By Alex Tarrant
New Zealand 'mum and dad' investors are the number one priority for Prime Minister John Key when it comes to share allocations from the 49% sell downs of four state-owned energy companies.
But that doesn't necessarily mean Kiwis will be allocated 100% of the shares sold in Mighty River Power, Genesis, Meridian and Solid Energy, as allocations will for some part depend what investors initially offer for the shares.
The government yesterday tabled legislation to allow the partial privatisations of the four energy companies to proceed, but despite repeatedly saying New Zealanders would be 'front of the queue' when it came to share allocations, the legislation did not touch upon ways to ensure this.
Key told media in Parliament Buildings on Tuesday that the legislation did not need to stipulate New Zealanders would be at the front of the queue. Rather, that would be determined by how the companies’ book-builds were handled by the investment banks managing the floats.
“We’ve had extensive discussions with [the managers], and made it absolutely crystal clear what our expectations are. That’s an administrative matter, not something you put in legislation,” Key said.
A 2010 Treasury paper to Cabinet recommended that, even though the government would prefer to sell shares to New Zealand investors, potential overseas investors should also be canvassed during the book-build process in order to get the highest possible price for the shares. There are also worries about 'stagging' by overseas investors, a process where they immediately offer to buy shares allocated initially to Kiwis for a higher price than at the initial public offering.
There will also be a cap of 10% for any one shareholding, excluding the government's 51% holding. Government Ministers have said they expect 85-90% of the companies' shares to be held in New Zealand ownership, including the government's stake, meaning up to 30% of the shares sold in the companies could end up in foreign ownership.
Some in the investment banking industry have told interest.co.nz they expect Mighty River may even be sold at a discount to ensure full New Zealand ownership of the company to garner interest in the other floats.
'Number 1 priority'
The government's intention was to have “mums and dads...absolutely at the front of the queue,” Key told media on Tuesday.
“They’re my number one priority, and we will make sure that we will be setting that at a level where it’s affordable for a lot of New Zealanders,” he said.
The share prices would already arguably be discounted because the government was going to keep the companies under majority control.
“But how you actually sell – how you build the book and who gets to buy those shares – is a matter very much for the government and the way the managers fulfil their obligations to the government," Key said.
“What we’ve said is, when it comes to Mum and Dad, if they want to buy 1,000 shares or whatever it might be, I want to make sure that they get their allocation, they’re not scaled, and they’re at the front of the queue,” he said.
Front of the queue meant New Zealanders “may be able to” be allocated all the shares in the companies they applied for before any foreign investors were allocated shares, Key said.