Govt considering giving itself special power to approve or deny energy company board chairs following partial floats, English says

The government is considering whether to give itself the power to approve or block the appointments of chairmen of the boards of partially floated energy companies, Finance Minister Bill English says.

Meanwhile it still hasn't decided on what mechanisms will be used to ensure New Zealand investors are "at the front of the queue" for shares offered in the companies.

State-owned energy companies Mighty River Power, Meridian, Genesis and Solid Energy are each being readied by the government for a sell-off of up to 49% of their shares, in a move the government hopes will raise between NZ$5-7 billion over the next five years. The government is also looking to sell down its 74% stake in Air New Zealand to no less than 51%.

Mighty River Power will be first on the block in the third quarter this year, with either Genesis or Meridian to come second (and the other third), while Solid Energy is expected to be the last partially privatised under the government's "mixed-ownership" model.

By keeping 51% of voting shares, the government says it will keep control of the companies by controlling the majority of board appointments.

However, the government is also considering whether to give itself the special power of having to approve the appointment of the chairman of each company's board, a power it currently has in the case of Air New Zealand.

Responding to written Parliamentary questions from Green Party co-leader Russel Norman, Finance Minister Bill English said directors of the companies following the partial sales would be appointed in accordance with the Companies Act 1993 and the constitutions of the companies, which have yet to be written.

"The Crown will not reserve any special rights in relation to board appointments to itself beyond the rights set out in the Companies Act 1993. The exception is that the Government is still to decide whether it will have any special power to approve the chairman of the Board, as it has for Air New Zealand," English said.

"Such a power would be implemented through the constitutions of the companies," he said.

How we'll allocate shares to Kiwis

Meanwhile, in response to further questions from Norman, English said the mechanisms with which the government would ensure New Zealand investors were at the "front of the queue" for any shares offered in the companies' initial public offerings had not yet been decided on.

"The Government has complete control of the allocation of shares to investors as part of the Initial Public Offerings for each of the Mixed Ownership companies," English said.

"During the share allocation process the Government will ensure that New Zealand investors are at the front of the queue, and that there is widespread New Zealand ownership such that 85 to 90 percent of shares will be held by New Zealand investors," he said.

"The details of precisely what mechanisms will be used by the Government to allocate shares to ensure these objectives are met have yet to be decided."

Norman had asked whether the use of these mechanisms could mean the government received less for the companies than their market values. English said this could not be determined as it had not been decided what mechanisms to use.

The government has said it expects 85-90% of the companies' shares to be owned by New Zealanders following their partial floats. That includes the government's 51% stakes, meaning 20-30% of shares sold to private investors could go to foreign buyers.

In March, English told Parliament's Finance and Expenditure Select Committee that the book-build process for Mighty River Power, the first to be partially privatised, would need to be conducted in a way that "maintains interest across a number of bidders," as there would be a series of partial floats over the next three to five years.