Mighty River Power will be the first company off the block in the government's SOE share sell down, Finance Minister Bill English announced today.
English and SOE Minister Tony Ryall said Cabinet had agreed Mighty River would before the first IPO, with the sale likely to be in the third quarter of 2012, dependent on market conditions. Analysis by Treasury for the government shows a 49% sell-down of Might River Power could raise up to NZ$1.8 billion (see table below).
English and Ryall also confirmed the government would impose a 10% ownership cap on investors in the company, other than the government.
Mixed-ownership model
The National Party contested the November 26 election on the policy to sell up to 49% stakes in SOEs Genesis Energy, Mighty River Power, Solid Energy and Meridian Energy, as well as selling down the government's 73% stake in Air New Zealand to no less than 51%.
Treasury hopes the share sales will raise between NZ$5-7 billion, which has been earmarked by the government for 'social infrastructure' spending, such as school upgrades and irrigation, over at least the next five budgets. The money will be earmarked in the Treasury's accounts as the 'Future Investment Fund', announced by Prime Minister John Key at the National Party's election campaign launch at the end of October.
To date, the government has already promised to spend NZ$1.48 billion of the SOE share sale proceeds: NZ$1 billion has been earmarked for school upgrades, NZ$400 million has been earmarked for irrigation investment, and NZ$80 million would be used to help fund a technology institute. See article: National announces NZ$400 mln irrigation investment to come from SOE share sale cash; Brings total spending from sale fund to NZ$1.5 bln.
The first share sales are likely to be from the latter part of 2012, Prime Minister John Key said on November 28. Mighty River Power or Genesis Energy are likely to be the first off the block.
At the end of August, English and Ryall said they expected to place a 10% ownership cap on stakes held by investors in the SOEs, although this is not yet set in stone. They also said they expect 85-90% of the shares in those SOEs would be held in New Zealand, although that included the government's 51% stakes. That means about 30% of the shares sold to private investors could go into foreign ownership.
'Out of banks, into the economy'
English said on November 29 the share sale policy, or 'mixed-ownership model', was about getting money "out of bank accounts and helping build the economy". Resere Bank Governor Alan Bollard said last week he was not concerned about any flow-out from bank deposits to buy SOE shares.
“We’ve looked at the numbers in broad terms. It looks like the sorts of amounts we’re talking about from those mixed-ownership model sales, are likely to be a very small proportion of domestic deposits," Bollard told media at the RBNZ's December Monetary Policy Statement.
That NZ$5-7 billion would account for part of the NZ$13 billion increase in domestic deposits (to about NZ$160 billion) over the last year. The share sales may slow the growth in domestic deposits, but wouldn’t do much more than that, Bollard said.
(Updates with video)
35 Comments
It is not the selling of the 49% that grates...it is the manner in which the govt is splurging Keynesian style with the capital...that is the madness..
Sold to us as an investment in infratstructure...this is BS....the money is pouring into the pockets of the banks via the companies that chase the govt contracts to seal roads and nail gun new school sheds together.
And yes the money flows into the community...but it is 'borrowed' money...not earned money and that is the crucial fact pointing to a wall of future problems.
If the world economy follows predictable lines through an endless recession bogged down in debts and reserve bank trickery...there will not be the promised growth that we are told will generate the wealth to pay for and pay off the borrowings....and that means a high chance of future depression..
It is only a mattter of when!
Don't worry too much about paper money kiddies - the real world works on Energy.
And we are headed for a No Growth future in the long term as world energy supplies dwindle and the energy demand of the middle classes in China, India and Indonesia grows exponentially - So all the money printers and financial experts out there better find a better system becasue the one built on debt and the assumption that there is always going to be more in the future is doomed. In this scenario, the last thing we want to be doing is releasing control of our Energy Infrastructure to the Chinese...
The $6billion they expect to raise will fall into the govt expenditure hole...and so it could be said the money will go to the landlords subsidy that sucks way more than a billion a year from the economy...much of it goes straight to the banks that financed the landlord splurge on property....and thence across the ditch to aus....how do you like that truth.
Meanwhile low income Kiwi cannot afford the now price bloated low end property. But they are seen as potential chumps by the parasites...to be sold 'cheap' rate mortgages on the price bloated property...bloated as in bubble...bubble as in banking bonanza...
Yeah well we get BS whatever skudiv....sad thing is the loot is going to pork activity that we are promised will boost future earnings...that if it were true would be ok...but I think it is a pack of lies...the loot is heading into the Keynesian splurging madness in the hope that the world markets will emerge from the shite very soon...when it is clear to all that the shite will be deep and deadly.
Yes they are saying that without these sales"you will pay ".Yes it is threatening,and no a minority vote on sales is not a mandate to threaten.
Lets encourage "our" government to work our way through the next 2-3 years of financial strain without lining the pockets of the global pirates of opportunity,leaving most of us to pick up the leftovers.
Do believe that like the "demon" Winston say`s,"we should all face up to the pain evenly,and the gain should be spread evenly, when it comes"
How can we "encourage" government to work though the financial strain. Without lining the pockets of the global pirates, and ninjas.
The pain is not going to be that bad, if it is done for future benefit. I live with self imposed austerity everyday. Any spare cashflow, that could be spent on lifting my standard of living today, is invested, to provide security and insure I have a high quality of life tommorow. But government needs to assure us that there are going to be benefits, and that they will be spread evenly.
When you peel away the shite you can see a rort aimed at keeping the parasitic banks wallowing in loot with fat xmas bonuses for the puppet masters pulling and jerking the the cabinet and RBNZ strings.
No different to the scams in play in the UK and the usa...
Again a glimpse of the truth...a look into the banking bubble that is the NZ economy....
Are we having a predictions & prognostications section this year , Bernard ? ..
...Come on , another chance for us all to make prats of ourselves with our 2012 forecasts ......
..... and the goat industry is back in full swing , so plenty of livestock available for those who prefer the ancient Rome approach of reading goats gizzards & entrails ...... more scientific than Ken Ring , anyhow ....
Gummy says that 2012 will be a blockbuster year in the world's major stockmarkets , a huge leg upwards , DOW to exceed 15 000 !
I can see all Nats members in parliament so stupid, nicking YES, YES and agree with this idiotic “Key decisions ?”
It seems none has the guts and says NO !
http://www.youtube.com/watch?v=WQO-aOdJLiw
I'm sure selling Brownlee's grand- mother would make a few bugs.
So in a depression electricity use plummets, what are the SOE's worth then? The country loses once, the NZ investors lose TWICE. Overseas owners repatriate earnings on a greatly devalued dollar. The share price drops. In the end the only winners are those clipping the sales ticket.
How many geniuses out there were educated in a crappy old prefab? Pouring money into school upgrades is money down the drain.
What am I missing here??
snippy has got to get post of the day for this gem. But don't forget we have to pay back the 5 billion before we start sharing out the loot. That's only 12 years or so. I'm going to buy a case of Mudhouse Sauvignon with my share in 2023, as long as it's still on special at Devonport New World.
Here is your answer snippy...doing it that way would mean the stonecutters here missing out on $100,000,000 of easy money for doing Fanny Adams...which would mean a scarcity of future bank directorships for retiring National MPs...so get your priorities right snippy....it's pollies and banks first...................................................................................NZ a distant last...
This is one of the worst equity markets in a number of years. Forward P/E's are depressed. Contact Energy is near 6 year lows (Bet it is being shorted). These assets will go for a song. And we have nothing to show for it, some well watered dairy farms in Canterbury.
Why sell???
Snippy is right cost of debt is the cheapest in world history. Cheapest in 150 years.
And then the fees. OMG. Lambs to the slaughter. There is no corporate activity, no IPOs, no mergers, few capital raisings. Investment Bankers are doing it hard (by their standards), 200,000 laid off globally this year. Why the f*^k are they paying 1.8%!! Boils my blood...
Yet mum and dad NZ’er voted this lot in
The problem with selling the generation assets is that it prevents government from intervening in the electricity market in future (as this would not be fair to investors they argue).
But our electrical system will certainly need intervention on a massive government scale when Taranaki Gas Supplies run out - when this happens, NZ inc will have to import LNG (from Australia) for electricity generation and this LNG will be indexed to Crude Oil prices on a 25 year deal – and we all know what is going to happen to Crude Oil prices over the long term. (Note LNG should not be confused with LPG – google it if you are not sure).
The "invisible hand" of the existing electrical market is not able to prepare us for the coming crisis of the decline of the Taranaki Gas fields…. A massive centralised pump storage scheme and more wind generation is what we need to displace our thermal generation – only central government would build such a pumped storage scheme - it is well beyond the scope of the minuscule generation companies that are now up for an indirect lolly scramble to the Chinese.
Mighty River Power is a cash cow, built on the hard work of our forefathers who constructed the Hydro Dams on the Waikato (Arapuni was built mainly by hand in the 1920’s!)… While the company has done well with their little geothermal developments and has good relationships with Iwi land owners in New Zealand, their attempts to export this geothermal knowledge overseas (that is often lauded by the Media and Bill English) has been woeful to date – a crap deal on a plant in California, and a few useless holes in the middle of nowhere in Chile. However, MRP is still the most progressive of the New Zealand generation companies and is returning wonderful profits to the government in it’s current SOE form – this sell off is a big mistake as future generations of New Zealanders will simply have to buy MRP back (along with Contact which is already owned by the Aussies) so the government can intervene in the electrical market when the Taranaki Gas Runs out - circa 2017 I predict.
While I am at it, we need a moratorium on building roads (except perhaps the completion of the W-NW Link in Auckland) and expanding airports. The money should go towards creating an Energy Independent New Zealand - not a future where we suck off the LNG Nipple of Australia as per the plans that Origin and Genesis already have on the table... the coming global Peak Oil crisis is real, and we are not prepared as a country. We need to complete the electrification of the main trunk rail way between Auckland and Hamilton (and in the South Island) and invest in freight distribution from hub centres rather than pandering to the likes of Mainfreight who continually want to put bigger trucks on the road which requires more money to spent in stupid little road improvement in a never ending cycle... Over the long haul trains are 70% more efficient than trucks. We need to put a large tax on unnecessarily big cars (over 1600cc) because we simply can't afford them and do not need them. We need to work quickly towards a New Zealand that has 100% renewable electricity generation and a vision for total Energy Independence.
The rapidly growing middle classes (in India, China and Indonesia etc) will not sit by and watch while the "western world" continues to use more than it's fair share of Oil per head of population.
can anyone explain how the electricity system works at the moment?
my understanding is that trans power is responsible for getting generators power to retail network.
and ultimately trans power are the ones in control of which power stations are supplying the grid,and when.
as was the case the other day when trans powers system failed,so" they"( trans power)shut down power stations to avoid further damage to there grid.
would it be wise to buy shares in a company that is not control of when they can supply there product to the grid,and cant get there product to there customers without the grid.
be interested to know how much life span of some of mighty river powers dams on the waikato river have left! I live in cambridge(not far from kariparo).story goes,that maitinence guys dont want to be down in generator area(below dam) for any longer than necessary.
i think steel reinforced concrete from the era of karapiro and arapuni would have reached the end of its stuctual strength?i imagine decommssioning "past there use by date"dams would be horribly expensive.
There is no strategic plan as that needs centralised planning.....and this is a problem with private industry (and our hands off Govn), what they do is totally logical in support of their business and shareholders....and thats a legal and moral requirement. Hence if you privatise you have to regulate well. For instance have a policy that there must be a min of 5% spare capacity per year to allow for outages and repairs....and since we are growing at 4% per year there has to be a rolling program of new works that must be in the pipeline...So say if you owned a 1GWH plant you must have 5% "spare" in theory thats easy of course......hard to do in practice...
As long as there is a controlling % kept with the Govn and the Govn appoints the SOE boards then a long term view will be held on how the SOEs are run....otherwise they will get run into the ground.........aka Toll and new capacity will be just in time if we are lucky....
The system we have now is pretty good, In effect companies compete now and are building plant.....but you are right in that enron is a danger to be watchful of.
I think it makes no sense to sell the SOEs....but dogma has taken over IMHO.
regards
another thought.bill english been saying he wants nz mum and dad investors to take money out of the banks to buy these shares.
with the rbnz implementing basel III.
is the amount of money involved with the sale of state assets,going to negatively affect banks meeting there obligations,or requirements of basel III?
the share sale policy, or 'mixed-ownership model', was about getting money "out of bank accounts and helping build the economy".
How exactly does buying shares in an asset we already own help build the economy?
And no limit on foreign ownership.
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10773507
The " referendum " was held two weeks ago , the general election ...... remember ?
... Jolly Kid campaigned the 2011 election with asset sales as one of his policies ....
..and , as he said in the 2008 election campaign . No asset sales until after the 2011 election ...
.. 3 years is plenty of time for the electorate to get that message , surely .
Guess some like to think they are clever with words on this site.... If we have an asset sale won't we be able to buy some shares and those dividents come directly to us as individuals?
We should be able to take opportunities to invest and not sit back and expect handouts when retired because couldn't be bothered as individuals to try to be more self-sufficient - eventual future of the country will depend on that . Also offers a good opportunuty for Kiwisaver and superannuation funds to invest in these entities. There are arguments against asset sales but the conversation on this site is becoming all emotional one-way rants, without taking into account the arguments in favour.
Just so clowns like yourself can buy the IPO and then sell off for a tidy profit to the Chinese two months later and buy a new Flat Screen TV - just like what happed to Contact Energy which is now controlled by the Aussies.... Large Scale Engineering Infrastructure Utilities are monopolies by nature and should not be owned by individuals... With your logic, why don't we sell State Highway 1 while we are at it, it would be worth a mint?
Guess some like to think they are clever with words on this site.... If we have an asset sale won't we be able to buy some shares and those dividents come directly to us as individuals?
We should be able to take opportunities to invest and not sit back and expect handouts when retired because couldn't be bothered as individuals to try to be more self-sufficient - eventual future of the country will depend on that . Also offers a good opportunuty for Kiwisaver and superannuation funds to invest in these entities. There are arguments against asset sales but the conversation on this site is becoming all emotional one-way rants, without taking into account the arguments in favour.
If the Govn holds the asset in total it gets to keep all of the dividend....thats tax we dont have to pay.
Selling 49% means we lose 1/2 the dividend yet the better off ppl will be able to buy shares.....so in effect its a regressive tax.
The capital gained in now spent as CAPEX on schools etc, tax taht didnt have to be increased in a progresive maner...
regards
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