KiwiSaver and the other investors," Ryall said.

Foreigners involved to get best value

Ryall said foreign investors would be involved in setting the share price so taxpayers got their best value for money when the government sold the shares.

That best value would be found by indicating to foreign investors there was a proportion of the shares they might be able to purchase - an important move in determining the price of the shares.

Following the process of deciding a share price by reviewing bids from both Kiwi and foreign investors, the government would invite bids from all parties, but allocations would be made to New Zealand interests before foreigners.

“When we float, for example, the first company, we will have New Zealanders...first in the queue, and we will also invite though a number of foreigners [who] will be able to participate in bidding for the shares – that’s to make sure that we get the best value for New Zealand taxpayers," Ryall said.

“But when we come to allocate the shares we’re making it very clear that New Zealanders are first in the queue, and that we expect that over the programme, New Zealanders will own between 85 and 90% of the shares, including the 51% that the government owns,” he said.

“If New Zealanders bid for these shares at the right price, then New Zealanders could end up owning 100% of what’s being floated.

"What we’ve indicated though, is when you make an assessment of what the likely level of investment from New Zealanders and super funds and KiwiSaver is going to be, we may end up with a small proportion of foreign investors involved in that as well, in order to get a good price for New Zealand taxpayers,” Ryall said.

Here's Ryall delivering the part of the speech in which the government announced the government's intention of a 10% shareholding cap

'It's a con job'

Meanwhile, National’s announcement on the SOE sell-down was a shallow con job that beared little resemblance to what would happen if the SOEs were sold, Labour Leader Phil Goff said.

“National doesn’t seem to understand that once shares are sold they are gone forever. There is no way to guarantee that they will remain in Kiwi hands,” Goff said in a media release.

“Bill English and Tony Ryall clearly don’t understand what it means to sell something, if they think they will have any control over what happens to shares once they are floated on the market. National’s claim that shares will stay in New Zealand because Kiwis are ‘hungry’ to invest and that because of this dividends will remain in this country are simply not credible. The cost of living is spiralling out of control, while wages are barely growing. Kiwis are struggling to make ends meet let alone having additional money to spend on the stock market," Goff said.

“It is once again clear that National is simply hoping that people don’t look too closely at the details of their announcement. The recent release of the annual reports reveal that the companies that National wants to sell returned NZ$900 million in dividends to Kiwi taxpayers in the 2011 financial year. Under National’s plans much of those dividends will in the future end up overseas," he said.

“National’s policy will see hundreds of millions of dollars in dividends heading off-shore.  That is simply economic madness. Labour’s economic policy will ensure a strong export lead growth economy and allow us to keep our assets at the same time.”

(Updated with Ryall comments, Key, Goff, videos, details)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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When Contact Energy was sold, the shares may well have started out being owned by Kiwis, but when a better price came along, who could blame them for selling them to the highest bidder. The result is that 2/3 of Contact energy dividends, in excess of $1billion worth, are now owned offshore, by mums and dads in distant lands.

exactly, and national have based their 85-90% number on what.

But this is all ssmoke and mirrors so we don't actually ask the questions about security of supply and affordability of electricity in New Zealand. We are 1400km for the nearest socket. If we don't generate enough electricity for ourselves we simply will not have it. Do National just not get this fact. We should poll the National MPs about what they think about imported electricity to get their views. It would make interesting reading.

Yes, it is about time NZ'ers had something substantial to invest in on the NZ stock market, which is very limited at present.  If the country is serious about people investing in a variety of ways and not just property, this would offer some avenues.  Trust the governmen twill  follows through on this! If NZ'ers simplythen  up and sell to overseas investors then we as a country get what we deserve, hopefully there will be some safeguards built in.  

Not sure if this is for real or not?

National sees 85-90% of shares in floated SOEs to be owned by NZers

National aren't looking at the glass half full or half empty, they are loking through the bottom of the glass. They have obviously had too much to drink. Where would they get such a half baked idea that New Zealanders will be able to hold onto 85-90% of the shares.

More importantly for anyone in business in New Zealand, absolutely no word on electricity supply issues and affordability. We cannot build an economy on shares in Power Co's we must build it on companies that use power. They need affordable electricity in plentyful supply. New Zealand as a whole needs renewable affordable plentiful electricity.

Any half baked ideas from the fools running the electricity regulatory Authority who only think of price rises should be told where to go. Hydro power generation costs approach zero we need to use the benifits if that cheap electricity to fund renewables, tidal, wave , wind and solar to balance our hydro resource.

New Zealand does not have an electricity market, nowhere in the world does, why do we have to go along with the pretence that there is?

National are trying to flog off a income stream to the rich loking to park their moneysomewhere safe without the threat of capital gains tax.

New Zealand does not need this rort.

Why would it be a rort, if you want to encourage us to have investments in other than just property, then there has to be something worthwhile to invest in.  Your comment seems to be coloured by your annoyance you don't have much to invest but others do??

Complete nonsense. My concern is about electricity, its supply and affordability. Do you not get that we cannot import electricity we have to make it here. The only way to make it is to generate it. They only way to generate it is to build pant to do it. If you are a ten percent owner of existing generation why would you let anyone build anymore genreation. You would fight very hard to stop it. Simple supply and demand. We struggle now to increase generation capacity in any meaningful amount. This hairbrained idea of flogging our hydro generation off simply makes matters worse.

And anyway what rightdo they have to sell off the actual hydro stations. They we built as a result of the agreement of the New Zealand people, they cost a lot of money, lives, and our environment to build them. They are part of the fabric of New Zealand. They are not an income stream to be capitalised. They are part of the lifeblood of the country. If you do not believe me about what they cost in real terms, you should open your eyes a little.

"If you are a ten percent owner of existing generation why would you let anyone build anymore genreation. You would fight very hard to stop it. Simple supply and demand"

yep just look at California for that outcome....

Classic and correct business model, do not over-capitalise on plant, which makes perfect sense for a single business, not for a Nation.

Yet, this is a strategic thing....NZ needs a guarantee of supply....yet there is no inbuilt cost for that spare capacity so no private company will build, hence private companies for such a critical need are a no no, and in fact its dangerous to us.

regards

Plan B ... its easy to manage a share register to control foreign ownership levels .

The Germans have been doing it for decades . 

Basically , the shares can be acquired by Kiwis and go into your Super ( Kiiwisaver)

I'll bet that Kiwisaver will be Compulsory within the next  5 years, simply because mathematically or statistically we will not be able to support the payment of pensions to those over 65 .

The numebr of retirees will double in the next 10 years , and the NZ working poulation is picked to remain roughly the same

Twice as many people receiving a benefit from the same number of taxpayers ... cant work 

And what stops the govt directed directors from constantly issuing new shares to raise new capital keeping 51% every time and the share price only being allowed to slide down the slope. The div just keeping pace with govt bonds. And along comes Labour sometime post 2020 and they will do what....extract whatever they can from the SOEs to slice more pork to buy a second term.

Why would the govt allow the div to rise to the level where voters booted them up the bum over the rort.

 “We would rather pay dividends to New Zealanders than interest on rising debt to foreigners," he said.

Dividends are already being paid to New Zealanders for the benefit of all New Zealanders and not just those who have the ability to buy shares.

It is the mismanagement of spending that is the problem and selling these SOE's does not fix the problem.

MEH dont get blinkered  

There are 2 very good reasons to sell off the SOE'S

1) We need to rebuild Chch

2) We are moving towards a compulsory Superannuation ( Like Australia ) and when this happens your Kiwisaver contributions will go into these SOE's

The reality is that we need smaller government  and less state intervention in the economy , and selling these SOE's is the only solution .

I'm not blinkered Boatman.

Selling the SOE's has nothing to do with rebuilding Christchurch.

I am not involved in Kiwisaver as I value personal responsibility and accountability for making my own financial decisions and do not believe this should be dictated to me by govt.

Selling the SOE's will not reduce the size of the government or reduce their intervention in the economy.

It is you who are blinkered Boatman.

The issue is still the mismanagement of spending and a narrow tax base that allows too many to rort the system.

You do understand Meh's point?

These SOE's already pay dividends to the government. It's part of their revenue stream. Selling off these SOE's is a short term gain. Once sold, the dividends go elsewhere so how will the government fill the hole left by the dividends they used to receive?

As Meh points out, it is the misuse and mismanagement that is a Key issue.

selling these SOE's is the only solution .

This statement makes no sense at all. "the only solution to rebuilding Christchurch is somehow to sell off our hydro dams. Complete nonsense.

Boatman this is your opinion and not reality.  Shake off the blinkers of your ideology.

1) The SOEs make a profit which comes back to the Govn.  They act with a medium and long term view not driven by shareholders which for a strategically critical asset is a must.  In fact I think the entire share market is fundimentally broken....to the point its dangerious to our society.

2) We may or we may not....the SOEs dont matter to this.

Smaller Govn, sure it should be kept in chek the reality is it is about minimal....less state intervention, well we can see how much of a basket case the USA is in that....so thats a questionable assumption..Selling SOE's is an idealogical solution to a problem thats the figment of the imagination of the right...nothing more.

regards

So now, apparently, we have all this money sitting around with nothing worthwhile to invest in.

Perhaps Blinglish can explain why the Government felt it necassary to go grovelling to Chinese investors on behalf of the planned Pacific fibre cable or have the taxpayer underwrite Telecom broadband expansion in one of the most one sided deals imaginable. Or why we have foreign companies making off with our mineral wealth - purportedly because we lack the capital to develop them ourselves.

We are being lied to people. Our free capital base is not large and diverting it to a buyout of existing assets represents zero net gain, worse than that, these funds should be going to new developments that generate real wealth. 

Get your budget in order Bill and let capital do what it does best.

Yes I fully agree . There are numerous examples where this is done.

Take Volkswagen AG  in Germany  for instance , where 75% of the shares must be owned by resident Germans .

In addition , if you want to buy any shares in listed German companies on the DAX , the shareholding must be registered locally ( in Germany) resulting in the use of nominees . The share certificate will reflect the owners name , but held by a nominee . 

This ensures that in the case of  VW or say Mercedes Benz , or Deutsche Bank for instance , it remains a national asset and does not end up in the hands of oil rich Arabs , or someone worse such as ........

The Thailand Stock Exchange is regulated in similar fashion . Of any individual  company's float , only 40 % of the stock is available to foreigners .

Another clue! "English said New Zealand investors currently had more than NZ$300 billion invested in assets, excluding their own homes. These included money in bank term deposits, bonds and rental property. "

SELL, SELL, SELL

Why does that NZ state have such a big stake in the businesses anyway ? Goverments are inherently wasteful and inefficient  

Goverments are there to govern and facilitate development , not own and run businesses.

We need small government and no state intervention in running businesses 

Keep, Keep, Keep Just look at the US healthcae system for how in-efficient they can be, or ENRON for how criminal they can be without adequate and enforced regualtion.

The world is littered with real life examples of why you are wrong.

Owning the power SOEs means the Govn will govn our energy development, to do otherwise will be a disaster.......With such long term goals real businesses can get on knowing they have a power supply that is reasonably well guaranteed....that way if nothing else they dont have to buy ther own backup generation like most of China and the USA does.

We dont need small Govn, we need effective and efficient govn....one that gives us policy and vision and ensures our well being on a National/International level.

regards

The hydro dams are not businesses, never have been really. Businesses cannot do that sort of thing. They can do the building, they can invent and create the turbines, but political will is required to actually allow them to be built. It is the same everywhere in the world. All we are looking at now is a naked  private interest grab for the potential revenues if they are turned into a fake business.The end result will be a wealth transfer from poor to rich and from productive businesses to idle wealth. Great result for National - New National that is.

Studies have shown that governments are no more or less wasteful and inefficient than the private sector. 

Here's one study for you , " Lethal Politics : Soviet Democide and Mass Murder since 1917 " , by R.J.Rummel

.. and I quote :

.. " .. for every 19 tons of steel produced under Stalin , at least one Soviet citizen died as a result of man-made famine , deportation , incarceration in the gulag or execution . The evidence is compelling that the communist system was so wasteful of resources and so perverse in its incentive structure as ultimately to be self-destructive " ..

... unquote .....

..... hmmm , that guy really says a mouthful , don't he ... comrade !

I'm pretty sure everyone here is smart enough to tell the difference between the Soviet goverment and a modern day capitalist one GBH. 

The soviet govn was a totalitarian Govn and like any extreme form of Govn doesnt really work...

The world is not black and white for normal ppl, its many shades of grey.

For those on the fringe though its seems it is a case of black or white....What you are trying to do is take an extreme case (Black) to prove a shade of grey wont work....that is silly.

regards

 

Nationalistic rhetoric. Just get out there and say it like it is. They are going to be floated on a market - it's not some commune happy clappy we all own it idea, it's a market.

"National sees 85-90% of shares in floated SOEs to be owned by NZers and eyes 10% cap on stakes in SOEs."

How is this guaranteed?

Its interesting though that while they wont or cant backdown on the sale they seem to be moving away from anything goes to locking it down to make it palitable for what must be quite a lot of voters....otherwise they tell us to take a runnign jump.

regards

How many shares of SOEs can the average Kiwi afford to buy?   This is nothing but another scheme to help the rich get richer.

Yep...but worse than taht, the rich will want their pound of flesh, this means investment will be curtailed just when we need the energy companies to build for our future....so we could well sit in the dark and get ripped off for the privaledge.

regards

Boatmans comment shows ignorance of reality

Goverments are there to govern and facilitate development , not own and run businesses 

The two are not exclusive. In fact often to  facilitate development   it is necessary for theown the business.

Potential may exist to allow management to exist under contract to private enterprise.

We have right now problems of future power supplies because competing power developments are delayed because the case for profit is inadequate.

Have updated with two vidoes of Ryall - the top one him explaining the 85-90% ownership bit, and the second him explaining how share prices will be set

Jeez are you lot insane...you're arguing the toss about the divs going to non kiwi....please to tell us why the dividends will ever rise above the cost of govt bonds...who do you think will determine the divs!

All this amounts to is the govt swapping the right to collect the divs for up front capital...knowing dam well they are debasing the currency and have every intention of keeping the divs below the voter screaming level...and taxing them too.

Are you seriously suggesting National would sit back and say nout as the divs climbed toward the "bloody good" level....get a life....the result would be the end of national in 2014.

here's a curly one...

Comalco takes about 15% of our power.  Meridian supplies it and Meridian is on the list

It buys electricity at a very cheap and secretive rate. They continue to milk our power supply, despite power shortages. Their long-term contract at a fixed price was made in 1961 and still about 15 years to run.

Via Cmalco we are exporting electricity at rates we cannot buy it for!

It was a back scratcher rastus!

Yeah Right.

Stage 1 Break up of Govt owned power generator and sale of Contact.

Stage 2 Partial sale of State owned generators

Stage 3 Approx 9-12 years time after National have been out of power for about 3-4 elections.  Full sale of State owned generators.

At some point we have to put our foot down or these theives will sell the whole country out from under us, to their overseas and handful of local mates.  

I wonder why the wealth gap is increasing so quickly?

I dont wonder at all....yet the voter allows it.

regards

sure was.............but it does demonstrate that you can export electricity...and so to import it.

If Meridian is privatised and has no obligation to extend the contract, then it will be by by Comalco...

I can see I have nearly as many detractors as Wolly . 40 Years ago my first Economics Lecturer was a full on Communist . The next lecturer was a great beleiver in Adam Smith Keynes and Friedman 

I realised then that until something better than the free market comes along , its probably the best of all the evils 

Minimal state intervention  is the only way 

...or you could stop seeing the world in black and white and have a fossick around the middle ground...

Minimal state intervention  is the only way.

Well I'm not sure intervention (in a market) and ownership (of an asset) can be conflated given our SOE model in the way you do, but, that aside - surely the economic theory you ascribe to is worth pursuing only if there is an expectation for market prices to go down and security of supply to improve with the proposal to partially float the assets?

On those issues of market function, the protagonist argument seems to remain silent.

We, and in particualr teh USA  just tried that for 30 years and now look at the state we are in....

"Minimal state intervention" I quite agree, the difference is on what we both mean by "minimal".....clearly thats a huge distance.

regards

Really?

How about no state intervention when banks and large financial institutions are facing bankruptcy, well err umm, no we cant have that.

How about a free market with no intervention in the supply of residential land. We couldn't possibly have that, it may visually and socially pollute the ambiance of our 10 acre blocks.  Besides which it would completely undermine the property rental and speculation market.  How are we going to maintain our 10 acre blocks if that happens.

How about free compedative market, with an absence of monopolies in the building material supplies.  We could'nt possibly have that, it might upset our powerful friends and benefactors.

It seems to me that the establishment is very selective and self serving in how it applies the concept of competition and free enterprise.  They seem to be playing the game of shifting the focus onto the comparitively insignificant issues like Fonterra's milk processing margin and ignoring the large significant problems.

Youre onto it...what about the latest. 

The local's are undermining the alcohol profits of the supermarkets...answer   lets ban local owner operators from selling alcohol and hand the trade back to the two big supermarket duopolys!

What a croc

Bad idea. They’re gonna come in here those foreigners and buy the whole lot up and take it all back to Stuffuistan. You won’t even be able to turn a light on in this country. There won’t be an ounce of electricity for anybody. There’ll just be this big cable right up the Pacific taking all our power away and Kiwi suckers will be left with nothing. And they’ll come to our houses, smack us around and sleep our women. The bastards! I suggest we take immediate and urgent action to add another foot of thickness to the bunker!

As a New Zealander I would rather own share of those companies and have the dividends paid directly to me, than to have those dividends, after been collected by the Govt. going straight offshore as interest payments on overseas debt. 

You have a point, however if the dividends equate to less than the price hikes on the purchase of your requirements of the commodity which the company delivers

The question to me is whether the SOE ownership model serves to moderate the potential for price gouging as a means to hike up the share price.  Certainly, Telecom's behaviour post-sale offers us some instructive insight there.

Well given that the Govt. will retain 51% ownership, it's a bit of a moot point isn't it? The current SOE model that applies to these companies won't actually change?

Presently, there is no consideration of share price in the governance equation of wholly Crown owned SOEs. I reckon the decision-making criteria of the Board would change dramatically within a listed company.  Whether this shift in focus is beneficial where critical infrastructure is concerned is the question.  We have already bought back rail and air infrastructure following market failures.  How/why will electricity be somehow different?

 

 

.

.

Well I don't think those examples you have used are relevant. Both rail and AirNZ were 100% privatised, Govt. did not retain 51% ownership of them. This new policy put forward by National has learnt from the past mistakes of Labour’s failed privatisations of the 1980s. Moreover both rail and AirNZ being transport companies face considerable competition from the private sector. That is not the case with power generators in New Zealand.

Given that SOE are by definition already run along commercial lines and are expected to deliver a profit to the Crown, will a change to partial privatisation change that commercial imperative in any way. I wouldn't of thought so.

Does the hydroelectric dams have earthquake insurance???

I still don't understand WHY.... sorry. 

Please point me to the rationalisations - this is a party policy. 

 I'd really like to see a debate on the WHY. 

Preferably from the party proposing it.

I can handle the truth...... Not the how, who,where, when etc just the WHY.

 Reinvigorate the stock market, mum and dad investors, money for doing something else isn't convincing enough.

What is it about us, the typical kiwis and the foreign ownership phobia?  You , you and you can freely take your money and buy shares in other country.  Fonterra and Wrightson already did with their dairy farms and milk production in South America, China. 

If we are so against the concept of foreign ownership concept - why didn't anyone raise their voices against NZ companies buying into other countries?  it is Ok for us to go into other countries but not vice versa..

Just double standard!

Because houses are such a good investment, and because there are so many we have no money left for investing offshore.

But there is actually sense in what you say.

Because for some things they should remain in National ownership, those that are "mission critical" to NZ....

Simple really.

regards

That's beside the point. 

Someone told me once "we are quite happy to p_ss on other people's pond but get quite upset when other people p_ssed in our pond"  how true...

I'm not worried about this. Tony ryall was a credit analyst for a bank until he was 26, then he became an MP. The guy has Life Experience!

The last thing he would do is amend an ideologically driven policy to enhance his own odds of re-election.

By all means sell Air NZ - it's replaceable.  Don't sell any strategic energy companies, instead transfer ownership to the "Cullen" fund (with the restriction of them not being able to sell), and use the capital to repay debt.  Don't waste money on Investment Bankers setting up IPOs.

the PM urgently needs to do a State of Nation speech and tell us the horrid truth - the Chch rebuild cost is out of control before it starts , and when China/Oz slow down we are in dire straits, if not allready.  The only way to balance the books is flog off assets or the IMF etc will do it for us

Are you that much of an idiot?

So we take something thats making an operating PROFIT and sell it as a one off....that doesnt cure our opertating deficit RATE, it just reduces the deficit SUM for a bit.  Then of course our deficit RATE is increasing FASTER because we have less INCOME.

like duh.

The only way to cure the operating deficit is to increase taxes and a CGT is it....

regards

 

 

John Key says trust him on SOE sales.

But we trusted him on GST

He said he wouldn't increase it. But then he did.

cheers

Bernard

 

Oh dear - you trusted a politician.  Must send you back to school !

But look, we have built up over the last three years, I think, a very strong sense of trust with the New Zealand public. When I say I’m going to maintain 51%, or [not] sell more than 49%, I think New Zealanders will take me at my word," Key said.

I think Key has used up much of the trust he still takes for granted. That said, it may be years before that loss of trust is reflected in a loss of votes - changing voting patterns are I suspect a cultural process that only changes slowly. Labour's current poor polling could still in part reflect a similar loss of trust from the Helen Clark era.

Whether New Zealanders will take Key at his word could be a good question - one posed by Key himself - to run a poll on.

Whether such major issues as SOE privatisation should be left to a government-of-the-day and 'trust' is the issue. Mr Key may be the nicest /most trustworthy person around, but he may also be wrong... They are not discussing  WHY. Please will one of their number explain in detail WHY.  Just a link to the policy documents please......  

The Idea/Plan might be bl**dy brilliant..... sneaking it in as an aside because the opposition is cr*p is dangerous...letting us all guess why is dangerous.... What is the plan....

We get "trust us" because the truth behind the WHY isn't palatable.

For me, the only answer that would stack up in justifying sales is that some new government spending is going to provide higher long term returns than the sold SOE's. So a sale of Landcorp would easily make sense, AirNZ probably, but not the hydro electricity generators - until Key can be explicit about what government chosen winner is going to provide a better return on capital. More motorways for Auckland don't seem to cut it.

These asset sales are against the wish of the majority of NZ people (including the majority of National party supporters). How legitimate is a government that tramples over the clearly expressed wishes of its people?

Exactly.  Including it as part of the election is plain wrong when they know full well the voter doesn't agree but has no other credible option.  National is the best of a useless bunch at the moment but equally as useless.  We're damned if we do and damned if we don't.

Their reasons for justifying the sales are quite plainly BS.

The reason the countries finances are in such bad shape is because of the mismanagement by both parties over the past 30 years.  Unless the population opens their eyes and realises this we're screwed.

There are only two options IMO.  The new Conservative Party does some significant campaigning between now and election time and can sway the majority or we simply don't vote in anyone.

 

 

There are only two options IMO.  The new Conservative Party does some significant campaigning between now and election time and can sway the majority or we simply don't vote in anyone.

I think that there is a better third option, being:

a) Vote for the most capable electorate candidate irrespective of party (that will make no significant difference to the number of seats any party gets but will improve the quality of MPs). Include the candidate's position on asset sales in the assessment if you wish.

b) Party vote goes to any political party except Labour or National. National will still get by far the most seats, but possibly not an outright majority nor enough to claim public support for sales of government electricity generators. There may even be enough opposition to provide some check on government abuse of power.

New Conservative party?

Lets be serious, if your party is not across or seen to be across the centre of NZ politics you are fringe.

In terms of  SOE sales I suspect National is kicking itself for doing this....it cant back out without losing face.....but just listen to the flak its getting....it was a mis-step I think, very clearly a vote loser though not that many.

oh found it, somewhere between ACT and National.....well I suspect he'll get maybe 4000 votes.....4 times the libertarians....

;]

Mainly because I think too many ppl are wedded to thier respective historical parties (Labour and National) which is a pity.....

I'll watch how they do with great interest....

regards

Thats the trouble (sorry I was in Panay Bay for a while). One ends up justifying/explaining it. I could suggest that it will keep some of the infrastructure free from the clutches of the IMF.... or that  network generation is going to be pointless in a few years and that it's a con... probably utter rubbish - meanwhile it just sails (back in Panay Bay) away. 

Is there a policy document that can be picked to pieces. (Not that Goldman Sachs tender thing).

There was a group of documents from TSY in response to government requesting information on selling SOEs. They seem to be hard to find on TSY's website, but from memory TSY wasn't that enthusiastic about selling power generation, ranking some other SOEs as more justified even if the value was not of such magnitude.

Thanks.

There are now considerably more documents than when I first looked (months ago).

Searching TSY's website today I was getting very slow responses mixed with errors along the lines of "all servers not responding". 

I had similar errors and it was just a matter of trying the links again.  I couldn't get over the amount of waffle on the TSY site.  Some prob decent reports that were blatantly ignored by various govts. and some waste of time reports.  Why don't we get rid ot this dept. for a start - how much would that save each year?

I did read one of the reports regarding the SOE sales.  It looks like TSY favour the sales but they use purely economic/capital market theory to justify and regulation rather than govt ownership to reduce the negatives.  I think it's too big an issue to use such narrow measurements.

The main issue I have is that the electricity coys are strategic assets and already owned by all taxpayers.  The dividends are already in the hands of all taxpayers not just the few that can afford to buy the shares.  These sales will only benefit the few, not the many.

It is mismanagement by successive governments that has got NZ's finances where they are today.

Thanks Meh/Colin.

The justification (WHY) seems to be contained in

The 2010 Investment Statement... ( I liked this when I first read it)... namely the Forecast Balance Sheet...

The paper all flows from here.... in order to do this we must raise money, can we sell stuff to do it?....we don't want to borrow....all a bit small in the end... Roads/education/kiwirail.

Couldn't work out  "The capital freed up would have to be used on behalf of taxpayers to fund new public assets and thereby reduce the pressure on the Government to borrow" 

Trust... 

 

The WHY: Does that add up to - in shortest form - we must keep spending? Even if that means selling core infrastructure that we will regret later? Those answers would be consistent with this government also pushing councils into keeping up spending.

If so, WHY must we keep spending? That I believe will be where the answers get unpalatable.

KW John, I think your pursuit of WHY has proved very informative.

I don't know - but it isn't a grand plan that is stated - more of a spreadsheet balancing. To the  government's credit it is relatively transparent.... just a little empty... 

So:

No grand plan, and presumably no sound strategy - just keep spending. No change then from the last Labour government. Check.

Next the spreadsheet balancing. Where is the money going to come from? This time not from tax increases (at least not for the wealthier), so that means borrowing $300 million per week. Check.

But $300 million per week is not enough and borrowing more looks bad, so sell our best assets regardless of the long term consequences. Check.

Then hope the neo Keynesian magical thinking delivers. Check.

At this point I'm hoping someone from the National Party will jump in and slay me for my ignorance... actually it might make me feel better....  

I would certainly like someone from the National Party to engage - perhaps even provide an explanation of WHY, but from past experience I expect deafening silence in this forum.

Somewhere - in another forum where questioning is less likely - the Status Quo will respond and paper over a few of the cracks we have opened up. 

Cultural change is normally resisted so is slow. 

 Hey – YOU - generations after me – an important message – PAY NOW !

http://www.powerlineblog.com/archives/2011/08/peoples-choice-7-doorbell.php

Truly prophetic Mr Riden :} The requisite article in the NZ Herald. 

Thanks KW.

Depressing isn't it.

A case not where "a fool and his money are soon parted", but the fools are I presume being very well rewarded.

Sounds familiar.

Actually made me feel a bit sick...Policy by PR blog.

 Why is there no protest of the wider population against the government importing 57 electric trains, exporting skilful jobs to foreign countries/ companies/ workforces of value $ 500 millions – now - when time is tough, redundancies and youth unemployment daily news ?

 http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10748778

 NZYouths - educate them, train them, skill them and then – they are still jobless and  -rumble - they export them selves !

When will our society, politicians, economists and policymakers wake up and understand, that only fundamental changes in our way of thinking, will lead into a better, rather sustainable, balanced economic, financial and social future ?  

.. they've all gone to bed , Walter ... no one left for you to play with . And we had a robust afternoon here , until Bernard disgraced himself by getting rat-arsed on the tequila .....

GBH has a partial solution to youth unemployment , one which is free , and which has immediate effects !

Business....why should a business take the risk that an un-proven, non-existant, not cost limited product would work?

Would you walk up to even an excellent garage and say build me a car from scratch and here's a blank cheque? I know I would not.

regards

 Steven – who wants to manufacture a Fiat (mass production) – how stupid. The matter is, there are a number of successful businesses making cars not necessary from scratch, but highly exclusive and profitable.  

Steven - your answer is too easy - how do you tackle the many problems I mentioned above ??  On these basis, it is a matter of weighting up, what can be done and should be done in this country.

 

“National doesn’t seem to understand that once shares are sold they are gone forever. There is no way to guarantee that they will remain in Kiwi hands,” Goff said in a media release.

What is to stop the government slowly buying back shares once the debt is paid back,. if they really think it is the best use of taxpayer's money.  I think Phil is being slightly melodramatic!   Presunably there will be a market in them and people will sell them from time to time.

And when the big Kahuna comes the price will drop and they can buy them back cheaper!

When the next depresion hits or Peak oil comes there will be alot of shares worth far less than they are today.....some like these may not suffer to badly.

The point is to keep a strategic view of a critical resource....if NZ businesses and households are to have electricity in all foreseeable circumstances then Govn and the companies need to have a long term view, the share market will hobble that, they are fundimentally incompatible.....

regards

Can anyone provided informed information re New Zealand domestic electricity prices vs rest of world?

How do this prices in here compare with NZ prices at that time in USD?

 

http://www.theoildrum.com/node/7215

and

http://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspx

with an exchange rate at the time approx of 1.459

does it seem like our costs are on the high side, especially when compared with other countries with a major hydro supply.

Has this all been covered?

Just wondering, we need to survey National Politicians on thier position on imported Electricity. Are they for it or against it? The country need to know.

You also have to consider quality and availability of supply.....Take California, they suffer brownouts and blackouts...and many businesses and even it seems households (sometimes) have back up generation.....The US also doesnt have a national grid and what they have is falling apart due to lack of investment so there is risk....and if you consider peak oil a huge one.....do you really want to be faced with that?  I know I dont.

regards

You do indeed need to consider quality and reliability of supply as well as prices, but there is no evidence that those are more likely to be well-balanced under a state-run energy system than through a competitive market.  California is an example of how it goes wrong when politicians interfere, not of how markets fail to deliver.  What happened there was that politicians imposed price controls which meant no profits were available for investment either in building new electricity supply capacity or in maintaining the existing capacity, so existing capacity ran down and was not replaced.   Same happened in South Africa.

In the UK, where prices have been set by supply and demand in a competitive market for many years, there has been massive investment (at no cost to taxpayers) in new gas supply capacity, and significant increases in the efficiency and environmental performance of electricity generating capacity; and there have not been brownouts or blackouts of electricity supply due to generating shortages, and gas supply has not been cut off, unlike elsewhere in Europe.

In the USA there is no national grid.....yet a lot of talk to do so to allow more resiliance.....however some areas (Texas?) dont want that because they think the surrounding states will take from their spare capacity instead of building new/more....

Right now it appears Huntley is closing or being reduced in capacity because no one is paying for the safety margin.....kind of raises an eyebrow on margins.....if a drp year or more likely two in a row come along we will be in the poo....

In the UK prices for monopolies are regulated by various "Offices" and not by supply and demand....Sure they built more gas generation, which used to be supplied from their own gas fields.....only now to be faced with the real risk in the future they will get no gas from Russia...kind of an oops....

regards

 

The "real world is this", you only sell such assets to either:

 

A: Put the state owned companies into more private hands to push up profits, ie, fleece more from the NZ taxpayer so you can say "hey, it's out of our control, it's not us doing this too you, it's the market"

B: Attract foreign investors who DO have the spare cash as NZ "Mum & Dad" investor have lock all their spending and debt in stupid property bubbles  and are living week to week.

C: Buy more votes from my corporate buddies by offering them a nice cheap NZ taxpayer "strategic asset" that they can screw over in a few years for bigger  and bigger profits with little capital or maintenance costs upfront.

 

 

Hmm, which is it John?

All three.

D: Blind political dogma.

E: Sell off the assets so S&P dont downgrade us.

For me the SOE model would seem to be one of the most effective in terms of looking after our critical needs and providing a return to the Govn....I see nothing as effective.

regards

It still seems to me that this is like an Alcoholic selling his house to fund his drinking habit then renting it back from the person he sold it to.

Money now being more important than ongoing savings.

Except the Alcoholic will eventually die so no harm done. Not so the Government.

Now we can buy shares in something we theoretically paid for. Unless all of our SOE's have all been funded by the selling of Government bonds. Even better still, why not compare what the sale of these assets will bring in comparison to our outstanding Government debt. Short loss, longer term even bigger loss.

 Key's next quote will be:  " we will put these assets on Trade Me at a $1 reserve and hope for the best".

The vultures are waiting ! Lot of  dollars out there that needs to move into hard assetts fast.  Dont see Singapore and China  selling of their SOE. This is a time to hunker down and hold onto our assetts. Anything worthwhile will be gobbled up just like in other countries.  A massive re adjustment has started. 

SELL, SELL ,SELL

Congratulations - your comment immediately above presents the most honest and compelling case I have so far seen for the sale of state power generation capacity.

Since so many people seem against this why arn't they proposing increasing government debt to buy back Contact shares?

How about because that doesnt make sense either.......

regards

I am absolutely, fundementally opposed to any foreign ownership of our necessaries (utilities). Are you really fooled buy the rhetoric, do you really believe that these important assets of ours will not 100% end up in foregn hands sooner or later (my money is on sooner) That will only be one more pen stroke away and probably the promise of a further term of this govt. Can anybody tell me honestly that they are comfortable with, eventually, having to pay foreign corporate for the very water that you drink, water from YOUR OWN land. Absolutely NO NO NO to asset sales to foreigners, I can almost go along with us being able to invest in them, but if it means that the foreign vultures can pick us off one by one, then go to hell.

What's the real problem raegun?

It does seem a good idea for the iwis to be able to buy shares in them as they would probably keep them long term and they would be a sensible thing for them to invest in compared with some of the things they have invested in in the past.  Maybe some treaty claims could include shares in these.

I don't agree they the govt would every sell more than 49% as it is an entirely different proposition to do that. Phil is just scare mongering.  They could also slowly buy some back over time once we are back in surplus. 

Totally agree Iain....selling critical infrastructure makes no sense....there is little if any evidence that doing so is in the National interest medium and long term....at best its in the Govn of the day's political interest short term....what this bunch of jokers want is a fix to get them over what they see as a short term bust to the next boom when they see the gormless voters will be happy again....its rank incompetance IMHO....(however Labour are not better)

What we see here with the asset sales is a delaying tactic to get us over a short term bad spot that a CGT and modest raising of the top tax rate would do as well if not better over the medium and long term.  This has to happen anyway....yet I see nothing or little by economists talking about balancing the long term books.....ie a tax rate that is neutral on a neutral economy.....If the Govn went to a budgeting service they'd get ripped apart!

regards

 "...a CGT and modest raising of the top tax rate would do"

err ummm no it wouldn't steven.

Hiking the gst rate has serious consequences, as it goes up, spending goes down and activity diverts to the black market where it stays. Higher gst hits low income folk harder and most Kiwi are on the bones of their arse right now.

Tax rate hikes have two negative outcomes. The first is avoidance increasing and the cost of IRD policing going up. The second is to see an increase in income avoidance! ...where more people decide the extra effort and work isn't bloodwell worth it. Throw in the fact that immigrant capital is put off coming....and that the income taken will no longer be invested or spent....!

I do hope you can see this steven.

Not GST Wolly, I said CGT, to tax what isnt taxed...

Raising GST I dont (and didnt) like, yes its regressive and in a down turn the GST take drops. Really a Govn wants a tax thats as constant as possible IMHO....hence I am drawn to a Land tax....0.01% say met with a reduction in PAYE (and whereever else is fair/necessary to stay neutral....sadly no Pollie wants to chnage the system in good times....its only done in bad times when there is no other option, totally the wrong time....Would a CGT and modest tax take balance our budget now? no because we are down too far....Ive said it else where Govn's are setting the tax take to give them enough $ in boom times, in bust times they and us are screwed...so we need tax levels that are neutral....in boms the excess is saved, in bust times it is drawn down....its not rocket science....

I also dont like the idea of GST excemptions....for instance off fresh fruit means the poor have more $, OK, but does that mean they spend it on more fresh fruit or can now afford more fags?  I really want to see more research on this....Im not convinced....If you want to do this then having the first say $1000 income tax free should achieve the same thing IMHO.

Tax hikes, tis simple a Govn needs sufficient income if that means tax rates are 35% so be it....tax rates have been higher......and are in other countries....sorry but where the f*** do you expect the money to come from? get real....

Avoidance, so hammer ppl more, give them jail time....when some large mongrel mob chap fancies your ass you'll soon get the message that meeting your tax obligaltions is far less "risky"

Immigrant capital....they are coming here because its better here than the 3rd world sh*t h*le they are in....

See your illogic? lack of how we sort our problems? the fact you snipe at every thing but dont have any solutions? yes I clearly do.

regards

 

 

 

 

Well I am sorry about that steven....so I'll blow a trust hole in your cgt pipe dream instead and " its not rocket science"!

Look at what you have claimed...this is a 'bust" time...yet you argue for a policy you say should happen in a "boom" time....can you see a wee flaw in that!

We will pass that flaw by. The reason Labour's daft cgt is dead in the electorates is because people know bloody well Labour would apply the tax to the family home....and people really don't want to be paying money over to liars in the Beehive. Labour cannot be trusted...end of story.

And you demand I " get real...."....that I should accept your argument in which you say " tis simple a Govn needs sufficient income if that means tax rates are 35% so be it"....this is putting the cart in front of the DonKey!

I'll help you out steven..you need it...first task is for govt to reduce its own demand for money by chopping out the wasteful stupidity it found left by Clark and Cullen...plenty yet to cut too...and post the election expect the axe to swing...You see steven, the task of balancing the budget does not just demand raising taxes...the spending side needs sorting.

 

 

 

Asset sales - what's the political cost?

 http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10748931

And written by a National party affiliate

Note the comments.

This is a payoff IMHO....

Thanks, yes the comments are really telling.....seems there are a lot of ppl of the same view (as me anyway)....major foobar by the smiling death....

One commentor is right on it.....We borrow $100k~200k per week, that means the 5billion lasts us 50 weeks max, so 6 to 11 months  debt....then we spend the next 20 odd years paying for it.....on several levels....a) Profits extracted b) Profits sent offshore c) 1/2 of the present dividend which makes our debt worse in the second year+ d) risk to our economy from lack of investment in future generation.

As a business case its one of the stupidest things I have ever seen....

Lets take c) So sell something for year one in a multi-year debt problem, how long does it kae for the lost revenue to equal the money from teh sales? 5 years?....this is a decade or multi-decade event....its just nuts...

It has to be politically driven or its a pay off condition of some sort....I suspect the latter something like an agreement JK has with S&P not to downgrade us if we do sell....it reaks for me of a pay off.

regards

He's a political zombie, what did you expect?

regards

Tell you what Parky....why don't we just go ahead and make believe your system is operating here and now....so away you go parky...tell us how.

Don't post a page of links to fluff .....you explain the whole pile right here and now..and that means dealing with the decades of shite piled up.

Bit off-thread though Wally... Iain's got a good web site...Best stick with the thread.....Can you do a better job than Mr Farrar? Do you think National would be better served to 'drop' the sell-off of power generation as a policy? I still can't understand it, and not one of their number seems prepared to explain....

Good for him. Flogging 49% off the power sites and airnz is a no brainer while they still have some value!...The share buyers are swapping today's capital for tomorrows divs and debased capital recovery. Anyone who thinks the govt will not be deeply involved in div determination and therefore share value..is blind.

There is no way foreign entities will want to invest in something so exposed to a future Labour govt fiddle...look what Clark and Cullen did to aia....buggered the share value overnight.

QED this is all about grabbing current capital to take the stink off the pile of debt built up to carry on Clark's benefit legacy and prop up the unbalanced turd economy. I doubt that the chch events and the rotting building farce are in any way a cause of the selloff.

Ta...."grabbing current capital to take the stink off the pile of debt"... just housekeeping then.

Dodgy game to be playing though (politically). I don't think they're doing a very good job of explaining this. Done properly, they could be articulating this as part of an ongoing plan...

At the moment it just appears somewhat desperate...reliant on the party faithful 'getting it'. 

But KWJ can you not see why they would never say what I have...would Kiwi buy the shares if they knew they faced divs kept down by govt and future share issues to ensure same and to continue the capital flow to the govt...each issue would return them 49% of the sale...while the divs would always stay at or below the govt bond number.

Sorry Wally, duties...

Not sure how to respond really... Am I supposed to 'feel better' that NZ shareholders might not get much in return for their capital. I don't. And with the attendant risks that your analysis might be wrong...My main problem is the lack of transparency here... I still have not seen the government argue the WHY of this issue (and you may, by rumour, have explained it).  

 The perceived issue (the ongoing 'risk' to our power infrastructure) is skimmed over as 

' In addition, the Government intends to extend the mixed ownership model'

Maybe they're too busy, but one of their number should 'put this one to bed'...I'll settle for Bill English arguing it - there are brownie points in this if they get it right, they should at least try.  

p.s. I like Brian Easton's writing on this - but still I think the govt is missing a huge opportunity  to aggressively argue this - carrying centrist voters with them. It'd be fun....   

 

 

BE seems to skim over why ppl dont want asset sales...he comes across as the idealoge he seems to poo poo.

However he does cover those who want to sell....which is marginally better than a kick in the teeth.....

I dont regret canceling my subscription when it swung to the right....more national adveretising I dont need.

regards

Brian  Easton actually  does not give a reason to do it either... only 'benefits' as a justification.

I like his writing, but even such a learned writer doesn't get  close  to tackling the voters concerns on this.  My main interest is the paucity of the discussion, such a serious issue, yet it just divides into teams. I keep expecting someone to just say - 'surely we did the privatisation thing to death - you lost'.  Intellectually empty. No confidence here I'm afraid.

Check the numbers, Govn has been demanding divs go up....and they are in a position to do so.....even a quiet 3rd party investor can see how and what National have done over the last 3 years....they just sit there taking the dividend while the govn takes the flak.....

regards

Do try to think steven...if the partially private but 51% govt owned power companies and airnz were to raise dividends...with 2014 approaching, Goofy's replacement would scream "unfair unfair"....and the people having forgotten about the 9 wasted years under Clark, would be inclined to believe the fool. The evidence would be there for all to to see.

So you can expect the directors to do the bidding of the govt...and that will be to keep the divs close to the same return to shareholders as interest paid on govt bonds. That would make the 'fools' screams just so much fluff.

By keeping the divs low, because the bond payments will be kept low, the companies will build up the capital and invest that in new power ventures and new planes. Otherwise they would have to borrow the bloody capital.

In a fully private company, such a war chest of loot would invite a take over...the share price would rocket higher...That cannot happen with the govt owning 51%. What can happen is for the govt to tell the directors to issue new shares..51% of them to the govt...selling the rest...to collect the capital...and use some of the accumulated capital to keep the div stable.

So the capital needed to improve the power infrastructure and to replace the planes would come from the 'filthy rich'......otherwise with no sales the capital will have to come from steeply higher power prices, while airnz would face a forced merger!

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