The government needs to conduct the book-build process for the sale of shares in Mighty River Power (MRP) in a way that will maintain interest in mixed-ownership company shares across a range of bidders, Finance Minister Bill English says.
The government plans to sell up to 49% of MRP, Genesis Energy, Meridian Energy and Solid Energy, as well as selling down its three-quarter stake in Air New Zealand to no less than 51%, in a bid to raise NZ$5-7 billion to pay for new capital spending over the next five Budgets.
Mighty River Power is being readied for the first initial public offering (IPO), with shares going on sale sometime in the third quarter this year. Either Genesis or Meridian are likely to come second (and third), while Solid Energy is tipped to be the fourth of the energy companies to have a partial stake sold off to private investors.
The government must keep in mind that there is a series of partial floats planned, and therefore needs to conduct the share allocation process for MRP in a way that "maintains interest across a number of bidders," English told Parliament's Finance and Expenditure select committee on Wednesday morning.
The government has said it wants 85-90% of the companies to be New Zealand-owned, including its own 51% stakes. That means 20-30% of the shares sold to private investors may be sold to foreign interests.
The government has said it would like to see widespread New Zealand ownership of the companies.
There is interest in the companies from Iwi, KiwiSaver funds and 'mum and dad' investors, as well as foreign investors.
The government is considering investor loyalty bonuses for New Zealanders who are issued shares, although English said to the FEC today that the government was "not going to try and control the market," once shares had been sold off.
'Don't read too much into it'
Asked whether that indicated the government was leaning away from loyalty schemes, a spokesman for English said detailed decisions on that matter had yet been made. A Treasury official told interest.co.nz there were too many people jumping to conclusions when there was still a large amount of work still to be done.
No large capital demands
Meanwhile, English said, having looked through the companies set for partial privatisation, there "aren't really any requirements for large capital demands in the foreseesable future".
He was facing questions of what would happen if the companies needed more capital and the government had to take part in a capital raising, as it was legislated to own at least 51% of the companies.
9 Comments
I think he's starting to touch on a fatal flaw in the government's plan. 1) They say they want to raise the most money possible from the SOE selldowns. But 2) They say they want kiwi ma and pa's to get a good chunk.
Surely you either sell to the highest bidder or you don't sell at all?
It will be a topsee turvy ride for owners of these shares. Under Labour expect divs to be slashed. Under this lot expect the same. The govt gains nothing from allowing power prices to rise and divs to be fat....once they have the capital..the rug will be pulled.
Consider this govt election chances in 014, if fat SOE dividends on the back of bloated power prices make headlines every day.....hahaaaahaaa not a hope in hell.
Divs will be no better than govt bond returns. Share prices will reflect that.
Ma n Pa may get offered a good share Gareth ....much in the same way they did with Tranzrail.....Good ol Ma n Pa ....always there when you need em.
You have nailed it for the bollocks it is Gareth....to say any prime share is on offer to Mom n pop is disingenuous to a point of contempt...
But like the song goes ...? how did it go ...? it was by Denis Leary..... I'm an A$$hole yo yo e yo yo.
How it seems to work is that the Government sells our own stuff to us . We have to buy it with real tax paid NZ dollars ( well some of us do anyway). We pay a price less than maybe they could get for a trade sale to a soveriegn wealth fund.
We all sell some straight away, but over time we pretty much sell out.
Then at some point someone emerges as the real owner buy buying up the other stakes. Probably a soveriegn wealth fund. Always helps to buy stuff using other people money.
The political embarasement of selling out to foreigners is mitigated. NZders with money (older National party voters) get a tax free capital gain ( look arn't they all so clever).
We then pay foreigners for electricity made here using hydro that we used to own.
It is an 'enclosure of the commons'. Basically stealing from the people using rules, laws and money- but it is still stealing. This is how we are becoming 21st century serfs (note, not smurfs) debt, remittences, all for things we already owned.
You don't "have to buy" any of it planB...you won't know the true market for these powerless shares (pardon the pun) until well after the sales are over.
If any of the SOEs should grow in value, expect a future govt of liars to flog off 49% of the increase...the divs will settle at the govt bond level and share value relate to that.
So if you must buy any planB, could I suggest you value them on the govt bond rate!
There is also the risk that due to capex demands the SOE boards (appointed by govt) will hold back earnings..cut divs...reward themselves...speculate overseas...more pork for them!
Every time Bill English talks about these intended (but unmandated) sales of our property he shows how illogical the whole idea is. This morning he was talking about possibly borrowing money to pay for any increased capital requirements that might arise. This just makes a nonsense of his earlier argument that the sales are needed to avoid borrowing.
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