Labour will meddle in power market

January 17, 2014

Labour is planning to follow through on its policy to meddle in the power market if it is in government:

. . . Labour and the Greens unveiled plans to overhaul New Zealand’s electricity market on the eve of the government’s MightyRiverPower selldown last year. The operator of nine hydro stations on the Waikato River has traded below its $2.50 IPO price since just after the sale last May.  Meridian Energy, sold in October, is hovering around its listing price.

The opposition parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate excessive power company profits and pass savings onto consumers through cheaper electricity prices.

“A wise investor will be aware if the pricing model changes, in this case to stop the profiteering of public rivers, that will change the companies’ profits,” Parker, who would be finance minister in a Labour government, told BusinessDesk.

“Investors are already discounting those stocks because of what might happen if we win,” he said. “It’s actually a good example of how the market works.” . . .

If they can reduce the value of companies and the wealth of investors this much when they’re in opposition, they will do much worse in government.

Investors have already assessed the threat. The New Zealand stock exchange energy group index, which includes all listed power companies along with Z Energy and NZ Refining, has dropped 9.6 percent in the past 12 months, while the NZX 50 Index has rallied about 17 percent.

“Some people just won’t touch them because they are scared of a Labour-Greens government,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “Others say because they’re dirt cheap people are pessimistic. If National got re-elected they’d go up again.”

A potential change of government may pose risks to other sectors as well, he said.

“Regulatory risk is weighing on those sectors which could be in for attention from a Labour government,” Lister said. “The market is aware of the sectors susceptible to regulation – SkyCity, the electricity sector and Chorus have a cloud hanging over them, which will continue to the election.” . . .

If there’s a Labour/Green/New Zealand Firs/Mana and whichever else party after the election that cloud will darken.


If question is wrong how can any answer be valid?

November 27, 2013

The question on the politicians’ initiated referendum asks: do you support the Government selling up to 49% of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand.

Several people have pointed out that those who want more than 49% sold could vote no.

That would be taken as opposition to any sale when that’s the opposite of their view which favours total sales.

Then there’s the name of one of the companies – if Google is to be believed Genesis Energy is an SOE but I couldn’t find a Genesis Power.

There is another even more fundamental flaw in the question – the Government hasn’t sold and isn’t planning to sell up to 49% of Air New Zealand.

It didn’t own 100% of the shares in the first place and sold only 20% of the total, retaining 53%.

If the question is wrong, how can any answer be valid?


Referendum even more redundant

September 17, 2013

Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall have announced the timetable for the partial float of Meridian Energy and Genesis Energy and further selling down of Air New Zealand shares.

The Government has confirmed New Zealanders will have the opportunity to invest in a minority shareholding in Meridian Energy from later this month, before an expected sharemarket listing on 29 October.

Full details will be set out when the offer document is lodged this Friday 20 September, Finance Minister Bill English and State-owned Enterprises Minister Tony Ryall say.

Pre-offer marketing will start this evening, ensuring New Zealanders are aware of the Meridian offer through television, newspaper and online advertising. This will explain how people can get more information, including ordering an offer document.

As with the Mighty River Power share offer earlier this year, New Zealanders will again be at the front of the queue for shares in Meridian, Mr English says.

“The Government was very clear about the opportunity for New Zealanders when we put our share offers programme to New Zealanders during the 2011 election campaign. The compelling reasons for proceeding with the share offers are as valid today.

“The Government share offer will enable New Zealanders to invest in big Kiwi companies at a time when they are telling us they want to diversify their growing savings away from property, bank deposits and finance companies.

“And we can invest the proceeds in other public assets like modern schools and hospitals, without having to borrow that money in volatile overseas markets, and increase debt.”

As Ministers have previously indicated, investors will buy Meridian shares in two instalments over 18 months. This means investors will need to pay only around 60 per cent of the price up front – but they will receive in full any dividends.

In addition, there will be a price cap for New Zealand retail applicants to provide more certainty about how much the shares will cost.

Mr English says further decisions have now been confirmed, including:

  • The Meridian offer document will be lodged this Friday 20 September, setting out all the information investors need to make an informed decision about whether to invest. This will include the price range, the price of the first instalment, the capped price of the second instalment and the expected yield.
  • After the offer document is lodged, the Financial Markets Authority has around five business days to review the document. This ‘consideration period’ is expected to conclude on 27 September.
  • New Zealanders will then have three weeks from 30 September to consider the offer document and apply for shares before the general offer closes on 18 October. This will be followed by a book-build process where institutions bid for shares.
  • It is expected that Meridian will list on the New Zealand and Australian sharemarkets on 29 October.

Mr Ryall says the offer process puts New Zealanders at the front of the queue for shares and will ensure they have easy access to information.

“To help achieve this, a retail syndicate will be marketing the offer to New Zealanders, and they will offer information and advice to their clients.

“In addition, we have included what is called a ‘broker firm’ aspect to the Meridian offer. Under this arrangement, brokers assess demand from their clients and submit bids, and the Government then chooses how much to allocate them.

“Just like the retail offer, this process is open only to New Zealanders and is consistent with our commitment to ensuring 85-90 per cent New Zealand ownership of the shares,” Mr Ryall says.

Ministers have also confirmed they are considering options for Genesis Energy and Air New Zealand – two of the other companies in the Government’s share offer programme.

“As the Prime Minister said last month, we anticipate that the Genesis Energy share offer will occur in the first half of 2014, subject to market conditions,” Mr Ryall says. “Preliminary work is underway and will continue over the next few months.”

The Air New Zealand share offer will be different to the others, as it is already a sharemarket-listed company.

“What that means is that New Zealanders can buy shares in the company now, if they wish,” Mr Ryall says.

“We are currently working through the best way the sell down can occur and we remain keen to ensure that New Zealanders have the opportunity to participate in it.  At this stage, no final decisions have been made, including on timing. However, when it occurs we expect it will be a shorter process than that used for Meridian and Mighty River Power.”

This makes the politicians’ referendum on the partial sale of a few state owned assets now even more redundant.

It was always only political posturing.

It was never going to have any impact on government policy which was clearly signalled before the 2011 election, made the issue by the opposition and had already begun with the partial float of Mighty River Power before enough signatures had been gathered.

That Grey Power which fronted the referendum petition has now negotiated a deal for its members with a private power company makes it not just redundant but hypocritical.

Referendums are very blunt instruments and none of the four Citizens Initiated Referendums we’ve had since they were introduced in 1993 have achieved anything.

There are better, and cheaper, ways to make a point and influence policy.

All the latest one does is reinforce the growing body of opinion that Citizens Initiated Referendums have had their day.


Green hypocrisy

May 25, 2013

State Owned Minister Tony Ryall has correctly applied the H word to the Green Party:

The Government says it’s hypocritical of the Green Party to criticise the number of ‘mum and dad’ Mighty River Power investors, when they were responsible for “frightening them off”.

State-Owned Enterprises Minister Tony Ryall is defending using ‘mum and dad investors’ in the Government’s sales pitch of the shares, despite Greens co-leader Russel Norman calling it a “con”. . .

. . . Mr Ryall responded to those claims this afternoon, saying there was a huge turnout of first time investors, or ‘mum and dads’, despite a plan by the Greens and Labour to “sabotage” it.

He says there were 77,000 first-time investors and more than 101,000 people invested less than $15,000 in the company.

“The Green Party are being hypocritical, saying not enough everyday New Zealanders bought shares, while at the same time they are doing their level best to frighten them off.” . . .

“Over 76,000 people invested less than $5,000 on Mighty River shares and they got everything they asked for,” says Mr Ryall.

“That is a huge achievement despite the economic sabotage of the Green Party and Labour during the float.”

Mr Ryall says investors who were not ‘mum and dads’ had their shares reduced due to demand.

I know several people who were planning to dip their toes into the share market by buying Mighty river Power shares who got cold feet after the LabourGreen power play.
It is indeed hypocritical for Norman to complain that not enough everyday New Zealanders bought shares when their quest for publicity and economic ignorance caused some of those who would have bought to change their minds.

MRP shares open at $2.73

May 10, 2013

Mighty River Power shares started trading at 12:30 and opened at $2.73.

That’s a healthy premium on the listing price of $2.50 which poses a problem for LabourGreen.

They can’t complain about the money going into the pockets of people selling them because had it not been for their sabotage, more people would have opted to buy them before they listed and the listing price would have been higher.

If they can cost us this much money in opposition the thought of how much they could cost in government is terrifying.

 


Crocodile tears

May 10, 2013

Green co-leader Russel Norman is still complaining about the float of 49% of Mighty River Power.

Mighty River Power’s shares have been transferred from all New Zealanders to corporates and a small minority of already well off New Zealanders, Green Party Co-leader Dr Russel Norman said today. . . 

Finance Minister Bill English last night revealed that only 113,000 individual New Zealanders bought shares in the Mighty River Power offer with an average purchase of $8220 worth of shares. The Government claimed over 440,000 New Zealanders had pre-registered to buy shares.

“There aren’t too many mum and dad investors with the ability to put down $8,220 on a share portfolio,” said Dr Norman. . .

An average is just that – some people would have bought more than $8220 worth of shares and others would have bought less.

What’s more 68% of applicants didn’t have a CNS indicating they were first-time investors and more likely to have purchased smaller amounts of shares.

But Norman is crying crocodile tears anyway.

As Hey Clint showed, the Green Party is delighted at their act of sabotage and it is the LabourGreen power play which put a lot of the smaller investors off buying shares.

When they list today the price is very likely to go up because institutional investors like ACC, Community Trusts and KiwiSaver funds will want more.

LabourGreen will no doubt complain about people making a fast profit but had it not been for their power play the float price would almost certainly have been higher.


MRP shares to list at $2.50

May 9, 2013

The government has announced the listing price for Mighty River Power shares:

113,000 New Zealanders will become shareholders in Mighty River Power following a successful share offer, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall say.

The final price will be $2.50 per share.

Of the shares issued, 86.5 per cent will be New Zealand owned: 26.9 per cent by New Zealand retail investors, 8.6 per cent by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding. That leaves 13.5 per cent for overseas institutions.

“This is an outstanding result and fulfils our commitment to ensuring at least 85-90 per cent New Zealand ownership of the company,” Mr English says.

“The share offer will raise $1.7 billion, which is a very good return for New Zealand taxpayers. Those proceeds will go into the Future Investment Fund, allowing the Government to control debt while continuing to invest in public assets. More details will be announced in next week’s Budget.

“The Government has achieved all of its objectives for the Mighty River Power share offer, so the company will list on Friday.

“Given the strong response to the share offer, and the price we have set, Mighty River Power will have a market capitalisation of $3.5 billion.

“And with over 110,000 New Zealand shareholders, it will have the largest share register – by some margin – of any New Zealand company on the exchange.”

Mr Ryall says that due to the strong level of demand, some scaling has been necessary.

“We have decided to apply progressive scaling, which means that larger applications are scaled more than smaller ones,” Mr Ryall says.

“That means that more than 80 per cent New Zealanders will get what they applied for.”

More details of the allocation and scaling decisions are attached.

“While most New Zealand investors will be able to work out from this announcement what their share allocation is, they will also be able to get confirmation of their individual allocation from Friday – by checking the website or calling 0800 90 30 90. We will also be emailing or writing to all applicants to confirm their allocation,” Mr Ryall says.

“The demand from institutional investors was strong, and bids from both New Zealand and offshore institutions were scaled considerably. Institutions will be advised of their allocations shortly, after which a settlement process commences.

“Mighty River Power will list on the NZX at 12.30pm this Friday.

“We are delighted to get to this stage, and look forward to a healthy aftermarket and a positive experience for New Zealand investors, particularly those who are investing in shares for the first time,” Mr Ryall says.

The price might well have been higher had it not been for the LabourGreen sabotage.

If they can cost the country millions in opposition they’ll do even more damage in government.

The NBR has the numbers:

Mighty River Power share offer – at a glance

Share Price:  $2.50
Proceeds of share offer: $1.7 billion
Total NZ ownership (incl 51% Crown):  86.5%

New Zealand retail investors
Individual New Zealand shareholders: 113,857 (provisional)
Retail investors: $943m
Proportion of shares: 26.9%
Average shareholding for New Zealand retail: $8,220
Applicants who pre-registered:  91%
Applicants without CSNs:  68%
Withdrawal after Labour/Green policy:  1,783 applicants ($25m)

New Zealand institutional investors

NZ institutions:  $300m
Proportion of shares: 8.6%

International institutions                                                                                                               
Offshore institutions: $472m
Proportion of shares: 13.5%

The 68% of applicants without a CSN are almost certainly first-time buyers. That indicates the partial float has succeeded in encouraging new investors.


LabourGreen can’t win this one

May 3, 2013

The Mighty River Power float closes at 5pm today.

An experienced investor told me he’d written to David Shearer and Russel Norman thanking them.

Their power play was likely to depress the price so he’d get more shares.

Peter Sherwin at the NBR thinks the price is likely to be lower too:

Potential investors may now hold back because of confusion about the future of the power industry, uncertainty whether MRP will stag at a higher price and a fear the price will go down upon listing.

The lack of take up will dampen the listing price, which is more likely to be at the lower end of the scale, around $2.25 rather than the expected $2.80.

The Greens and Labour may have scored political points, but effectively they have slashed the government’s cash investment to fund health, education and infrastructure programmes. . .

So who pays the price for the opposition’s political gain? Every Kiwi, even those they claim to champion.

Professional and institutional investors will not be daunted by any of this and are making big offers, but with fewer “mum and dad” buyers they may not have to go to the market for as many shares when they are listed on May 10. . .

The investor I spoke to said much the same thing.

The LabourGreen power play was putting off first-time and small investors who had been planning to dip their toes in the water but now have cold feet.

The Hey Clint clip shows that Green MP Gareth Hughes thinks it’s funny. But Patrick Gower points out it’s not:

Now I know a lot of people watch “Hey Clint!” and find it funny.

But to me it showed much more than a bit of humour. It showed what we know – the Greens, like Labour, are trying to act like they are not gleeful that the policy is screwing with the MRP float.

In fact, it looked like Gareth Hughes was stoked. It was in the public interest to run it. No question.

It busted spin, in fact, it blew the spin apart.

It showed that the Greens, like Labour, are trying to come up with ‘lines’ to pretend that it’s not about wrecking the float.

And that’s fair enough; the Greens want to emphasise what they see as the good parts of the policy.

But, thanks to Gareth’s indiscretion, we could show what they really feel. . .

Putting politics before people isn’t the picture LabourGreen wish to portray.

They forgot that what’s good for the economy is good for people and their power play isn’t.

They can’t win on this one.

Support the policy or not, it’s in New Zealand’s best interest for the shares to sell for the best price.

If the float goes well their many attempts – most at the public’s expense – to counter the policy will have failed.

If it doesn’t, they’ll have cost the country millions of dollars.

Either way, they lose.


MRP good buy?

April 30, 2013

A share broker wrote to David Shearer and Russel Norman thanking them for sabotaging the Mighty River Power float because it would enable him to buy more shares.

He said one of the unfortunate consequences of the LabourGreen power play was that it was putting off first time investors.

They’d been prepared to dip their toes in the investment market with MRP but the uncertainty in the wake of the LabourGreen sabotage was putting them off.

So are MRP shares still a good buy?

I’m not qualified to give financial advice and wouldn’t presume to tell anyone else what to do with their money but I’ll be putting some of mine in MRP.


Labour’s desperate attempt at sabotage

April 15, 2013

Labour is making a last-ditch desperate attempt to sabotage the partial sale of Mighty River Power.

Shares in Mighty River Power go on sale today, but Labour is warning potential investors it plans to makes changes in the electricity sector if elected next year. . .

He won’t say what the changes will be, only that is was fair to warn potential investors.

“What we’re most concerned about is the rise in power prices and the fact that when these assets are sold the likelihood is that power prices are going to go up and that the companies are going to be increasingly held in foreign hands.” . .

The Labour leader is playing at being David Shearerpisos again.

There are no details on what they’d do because there is nothing they could do. If he’d asked his Finance Spokesman, David Parker, he’d know that.

Power prices went up far more steeply in the nine year’s when Labour was last in government than they have since National took over in 2008.

At a public meeting, when he was a Minister, Parker was asked about power prices and said he’d joined Labour because of Max Bradford’s electricity reforms.

In response to a question about why Labour had done nothing to reverse the changes or moderate them he said it was too late, there was nothing the government could do.

Shearer’s latest release is empty rhetoric. It displays the party’s contempt for, and ignorance of ,business and provides another reason to ensure they won’t be leading the government after next year’s election.


Risk good reason for sale

April 10, 2013

Opponents of the government’s programme for the partial sale of a few state owned assets are seizing on the risks to investors.

They purport to be worried that people who buy shares in Mighty River Power might lose money.

Their concern is no more than crocodile tears because they also complain that only the wealthy will be able to afford the shares.

But in raising fears of potential losses, they appear not to understand that if no shares are sold the government carries all that risk.

The risk of investment in non-core assets is not a reason for continued state ownership. It’s a very good reason the state should divest itself of them.

The government ought to ensure every cent of public money is put to best use.

There is potential gain in any business but there is also a potential for loss and that’s not a risk the state should be taking when there are far better uses for its very scarce resources.

While we’re on the subject of risk, Landcorp has told Shanghai Pengxin, which took over the former Crafar farms from receivers, that its investment will make a loss this year.

Chief executive Chris Kelly said the drought has had significant affect on revenue. Extra capital expenditure by Shanghai Pengxin has also been required.

People opposing land sales to foreigners are concerned about profits going overseas. At least this year, the owners will be losing money.

The risk the state takes in owning non-core assets is also illustrated by Landcorp’s half-year report:

At the time this report went to the printer, an operating result of around$6 million to $8 million for the full year 2012/13 was expected. Since then,Landcorp has experienced the worst widespread drought in many years. As a result, it is unlikely that the Company will report an operating profit for the year and consequently it is not likely to pay a full year dividend.
Around $1.6 billion in assets and no dividend. There are far better, and less risky, uses for public money than that.

 


Meridian unlikely to reach agreement with smelter

March 28, 2013

Meridian has announced it’s unlikely to reach an agreement with Pacific Aluminium over supply of electricity to its Bluff smelter.

. . . Chief Executive of Meridian Energy, Mark Binns, says that Meridian has advised Pacific Aluminium of its ‘bottom line’ position.

“Despite significant effort by both parties there remains a major gap between us on a number of issues, such that we believe that it is unlikely a new agreement can be reached with Pacific Aluminium,” says Mr Binns.

In the event no agreement can be reached, Meridian will seek to engage with Rio Tinto and Sumitomo Chemical Company Ltd, the shareholders of NZAS, who will ultimately decide on the future of the smelter. . . 

The smelter is a big employer in Southland but falling global prices for aluminium have put pressure on its operation.

This announcement also has implications for power prices. Without the smelter supply could well be greater than demand.

. . . news that there may be no new electricity price agreement with New Zealand Aluminium Smelters carries huge implications for the electricity sector, which has struggled to grow in the last five years and would face a massive supply over-hang which could last years, were the smelter to close.

However, that outcome is not yet certain.

The smelter’s majority owners, Anglo-Australian minerals giant Rio Tinto, are locked into the first three years of an new 18 year contract, which took effect from Jan 1, took three years to negotiate, and had been agreed in 2007.

While the New Zealand smelter makes internationally recognised high grade metal, which sells at a premium, Rio has been hit hard by its exposure to the aluminium sector, where world prices have been hit hard since the global financial crisis.

Rio Tinto is seeking to sell the smelter, along with a clutch of other, older smelters in Australasia, which it has packaged as a new subsidiary, Pacific Aluminium. . . .

If my recollection is correct the smelter was wooed to New Zealand by the price of cheap electricity.

This is an example of the dangers of such policy. It was designed with the good intentions of job creation but has skewed the electricity market.

State Services Minister Tony Ryall says all relevant information – including about the smelter electricity contract – will be reflected in the Mighty River Power offer document which is currently being finalised.


More than 400,000 pre-register for MRP shares

March 24, 2013

Around 440,000 people have pre-registered for Mighty River Power shares.

Minister of State-Owned Enterprises Tony Ryall said that the number of New Zealanders who pre-registered was extremely pleasing.

“Pre-registration is not a commitment to buy shares, and someone pre-registering their interest may decide to not apply for shares in Mighty River Power. However, it was a goal of the Government to achieve widespread awareness of the opportunity, and I believe we have achieved this.” . . .

This doesn’t mean 440,000 individuals have pre-registered.

People could register more than once by using their own names and also those of their companies; others might pre-register in the names of their children.

Not all of those who have pre-registered will support the partial sale of state assets. Some might be doing so in order to do their bit to keep the shares in New Zealand ownership.

But even so, this shows a very healthy interest in buying the shares that augurs well for the float.


WIll it be a bottom line?

March 17, 2013

In a speech typically high on emotion and rhetoric Winston Peters says:

We will use every ounce of influence after the next election and all the financial measures available to us to buy back Mighty River Power shares at a price no higher than originally paid for them.

The only way he can do this is to make it a bottom line in negotiations over supply and confidence with the party which will lead the next government.

It would mean that New Zealand First makes full state ownership of an energy company a higher priority than schools, hospitals, roads, irrigation and other assets.

It would mean that the party isn’t troubled by the prospect of sabotaging the value of public and private shareholdings and destabilising the share market.

It would mean that if New Zealand First held the balance of power, there would have to be another election.

The re-natonalisation of MRP would be a bottom line National wouldn’t accept.

And although David Shearer hasn’t quite ruled out buying back the shares in Mighty River he knows the cost and it’s one no party which wants to be regarded as a careful steward of the economy could contemplate.

If Peters is making it a bottom line he’s ruling his party out of government.

If he’s not then it’s just another example of his hot air.

 


What a waste

March 12, 2013

There is never a good time to waste public money but if ever there was a worse time, it’s now.

Our economy is growing, but  slowly, and many or our trading partners are still struggling with the impact of the Global Financial Crisis.

We’ve got the added cost of the Christchurch rebuild,  the need to cut back because of the extravagances and mismanagement of the previous Labour-led government and almost all of the country is facing drought.

There is no fat in the system.

National has been focussed on getting more for less from public services which requires very careful management and fiscal rigour.

The opposition has shown it hasn’t got the seriousness of the problem by opposing every move the government has made to reduce costs and improve efficiency.

Now the petition calling for a referendum on the policy to sell minority stake in a few state owned energy companies is to be presented to parliament.

It’s supposed to be a Citizen’s Initiated Referendum but this is a politician’s initiated one.

It was never anything more than a political stunt and carrying on with it now that the sales process for the sale of up to 49% of shares in Mighty River Power has begun reinforces that.

If there are enough valid signatures to force a referendum it will be too late. MRP will be under mixed ownership and at least one of the other companies could be too before it’s held.

Regardless of the timing of the referendum and the partial sales this is an expensive exercise in futility.

National campaigned on its Mixed Ownership Model and won.  The Labour and Green Parties and their potential coalition partners New Zealand First and Mana campaigned against it and lost.

The partial sales are a fundamental part of National’s financial plan and the referendum will do nothing but provide an opportunity for grandstanding by the opposition.

It’s time for them to realise they’ve lost and accept the importance of not wasting public money.

UPDATE:

Keeping Stock shows it’s not just money being wasted.


Would they buy them back?

March 8, 2013

Labour and the Green Party are still wasting their time gathering signatures for their petition opposing the partial sale of a few state assets.

They need to explain if they are going to present the petition and, if it has sufficient signatures, force the expense of their politicians’ initiated referendum on us when it will be too late to achieve anything.

Mighty River Power, is expected to be floated by mid-May, long before a referendum could take place, so why are they bothering to collect more signatures?

Truth points out in its editorial Labour  and the Greens need to come clean on asset sales:

. . . We know what the government thinks. We can all read the prospectus when it comes out for Mighty River Power, but what investors don’t know is what Labour intends as its policy towards these sales.

We know they oppose them, but what is their policy moving forward.

Investors and voters need to know if Labour intends opposing the sales in actions and not just words.

Will Labour commit to forced buy-back of the shares, essentially a re-nationalisation of the asset. Before readers poo-pooh that suggestion remember Air New Zealand.

Helen Clark even flirted with securities laws by advising on national television for Mum and Dad investors to keep their shares in Air New Zealand…that everything would be alright. As we know everything wan;t alright and some weeks later the government forcibly acquired as many shares as it could and left about 25% of shareholder mired without any sort of say in the company.

Would Labour do this again with the listed power companies…and if so how much would they pay for the shares…The listing price? The market price (unlikely)?

Labour and their hangers-on who oppose asset sales need to clarify before even a single share is sold what their intentions are.

I suspect that their policy will be as bankrupt as their position so far has been. Words not Deeds. . .

Winston Peters, a likely coalition partner in a Labour/Green government wants to buy the shares back:

. . . New Zealand First will use its influence on the next coalition Government to buy back our state-owned power companies which are being flogged off by National and we are committed to buying back the shares at no greater price than paid by the first purchaser.

Labour and the Green Party haven’t let us know their plans yet.

If they go ahead with the petition without making a commitment to buy the shares back they are adding yet more proof to the contention they’re after publicity for themselves not a change in policy.

If, however, they plan to buy back the shares they will sabotage any efforts they make to pretend they have any interest in the careful management of public finances and any concern for investors.


Private investors are ordinary Kiwis

March 6, 2013

My father arrived in New Zealand in the 1930s with almost nothing.

He was hoping for a better life here than he was able to have in Scotland and he got it.

When he returned after active service with the 20th Battalion during World War II he got a rehab. apprenticeship as a carpenter and spent the rest of his working life in that trade.

My mother was a nurse but, as most women did in those days, she gave up her profession when she married.

There wasn’t much to spare from a single income with three children to raise but Mum and Dad saved what they could and invested when able. By the time they retired they had a mortgage-free home and a small nest egg which gave them a bit more security and a few more choices than they would have had if they had nothing more than their pensions.

They were ordinary Kiwis who had worked and saved and were able to enjoy the fruits of that in their retirement.

The Labour Party doesn’t appear to recognise people like this.

Leader David Shearer reckons the partial float of Mighty River Power is another win for private investors over ordinary Kiwis.

Silly man, many private investors are ordinary Kiwis like my parents.

They’re the ones who work hard, save what they can and are looking for good investments.

No shareholding comes with a cast-iron guarantee but utility companies like MRP are usually good, safe, long-term, investments for ordinary Kiwis who are able and prepared to save and invest.


Selling at last

March 5, 2013

National’s policy to sell, or partially sell, a few state owned assets was forecast before the 2008 election when John Key made it clear no assets would be sold in the first term and any proposal to sell anything in the second term would be part of the election campaign.

It became a big part of the 2011 campaign, not just because national campaigned on the policy of selling minority shares in a few energy companies but even more because opposition parties campaigned so hard against the policy.

National won, the opposition lost but continued to campaign against the policy.

Like their election campaign that will get them nowhere.

The court ruling against the Maori Council’s bid to stop the sales cleared the way for the sales process and the government has lost no time in getting it under way.

Prime Minister John Key today confirmed the Government will offer the public up to 49 per cent of Mighty River Power in the second quarter of this year – subject to market conditions.

“This will begin tomorrow, with the opening of the process for investors to pre-register their interest in finding out more about the Mighty River Power share offer,” says Mr Key.

The Supreme Court last week dismissed challenges by the Māori Council and others to the Government’s sale of a minority shareholding in Mighty River Power. This follows the High Court reaching the same decision late last year.

“It means we can now proceed with offering a minority share in Mighty River Power.

“The Government’s share offer programme is an important policy. It is expected to free up $5-7 billion that we can then invest in other assets such as modern schools and hospitals, without having to borrow in volatile overseas markets,” says Mr Key.

“Under the share offer programme, New Zealanders will be at the front of the queue. They will have an opportunity to invest in big Kiwi companies at a time when they are telling us they want to diversify their savings away from property, bank deposits and finance companies.”

Cabinet today made a number of decisions about the timing and details of the Mighty River IPO.

These include:

  • The Order-in-Council decision was taken to remove Mighty River Power from the SOE Act.
  • A pre-registration process for New Zealand retail investors interested in finding out more about Mighty River Power shares will open tomorrow (5 March 2013) and run though until 22 March, around three weeks.
  • The offer period is expected to open in mid-April and run for three weeks. The share offer document will be available at that time.
  • Details of a loyalty bonus for New Zealand retail investors will be announced before the offer period starts.
  • When the offer period closes, the institutional book-build takes place. Ministers then make share pricing and allocation decisions.
  • We then expect that Mighty River Power will list on the sharemarket.

“My expectation is that, subject to market conditions, this process will be completed in mid-May, most likely before the Budget,” says Mr Key.

“The Mighty River Power share offer has been designed to achieve widespread New Zealand ownership. We envisage that, with the Government’s majority shareholding, total New Zealand ownership will be 85-90 per cent of the company after the share offer.

“From the Government’s perspective it makes sense to use this opportunity to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.

“We intend to make it as easy as possible for New Zealanders to get access to information, register their interest and apply for Mighty River Power shares.”

Today Finance Minister Bill English and State Owned enterprises Minister Tony Ryall will officially launch the pre-registration period for New Zealanders who are interested in finding out more about the Mighty River Power share offer.

 . . . Mr English says the initial public offering of up to 49 per cent of the Government-owned power company is an opportunity for New Zealanders, including those who have not owned shares before, to invest in the stockmarket.

. . . Pre-registration will allow New Zealand retail investors who are interested in finding out more about Mighty River Power shares to register their interest.

“Tomorrow will also see the start of a substantial advertising and communications campaign covering television, print and online media which will raise awareness of the IPO, and tell people how to pre-register,” Mr English says.

“That campaign will include a strong investor education element for those unfamiliar with the sharemarket. We strongly recommend investors obtain their own independent financial advice”

Ministers also announced today that they expect that the share offer document will be lodged shortly after the pre-registration period ends and that there will be a three-week offer period.

At the end of that, the book-building process will take place before ministers decide on the share price and the allocation of shares. Those decisions will include how the shares will be allocated between New Zealanders and overseas shareholders.

The Government expects this process to be completed in mid-May.

The share offer had been designed to put New Zealanders first, Mr Ryall says.

“Mighty River Power will apply to be listed on the NZX main board. We expect that its primary stock exchange listing will be in New Zealand.

“We also expect it to have a secondary listing on the Australian Stock Exchange. There is nothing at all unusual about this – eight of the 10 largest New Zealand listed companies are already dual listed in Australia.

“There is a balance to be struck here. On the one hand, we have given New Zealanders an absolute commitment that Kiwis will be at the front of the queue for shares.

“On the other hand, we want to ensure there is enough tension in the share price for investors. A secondary listing in Australia will help to achieve that.

“Another point worth noting is that some Australian institutions, under their own investment mandates, would not be able to invest in Mighty River Power unless it was also listed in Australia.”

Mr Ryall says the website for pre-registration and for the share offer itself has been designed to restrict people from outside New Zealand from participating.

However, the IPO will be open to certain institutional offshore investors because that will help ensure New Zealand taxpayers get the best price for the shares being sold. Ministers expect around 85-90 per cent of shares to be held by New Zealanders after the share offer.

Other decisions confirmed today include:

  • The minimum application for shares will be $1000, increasing in $100 increments.
  • New Zealanders applying for up to $2000 worth of shares will not be scaled back if the IPO is over-subscribed.
  • A loyalty bonus will apply for New Zealand retail investors who keep their shares for a minimum period. The terms of that bonus will be announced before the share offer opens.

I’m not purporting to be a financial advisor but I’ll be putting my money where my mouth is on this.

I think the partial sale will be good for the company, good for the country and good for all shareholders – the private ones who buy up to 49% of the shares which will be for sale and the government which will retain at least 51% of the shares.


Let the sales proceed

February 27, 2013

The Supreme Court has ruled in favour of the government over the sales of Mighty River Power.

“This confirms the Government can proceed to sell up to 49 per cent of shares in Mighty River Power in the second quarter of this year, in line with legislation passed by Parliament last year,” Mr English says.

“Cabinet will next Monday consider a timetable and other details of the Mighty River offer – including how New Zealanders will be at the front of the queue for shares. We expect to be in a position to confirm those details soon afterwards.

“We are pleased to be getting on with what we were elected to do.”

Mr Ryall says the Government’s share offer programme remains on track, following the Supreme Court decision.

“The Government has always been firmly of the view that the partial sale of shares does not in any way affect the Crown’s ability to recognise rights and interests in water, or to provide redress for genuine Treaty claims.

“The Government’s partial sale of shares in state-owned enterprises is good for taxpayers because we expect to generate between $5 billion and $7 billion in proceeds which we will use to control debt.

“It is also good for New Zealand’s capital markets and it will improve the performance of the companies in the share offer programme.

“The Government will invest these proceeds in new public assets like modern schools and hospitals – and that’s money we don’t have to borrow from overseas lenders.”

Excellent.

Let the sales proceed.


Treaty rights protected – judge

November 27, 2012

The Maori Council’s case attempting to stop the sale of up to 49% of shares in Mighty River Power opened yesterday.

The judge does not seem to be convinced:

However, Justice Young pushed back strongly in several exchanges with Cull, saying he could not understand the argument, given that the legislation explicitly assures Maori that the Crown would continue to be liable for settlement of such claims. . .

“You are really saying Parliament isn’t sovereign, that it is subject to the commercial interests of people involved with MRP” he said at one point. But Parliament changed the operating environment for companies “all the time.” . . .

“If the statute says it’s protected, it’s protected,” said Justice Young. The reassurance about the ability to continue pursuing Treaty of Waitangi claims was in the MOM legislation.

“Shareholders can’t object. They know the statute exists.” . . .

“Any Maori, hapu or iwi, who believe they have rights to water, can make a claim to the Waitangi Tribunal, irrespective of this. There is a mechanism,” said Justice Young of arguments from Cull that there was insufficient protection for assets that are or could in the future be subject to treaty claims.

“You identify a right and file a claim with the Waitangi Tribunal or negotiate a settlement,” he said. . .

The case is expected to cost the Maori C0uncil about $400,000.

They obviously think that will be money well spent but I doubt if many other people do.

 


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