Mighty River Power or Genesis Energy are likely to be the first State Owned Enterprises (SOEs) to be floated in the National-led government's mixed ownership share sell-down, Prime Minister John Key says.
Speaking on National Radio's Morning Report programme, Key said the first share sales should not be earlier than the latter part of 2012.
National is proposing to sell up to 49% stakes in SOEs Mighty River Power, Genesis Energy, Solid Energy and Meridian Energy. It is also proposing to sell down its 74% stake in Air New Zealand to no lower than 51%. The sale process is expected to take place over three to five years, and raise NZ$5-7 billion, which would be used to pay for new capital spending, like school upgrades and construction, over the next five budgets.
Speaking on Newstalk ZB this morning, Key said there was more work to be done on Solid Energy before shares were sold off. Meridian had just got a new chief executive, and markets might prefer a little more time before shares in that company were sold off, he said.
'Lower price than we could get'
Meanwhile Key acknowledged the government might get a lower price for the shares due to the mixed-ownership approach to the sell down, and because New Zealand investors would be front of the queue.
Budget advice from Treasury to the government released earlier this year included comments that foreign investors would play an important role in the sell downs, as they would put upward pressure on the share prices.
“New Zealanders will be at the front of the queue for any offers arising from the extension of the Mixed Ownership Model, but overseas investors have an important part to play in providing pricing tension to support the Government’s fiscal objectives,” it says in the Treasury advice.
In August, the government said it expected 85-90% of shares in the companies would be in New Zealand hands, including the government's 51% stake. That means 20-30% of the shares sold by the government could end up in foreign hands. The government is also considering setting a 10% ownership cap for any owners other than itself.
“We acknowledge we’ll get a lower price than we otherwise would do, because we’re keeping majority control and we’re building the book, or the allocation of those shares, favouring New Zealanders," Key said on Newstalk ZB Monday morning.
"If you just wanted to get the maximum price, you’d sell the lot and you wouldn’t care who you sold it to. But as we laboriously went through on the campaign, price is one issue, but it’s not an overarching objective. The main objective is to make sure we follow through on the commitments we set on the campaign trail,” he said.
This table is from the Treasury Budget advice to Ministers released earlier this year:
(Updates with Newstalk ZB comments, links to Treasury advice)
28 Comments
I am going to buy some SOE shares. After all, Labour are saying how wonderful these companies are and are bringing in great returns that I would like to own a bit more personally as well as spread the risk by having the govt still own 51%. A win-win as far as I can see.
I bet a lot of Kiwisaver companies will be doing the same as well.
Also, these companies own assets, not like finance companies who own over valued assets that came tumbling down.
The question I would asking is how any years or months it will be before the govt tells the country that is fact they will have to sell off the other half because of the pending ratings downgrade we are going to get.
We are being lead into receivership, that is what the reality is here...
And he's had his future planned out for a while, which is stay in parliament long enough to:
1) Set up lots of juicy deals for his corporate mates,
2) Sell off the assets (see above),
3) Become entitled to the generous parliamentary pension,
4) Retire, after getting himself on the boards of those sold off assets (an unwritten part of the sale agreement),
5) Retire to his private island and phone in his directorship duties once a year,
6) Sit on the beach, sipping something nice, while smirking at the thought of the suckers he left behind who paid for it all.
7) Receive his knighthood, alongside John Banks, Bill English, Paul Holmes and Paul Henry. It's the least a grateful nation can do for such outstanding people.
John Key on having a Plan, failing to close the gap with aussie, immigration, keeping the best and brightest in NZ, and 100% pure.
And having to listen to people wax on about what a nice man JK is, he is "self made successful, and gives his salary to charity, oh and he is doing such a great job. Much better than the 9 years Labour had"
I have been trying to work what it is they think deep inside...is it
1: Hope
2: The need to feel secure inside by using denial
3: The desire to feel they are part of the "winning" team
4: Fear
5: All of the above, and some others I can't think of right now...
Effectivley buying the bad assets SCF, AMI etc, and selling the good ones. Going long financials, and short energy, is exactly the opposite stratagy I would advise if I was "investing" in shares, in this environment. Be interesting to hear what way the "experts" are going.
Malarkey | 28 Nov 11, 9:14am
And he's had his future
And he's had his future planned out for a while, which is stay in parliament long enough to:
1) Set up lots of juicy deals for his corporate mates,
2) Sell off the assets (see above),
3) Become entitled to the generous parliamentary pension,
4) Retire, after getting himself on the boards of those sold off assets (an unwritten part of the sale agreement),
Malarkey, I guess It's a bit late now - you have to accept the outcome and suck it up for the next 3 years... or join the the rest to have Julia as your PM..
A good idea would be for Labour or the Greens or NZ First or the Maori Party or Mana to announce that upon becoming the government any shares sold in these SOEs will be compulsorily re-purchased for the same price as was originally received for them.
Even better would be recombining Mighty River Power, Genesis, and Meridian into one SOE with instructions that their priorities in order were something like: security of supply, environmental efficiency of generation/low carbon energy, and price.
I had this idea too, threaten to seize all state assets sold by the previous (National) government if elected. Problem is John Key is already one step ahead - why do you think he is giving investment preference to New Zealanders - they are voters! Anyone that owns shares in these companies won't ever vote for a party that would devalue their shares.
Yeah but the flaw in John Key's cunning plan to ensnare New Zealanders into buyoing these shares is that at the same time he is getting wages reduced in real terms so there are less New Zealanders who could buy shares so more voters who would be happy to support getting our assets back.
OMG asset sales.
Man lefties foam at the mouth over this.
Mix ownership works, look at Statoil in Norway, a very socialist country.
http://www.statoil.com/en/InvestorCentre/Share/Shareholders/Pages/default.aspx
re what do you right thinkers not get?
Norway's Statoil produces a product for export.
Air New Zealand provides a service in international markets.
Our power companies supply power to who exactly? Zimbabwe? Russia? Ahh no.
But I'm going to assume that agrument is too obtuse for you.
However....Air NZ cant survive oil above $120USD a barrel, maybe not even $100USD, Statoil can.....until its reserves are empty. AirNZ uill be bankrupt and history in at most 10 years, maybe even 5 at least as the scale of operations it is today. So say 10 aircraft max for senior Govn officals and very rich ppl.......running on NZ grown jetfuel....
regards
40 years ago people were probably saying airlines couldn't survive with oil over $40USD a barrel. Your $100 or $120 numbers are just that, numbers. $100 today isn't going to necessarily be equivalnt to $100 in 5 years time or 10 years time.
Anyway, I'll keep believing there is a future in air transport as long as they keep building planes. When they stop building planes then I might start thinking otherwise. Not to say that I'd be buying shares in Air N.Z. though.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.