Other questions


One of the tricks in politics is to ask a question to which you’ll get the answer that suits your bias.

That’s why the question the opposition parties keep asking about the governments’ mixed ownership model for a few state owned enterprises is, do you support asset sales?

The referendum question is far more specific but the left still keeps asking the same inaccurate question.

There are other questions which could be posed on the issue.

One of these is, would you rather pay interest to foreign banks or dividends to mostly New Zealand shareholders.

If the answer to that is neither, the next question would be, how else are we going to fund other assets?

The opposition have made it quite clear they oppose any change at all in the government’ shareholding in SOEs.

They have yet to come up with any credible alternatives for reducing debt and funding other assets.

What’s the case for state ownerhsip of Solid Energy


The Opposition are not just opposed to the Mixed Ownership Model for state assets under which a minority share in a few companies are sold.

They want to retain all the companies the crown currently owns.

A case can be made for the state to own some companies but what is the case for owning Solid Energy which is in such a dire state?

. . . The state-owned coal miner is grappling with debts of nearly $390 million and earlier in May announced a further 105 job losses. . .

What justification is there for the state to be risking public money in this enterprise?

It’s not a monopoly, it’s not an essential or strategic industry.

It is possible that had it not been state owned, banks would have been a lot more careful about lending it money and it might not be so deeply in debt.

The other side of the sale story


Opponents of the partial sale of a few state assets are still peddling their emotive arguments against the policy and in doing so are telling only half the story.

They’re saying we’ve lost Mighty River Power but we haven’t.

The state still owns 51% of the company; those shares are worth more now than they were before the partial float and all dividends will be taxed.

Opponents to the policy would have us believe the 49% of shares floated have gone with nothing in return.

That’s not the case. The government now has $1.7 billion to put to more productive use.

As Finance Minister Bill English said in parliament on Thursday:

There has been, I think, a misunderstanding that somehow in selling shares the Government and the taxpayer are losing an asset. In fact, we are swapping shares for cash, and by tomorrow night, the Government will have $1.7 billion in its bank account ready to invest in those projects that will be outlined in the Budget through the Future Investment Fund. Future proceeds of asset sales will also go into that fund. Parties that want to buy back the assets, or not sell them, will have to borrow the same amount of money from foreign bankers if they want to invest in the same way this Government plans to invest in infrastructure, in hospitals, in schools, and in better public services.

Jacqui Dean: What are the benefits of the Government’s share offer programme?

Hon BILL ENGLISH: There are many benefits. In the first place, the Government achieved its objective of widespread New Zealand ownership, so 86.5 percent of this company remains owned by New Zealanders. Secondly, it has provided an opportunity for New Zealand savers to invest their money in the share market, many of them for the first time. Thirdly, we have collected $1.7 billion in cash proceeds, which are available to the Government for reinvestment in public assets. And, finally, it is a significant move in reinforcing our public capital markets, where Mighty River Power will list as the fifth-biggest company on the stock exchange. A strong public capital market is one of the ingredients for higher incomes and more jobs.

That’s the other and more important half of the Mixed Ownership Model story.

It makes far better reading than more debt and less investment in other areas where there’s greater need for public money than energy companies.

What a waste


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.


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

Expensive political stunt


The organisers of a petition to force a referendum on the partial sale of a few state assets say they have more than the 310,000 signatures required.

The signatures will have to be checked but with around 340,000 there will probably still be enough to force the referendum when invalid ones are removed.

It is nothing but a very expensive political stunt which, regardless of the result,  the government will ignore as it has a right to do.

National campaigned on the mixed ownership model and won.

Opposition parties, Labour in particular, campaigned against the issue and lost.

That doesn’t mean everyone who voted for National supports the partial sales policy nor that everyone who voted for other parties opposes it.

But voters aren’t voting for or against individual policies they’re voting for or against a package.

Enough people voted for National to enable it to lead a government and whether that was because of or in spite of the partial sales policy is irrelevant.

National won and the policy is a fundamental part of its economic programme.

The referendum will merely provide very costly publicity for the parties promoting it at our expense.

Clothes maketh not the millionaire


Some people who thought they were dressed as millionaires protested  outside the Prime Minister’s home yesterday against the proposal to sell a minority share of a few state owned companies .

They dressed that way to make a point and one point they made was about their ignorance.

You don’t have to be a millionaire to buy shares. A lot of people who are of far more modest means will have the good sense to invest some money when the partial floats are done.

They also showed their ideas about how millionaires dress are rooted in fantasy.

Those in the photo in the link above were dressed as any man, regardless of his financial status, might be for a formal occasion.

These clothes aren’t normal day wear for anyone, except perhaps a doorman, and you can’t necessarily judge people’s worth by what they wear.

Few if any at a seminar a couple of months ago would have owned businesses worth at less than a few million dollars. Had they been urban business people they might have been dressed for the office. But these were farmers. The only ones in suits were staff of the bank hosting the seminar, the rest of the people were tidily but  casually dressed.

If only the protesters understood that clothes maketh not a millionaire.

But the reality of ordinary people who through dint of their own ability and hard work have managed to make money from successful businesses  wouldn’t suit their narrative.

Nor would the idea that ordinary people who work for wages and salaries save and will be keen to invest in shares which ought to bring a far better return than leaving it in the bank and far safer than many finance companies.

Case for MOM


Joanne Black has a good case for the Mixed ownership Model for state assets (on-line here next week):

. . .  I need think only of Solid Energy’s plans to build a lignite-to-briquette plant to remind myself why ownership of these companies is better left to people who can afford to risk (that is, possibly lose) their money, than to have such investments funded by taxpayers.

I imagine most of us could think of several hundred things on which the government could more urgently and usefully spend our taxes than on finding out whether converting lignite to briquettes actually works. It might not.

that is not a reason for Solid energy to not pursue the project, but it is quite a good reason why someone other than taxpayers alone should pay for it.

Opponents of the MOM have focussed on the income that will be lost when a minority of shares are sold.

They conveniently overlook the costs, and the risks, that will be reduced when they’re shared by other investors.

MRP “highly attractive investment”


While the Green Party is wasting money attemtping to get enough support for a Citizan’s  an MPs’ Initiated Referendum, and Labour is threatening to hold up legislation for the Mixed Ownership Model for state assets, Trans Tasman says:

Mighty River Power Looks Even More Attractive. State-owned Mighty River Power expects electricity from its latest geothermal project to be lower-cost than normally assumed for new geothermal power stations, and well below the assumed cost of new wind farms. MRP, soon to be partially privatised, says it expects the $466m Ngatamariki plant with an installed generating capacity of 82MW to produce electricity with a real longrun marginal cost less than market estimates of $80 to $85MWh. Most wind projects are assumed to require paybacks of around $100MWh. The project remains within budget and on track for commissioning in mid-2013. MRP’s success with geothermal power enhances its competitiveness in the local market and is also strengthening its international operations, both in the US and in Chile, making it a highly attractive investment proposition.

Why doesn’t the left want to allow superannuation funds, community trusts, Iwi, other groups and individuals to invest in this business?

Don’t tell me we already own it. We  don’t, the state owns it on our behalf but that is very different from having a private shareholding.

Selling a minority share of the company frees up public money for other investment, and provides a much safer investment for people than finance companies.

The loss of dividend revenue to the government will be factored into the sale price.

If some shares are bought by people or organizations from overseas that’s  welcome inwards investment and they, like all other shareholders will pay tax on any dividends.

The left are painting the sale as a loss when the state, taxpayers, shareholders and the company have much to gain from it.

From grievance to growth


Trans-Tasman notes a tug-of-war between the government and Maori over the mixed ownership model for partial sales of state assets:

In seeking to get its mixed ownership model on state assets off the starting blocks the Govt is engaged in a vigorous tug-of-war with Maori interests, as it readies a share float of 49% of Mighty River Power. On the one hand some Maori interests have mounted a case with the Waitangi Tribunal to halt the sale. On the other, elements within the Iwi Leadership Forum see virtue in the share float as a safe haven for Treaty settlement money.

The more commercially minded believe a steady cash flow from investing in a utility (which has a proven record of consistent profits over a long period) is more desirable than costly court action. If the share float were to be halted it would eliminate an important avenue for safe investment of hard won Treaty settlement proceeds. Some within the Maori leadership see an opportunity to repeat the tactics of the 1980s when predecessors used the courts to extract concessions from the Govt. In its eagerness to get the sale off the ground, the Govt for its part has to find a balance which satisfies both elements.

You can’t blame anyone who sees a chance to get more from doing what they can to get it, including court action.

But real progress for Maori will come not from continuing protest and court action. It will come from moving from grievance to growth. That requires accepting  Treaty settlements, investing them wisely and using the proceeds carefully for economic and social good.

Another exercise in futility


The Labour Party is engaged in a publicity campaign for themselves  by trying to force a citizen’s initiated referendum on the government’s plan to sell minority shares in a few energy companies.

If they get the required 310,000 signatures – 10 per cent of the voting population – in a year we’ll have the expense of a referendum but it won’t be binding on the government.

The story had attracted 69 comments when I read it last night.

Among them were:

Labour…leaders of the few stupid enough to not understand even IF they get the support, that the referendum is NON BINDING and the recent election, in which Labour were smashed into the ground was a clear mandate to PARTIALLY SELL (ie retain majority ownership 51%) state assets to help the country get out of the financial crap it is in….DUH !!!


The asset sales were clearly set as policy before the election, and as one of the major items of debate the election itself was a virtual referendum on this.

If Labour seriously thinks wasting a huge amount of revenue running a referendum, on an issue that has been debated and agreed, is a proper way to behave, it just shows how out of touch they are with reality.


Mr Shearer must be the most highly paid clip board holder in the history of petitions. Mind you as a Labour leader about all he’s good for.


What an absolute load of rubbish. – Total waste of time – the govt has a mandate to sell them and even if 80% of population vote against asset sales, the current govt wont change their mind. – Total waste of money which could be used elsewhere.


Keeping total ownership of all state assets while the country goes further into the red is like keeping your holiday home while the bank forecloses on the house you live in.


The government have a mandate. They campaigned on partial asset sales. They got voted back into power. That’s a mandate.

If you don’t think its a mandate, then look at your warped logic. If the government doesn’t have a mandate (based on the argument that they didn’t gain over 50% of votes) then no government ever had one or ever will. Quite simple really. So, question. When is a mandate a mandate?


If Shearer and others are so certain, why don’t we ask John Key to have a new election and let the population vote on it. Lets have another election or didn’t labour lose the last election on this matter!


The whole reason assets are being sold is to fix the economy after Labour stuffed it up. It’s always the same. Labour comes in, screws up the economy & country, National is voted in, sells assets to fix the economy, Labour is voted in, buys back the assets, screws the economy & country, National is voted in, sells assets to fix the economy, and the whole cycle goes on and on and on. Labour should just get over it – they aren’t good for the country. . .


Sorry Labour, but as long as you have silly policies like giving solo mums massive pay rises, putting the pension age up and borrowing billions to get us out of trouble, I will be voting National just to keep you out of power. Ex labour man.


haha cos they are forced to word things in a non misleading way they have to state things truthfully as ‘up to 49 percent’ of 5 companies. That’s goes against the spin and hype they have been spinning up until now. I can just see the signature labour target market going “huh, i thought they were selling the whole of everything?”

That last comment nails it – opponents of the policy have been raving about asset sales when the policy is not to sell assets but a minority share in them.

But the petition reads:

 “Do you support the Government selling up to 49 per cent of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand?”

If those signing the petition really don’t want minority shares in those companies sold do they also want the government to buy back the shares it doesn’t already own in Air New Zealand?

There are some comments supporting the petition and there is also this one:

Just stopping partial asset sales is pointless unless it is accompanied by a credible alternative to raise the same amount of money.

Very few people really want partial asset sales, but it is better than increasing debt.

And this one:

Kiwi’s don’t want to borrow money but also anti-asset sales. We want renewable energy, but we don’t want any wind farms polluting the skyline, nor dams flooding our land, nor fossil fuel burning plants, nor geothermal. The people of this backward country are a basket-case!

Maybe someone could start a petition asking if people support an increase in debt. Unless and until Labour has a credible economic plan that will return the country to surplus while funding mcuh-needed new infrastructure without increasing debt, opposing the Mixed Ownership Model for state assets is empty rhetoric and the petition an exercise in futility.

Website explains MOM share offers


The government has launched a website which gives the facts on share offers under the Mixed Ownership Model for state assets.

State Owned Entreprises Minister Tony Ryall said:

“The website provides information about the share offer programme including what mixed ownership means, why the Government is undertaking the programme and how a public share offer works,” Mr Ryall says.

Mr Ryall says the website content reaffirms the Government’s core share offer commitments, including:

  • The Government will retain at least 51 per cent ownership of each company;
  • The Government expects 85-90 per cent New Zealand ownership. This means Kiwi investors will be at the front of the queue for shares; and
  • No investor will be able to own more than 10% of each company.

“With New Zealand’s debt going from $50 billion today to $72 billion in three years’ time, New Zealand needs to control debt.

“We expect to receive $5 billion to $7 billion in proceeds, which will help control debt and allow us to build new schools and hospitals.

“The programme will also reinvigorate the capital markets and bring stronger commercial disciplines to each of the mixed ownership model companies.”

The Government remains on track to proceed with the first share offer, for Mighty River Power, in the third quarter of 2012, market conditions permitting.

Under securities law, there are restrictions on what owners can say publicly about the business and their shares in advance of an offer. An exemption from some of these restrictions has been granted by the Financial Markets Authority (FMA). Such exemptions are quite common, such as the recent exemption for Fonterra, and past exemptions for the float of Contact Energy and at Auckland International Airport.

The website is here. It requires you to put the name of the nearest city to where you live and confirm you are a New Zealander before you get access.

Many reasons for MOM


Prime Minister John Key explained the reasoning behind the Mixed Ownership Model for state assets during Question Time yesterday:

The mixed-ownership model is there for a variety of extremely sound reasons. For a start-off, it is to give New Zealanders an opportunity to have some quality assets to invest in. This is actually what opponents of the mixed-ownership model are saying: they are saying it is OK for the New Zealand Superannuation Fund to be the custodian of $17 billion worth of New Zealanders’ assets, and to invest in just about every single Australian energy company, but it is not to be allowed to invest in New Zealand energy companies, with the exception of Contact Energy. Secondly, the Government wants to expand the balance sheet, not contract the balance sheet, and in 5 years’ time we will have $22 billion more of assets. Thirdly, I do not know whether the member watches TV, but if he does he will see countries that are highly indebted, like Greece, and realise that that is not the right way to be going.

Quite why it is acceptable for our super fund to invest in Australian energy companies but be limited to investing in only one of ours escapes me.

Why opponents to the MOM think increasing borrowing from foreign banks is preferable to providing investment options for domestic individuals and institutions is even more puzzling.


Election win gives mandate


Elections in New Zealand are run on a multitude of issues.

The winning party can’t claim to have a mandate on every issue but holding a majority in parliament gives it a mandate to govern and to do what it said it would do in its campaign even if that isn’t popular.

The Opposition has done a good job in stirring up opposition to what it labels asset sales but is more accurately a partial sale.

But the attempt to force a referendum on the issue of the Mixed Ownership Model for a few state assets is a stunt which will, if it is successful, cost a lot but change nothing.

Asked about the plans for a referendum today, Key said: “We’ve had that, it was called an election.”

He said National had openly campaigned on the issue and won the election decisively.

As the Prime Minister pointed out in parliament yesterday there are many reasons that more voters favoured National than any other party in the election:

 I accept that voters’ votes are for a variety of different reasons. I think voters who voted for National in the last campaign did so because they knew that we could manage the economy better than Labour and the Greens, they knew that we would have a better jobs programme than Labour and the Greens, they knew that we would run the health system better than Labour and the Greens, they knew that we would run the police force better than Labour and the Greens, and they knew that we would look after education services and demand standards better than Labour and the Greens. So I accept that there is a multitude of reasons, but you would have to say election 2011 was very much on the mixed-ownership model, and, on that basis, more people voted for National than in the previous election.

Some people might have voted for National in spite of the mixed ownerhsip model policy but even with almost all other parties vigorously opposing the partial sale of a few energy companies, the party won enough seats to lead the government.

That gives it a mandate to enact the policies on which it campaigned with or without a referendum.

Effective return yield not value


Opponents to National’s plan to sell a minority share in a few state owned enterprises keep raising the return the government will miss out on after the sale.

But ODT political editor Dene Mackenzie said figures being bandied about on what returns state-owned assets are providing to the Government are skewing the argument:

A media release from Green Party leader Russel Norman questioned National’s decision to fund new infrastructure by selling SOEs that had returned, on average, 17.6% per annum over the last five years.

But the total shareholder return he quoted combined the return from cash dividends with the growth in the value of the company.

What he does not point out that while the increased capital value is nice to have, a government cannot spend it on social  programmes such as schools, hospitals or welfare.   

The only money a government has access to is the cash from the dividends paid.   

The only way to release the stored up capital value of the assets is to sell the assets.   

You can borrow against the value but that increases debt and comes with risk that if the value of the asset drops the debt increases in proportion.

The crisis in Greece and other European countries illustrates the danger of too much borrowing.

National is committed to getting the country’s debt under control and balancing the books. Until we do that the economy will be held back which will restrict the ability to increase employment opportunities and pay rates.

National’s plan is to continue eliminating waste in the public service, increase export income and use the mixed ownership model, which has worked well for Air New Zealand, for four energy companies.

The proceeds from selling minority shareholdings will go into a new Future Investment Fund which will be used for other assets like schools and hospitals without increasing overseas debt.

The plan isn’t to get rid of assets it is to pay for more assets without increasing debt which is what Labour will have to do to pay for all it plans to do.

Quite how they believe that retaining a majority shareholding in public control and selling a  minority share to mainly New Zealand individuals and organisations is wrong yet borrowing more from foreign banks is right defies logic.

Partial asset sales ideal


Quote of the week:

“The market is flush with cash and there is a thirst out there for new equity issues. Funds like KiwiSaver have to find a home for their money and the Government’s partial asset sales would have been ideal.”

It comes from Deloitte Dunedin managing partner Steve Thompson in response to Prime Minister John Key saying that partial sales of state assets might be delayed by a few months if market conditions were unsuitable.

This is one major difference between what National is proposing and the sale of assets in the late 80s and early 90s.

Then assets were sold in total in fire sales. The new plan is for a mixed ownership model. The government will retain a majority share and sell the minority stake in an orderly manner, holding back if the time isn’t right.

Mr Thompson’s comments show that New Zealand super funds and other institutions like ACC will be lining up to buy.

Why didn’t Labour nationalise Air NZ?


Labour is trying its best to put people off National’s mixed-ownership model for state assets.

They’d rather borrow or tax more than allow New Zealand individuals and institutions like superanuation funds to invest in local companies through the partial sale of some state-owned companies.

Their argument is high on emotion and low on logic and it’s very much do as we say not as we do – or at least did when in power.

If the mixed-ownership model was really such a bad idea, they’d have nationalised Air New Zealand.

Instead, they purchased a share, leaving the rest of the company in public hands and subject to the discipline, rigor and scrutiny of  a publicly listed company.

The airline and its shareholders, including the government on our behalf,  are much better off this way than if the company was 100% state owned.

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