Case for MOM

05/07/2012

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.


How else do you raise $5 – $7b?

23/02/2012

If the government doesn’t sell minority shares in a few state owned assets, how else does it get the money it needs?

This question came from Finance Minister Bill English who said:

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.

 Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.

 “Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

 The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.

 “First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

 “Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.

The logic of those opposed to the partial sales escapes me. How can borrowing more money from foreign banks be better than selling shares, most of which will be bought by New Zealanders?

 “We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.

 “The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.

 “Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”

Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.

 “Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”

Thirdly, mixed ownership will be good for the companies themselves, Mr English says.

“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.

 “We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”

 In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.

It’s main priorities are: 

  • Responsibly      managing the Government’s finances.
  • Building      a more productive and competitive economy.
  • Delivering      better public services within tight financial constraints.
  • Rebuilding      Christchurch.

 “So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”

The full speech is here.


Ownership doesn’t influence price and service

25/05/2011

A friend reckons all power companies are a pack of b of questionable legitimacy:

I wouldn’t go that far. But we use different companies in different places and have noticed no appreciable difference between the price and service from SOEs and private companies.

Opponents of the partial sale of state owned power companies are fear mongering over the difference it will make to consumers.

In our experience ownership doesn’t seem to influence price or service which are the things which matter to consumers.


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