Even if they win, the nationalisation may never happen

April 24th, 2013 at 1:00 pm by David Farrar

Stuff reports:

Professional investors, while still nervous of the proposal, have begun to question whether it will be implemented, even if the Opposition wins next year’s election.

AMP Capital’s head of equities, Guy Elliffe, estimates it will take at least five years to design and implement the plan, exposing it to the same policy about-face that has National so concerned.

“Most people think it is [going to take] more than one electoral term … but then what is the probability of a Labour-Green coalition being elected twice?” he asked.

Mr Moghe, meanwhile, has maintained his recommendation that investors subscribe to the share offer, which closes on May 3 for retail investors.

I think Mr Elliffe is largely correct.

To implement this policy, first Labour and Greens need to get 61 seats between them. If they have to rely on NZ First, he may not support the policy.

Secondly implementing the policy would be massively complex, probably the subject of huge litigation, and take years to do. It is most unlikely to be done in one term. And with Green/Labour policy veering radically leftwards (printing money, nationalising industries) the economy could be seriously tanking after three years.

But also look at who the Labour and Green energy spokespersons are, who would be the ones to implement this incredibly complex and controversial policy – Moana Mackey and Gareth Hughes. Now I like Moana and Gareth, but a policy like this would need a Michael Cullen or Steven Joyce to implement.

So I think the chances of this policy ever being implemented are in fact quite low.

Hence why I am increasing the amount of shares I was planning to purchase. Thanks to Greens and Labour, they are likely to be priced more towards the bottom end of the indicated range. This means I’ll pick up the shares for a discount. This is of course bad for the taxpayer, but good for me as an investor. Thanks Russell and Davids.

Feel free to comment below if you are pre-registered and if you still plan to invest.

Note that this blog post is not financial advice.

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47 Responses to “Even if they win, the nationalisation may never happen”

  1. Nigel Kearney (1,051 comments) says:

    I’m not buying shares. Labour and the Greens don’t like the idea of the shares being sold and will be in power at some point. They have displayed vindictive behaviour in the past. Even if this particular plan never gets off the ground, they will be trying to destroy the value of these companies in any way they can, and have many other weapons at their disposal. It’s just too risky.

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  2. Parlyguy (22 comments) says:

    I registered an interest as soon as I was able and always intended to buy a stake. While I’ve taken time to digest the potential impact of the Labour/Green intention – commentary from a wide variety of sources over the last couple of days has convinced me that my initial desire to purchase shares is vindicated. Forms will be completed tomorrow and submitted either Friday or Monday.

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  3. queenstfarmer (782 comments) says:

    To implement this policy, first Labour and Greens need to get 61 seats between them.

    I thought they had to get over 50% of the vote, otherwise they will have no mandate despite having campaigned on it for a year and a half before the election?

    Isn’t that how Labour & the Greens insist that it works?

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  4. Prince (109 comments) says:

    I’m in. Thanks for the discount guys. Lead me to those ‘super-profits’.

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  5. metcalph (1,436 comments) says:

    I’ve brought shares. I’m not increasing the amount since the policy was announced primarily due to a trip overseas.

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  6. Craig (22 comments) says:

    The Greens/Labour policy announcement will result in people who buy MRP shares making more money so I’ve purchased some.
    I’ll also look at getting SLI-System shares when they IPO, more likely capital gain there.

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  7. chris (647 comments) says:

    @queenstfarmer “Do as I say, not do as I do”

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  8. Rightandleft (670 comments) says:

    If they win in 2014 someone should immediately call for a referrendum on this policy and see how they like it.

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  9. Manolo (14,086 comments) says:

    If NZ is stupid and moronic enough to elect these saboteurs, we will deserve the misery and economic disaster that come our way.

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  10. muggins (3,816 comments) says:

    It is quite likely that those that want to buy shares will get a bigger allocation than they would have prior to the Labour/Green announcement,but how much bigger? If you put in for,say, 100000 shares ,how many could you expect to get?
    Also,it would have been nice to have the smelter issue resolved before the float closes.

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  11. Right of way is Way of Right (1,122 comments) says:

    Is David Shearer’s overseas trip to ensure his overseas funds are being used to purchase the now significantly cheaper MRP shares?

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  12. Simon (764 comments) says:

    Point is these clowns will be elected in at some stage. They will print money, move the inflation target up, crash the NZD & likely the economy.

    The better investment now is to get your money out of NZ into a country with sound monetary policy and bring that money back into NZ once the collectivist have finished ruining the economy.

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  13. projectman (229 comments) says:

    Moana Mackey and Gareth Hughes as the Labour/Greens spokespeople? ‘Lightweight’ hardly does their talents justice.

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  14. Pongo (374 comments) says:

    Makes the investment far more attractive, especially if Tiwai falls over as its the wholesale price that will fall quicker than the retail price and its cheaper generated power to boot.
    In a perverse way I hope the left win the next election, it will be a one term debacle with much potential for amusement. Anyone who imagines that this is to help the poor and not designed to scupper the sale is a fool, millionaires will get cheaper power and the government will be shy 700million for its social assistance program’s. what we need is Bob Jones on the news backing the policy as the power bill on his mansion is getting a bit high.

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  15. 103PapPap (131 comments) says:

    I’m in! And going for double the amount of my original plan. Once NZ discover the other policies of the loony Greens mean they will effectively get nothing from the Power NZ Plan (think ETS, Tax increases et cetera) then they won’t win the 3014 election and MRP share price will rise.

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  16. Pete George (23,688 comments) says:

    Patrick Gower has blogged further confirmation that Labour and Greens meant to sabotage the MRP float, explaining how the “Hey Clint” slip exposed how Greens (and Labour) have been deliberately lying to try and hide what is obvious.

    Gower and Hughes confirm the obvious – intent to sabotage

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  17. jims_whare (404 comments) says:

    We have committed our $4K worth – I’m happy too as we should get more bang for our buck if the price is lower than expected.

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  18. Peter (1,725 comments) says:

    Hughes? I think you mean Clint. Hughes evidently had trouble running an interview by himself, let along a power sector restructure.

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  19. stigie (1,348 comments) says:

    Going to be interesting to see the 2 main polls down the track a bit, my guess there will a decent swing to the right after that power policy bribe from the far left !!

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  20. lastmanstanding (1,304 comments) says:

    I pre registered myself my wife and the family trust but aren’t going to buy as IMHO the shares wont stag and the 4% bonus isn’t worth it. Tiwai Pt is over and out its only a matter of time and then there Will be 15% extra capacity. High cost coal burning facilities will be moth balled and power prices will fall.

    Also again IMHO MRP have set some pretty high hurdles in regards the earnings in order to achieve the forecast dividend which even at the forecast isn’t that great. If they have a hiccup in sales revenue then they wont meet the forecast dividend and the share price will drop.

    The PE is also much higher than the other listed power companies so all in all Im going wait and see. There are plenty of other buying opportunities on both NZX and ASX with better returns

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  21. ross69 (3,652 comments) says:

    Secondly implementing the policy would be massively complex, probably the subject of huge litigation, and take years to do. It is most unlikely to be done in one term.

    You’re right, it might not happen becuase the power companies might take the bull by the horns and pre-empt the policy’s implementation. In other words, they might quit while they’re ahead.

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  22. ross69 (3,652 comments) says:

    The better investment now is to get your money out of NZ into a country with sound monetary policy and bring that money back into NZ once the collectivist have finished ruining the economy.

    Oh so you wouldn’t be investing in many (if any) of the major economies because they print money. You’ll be investing in Fiji then?

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  23. RightNow (7,013 comments) says:

    I’m buying shares for the kids as they’ll be a long-term investment for them. For myself I’m going to wait though – there’s probably more undermining to be done by the loony left and I’d be thrilled to profit from their idiocy.

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  24. All_on_Red (1,650 comments) says:

    “Now I like Moana and Gareth”

    You shouldn’t. You should despise them with every fibre in your body. They are destroyers of the wealth, fabric and wellbeing of NZ society. They are ignorant fools who should never ever be put in a position of power in this country.

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  25. Akld Commercial Lawyer (166 comments) says:

    As my psuedonym indicates, this is not an area that I will venture into directly lest it is seen as giving investment advice (its not).

    I would urge others to read the published material and take advice from their own professional adviser.

    Personally, having done my homework, I think the “policy” has no chance of ever being implemented in anything like the shape the Greens (particularly) planned. I say plan, because there are some distinct differences between the two sets of material – and different mistakes in each. That is putting to one side the fundamental misconceptions that (I suggest) are cited as support for little more than a desparate attempt to derail the MRP sale.

    Your list of reasons against implementation also fails to address Treasury and RBNZ advice, international commitments and so on.

    What it does show is a reckless disregard for almost all of the knock-on implications of the grand plan. It is easy to be rude about some of the comments that have ensued – really no surprises from the likes of Brian Rudman this morning, but the reality is that an as yet unknown number of people who have pre-registered but who do not have an existing relationship with a financial adviser will be wondering whatever next. How that washes out for the offer is something that (I am sure) those advisers will have formed a view about. There are any number of research notes starting to filter out – which is a healthy thing.

    Any failure to appreciate that blind idealogy won’t cut the mustard in a complex commercial world is a matter that can be revisited later. After MRP, the market expects that Meridian may be next. This is much larger business than MRP and one wonders what stunt that the opposition will try next. Their own electorate will, of course, suffer as much as the rest of the electorate from efforts to derail the process in such a ham-fisted manner.

    It is ironic that the efforts to start to build a savings culture that were inherent in Kiwisaver (and which will take a generation to be felt) are being undermined by the need to make some noise. If, for example, one of the planks of the opposition’s policy at the next election is, again, a capital gains tax – to shift savings to more productive forms of investment, then they are going to have a hard time explaining that they are the ones who have tried to frighten off a wider spread of such investment.

    My pick is that after the dust has settled in 10 days time the thanks that you record above, will be coming from institutional and high net worth investors – who have secured both a lower entry cost and a greater holding of MRP shares than they might have otherwise enjoyed. If that occurs, it will be at the expense of the NZ taxpayer.

    We deserve a better opposition than this.

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  26. Richard (97 comments) says:

    Agreed – same camp.

    Preregistered, still investing.

    Thanks David and the other guy :-)

    OMG .. almost forgot (re-edit) .. this is not financial advice :-)

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  27. Boglio (78 comments) says:

    I intended to buy shares for my 5 grandchildren as long term investments. I’ve thought about it and sent the cheque off yesterday

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  28. srylands (417 comments) says:

    Ross, as New Zealand interest rates are above zero (by some margin) the suggestion that we “print money” is criminal. Such a policy will drive up inflation and cause capital to flee. You had better hope that the power companies don’t “quit while they are ahead”. It could be cold and dark.

    I thought about withdrawing my MRP application but will go ahead. There is an upside that I will now get the shares at a discount but there is a slightly higher regulatory risk from the announced Labour/Melons policy.

    But the bigger Labor/Melons risk was always that they form a government in 2014 and do things like QE. That risk has not changed in the last week. Sadly., it will take the impacts of such a government to drive the Greens support base back down to the hard core 4-5% level. There is a soft 9-10 percentage points of support at the current levels of 13-15%. This soft support is typically urban/wine drinking/book club/property owners who feel good about making the flowers grow but they have no clue what is going to hit them.

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  29. Warren Murray (314 comments) says:

    Even before I read today’s Dom Post editorial, I’ve been wondering if we have reached a tipping point for reasons why the sale should stop. Proceeding now throws $hundreds of millions in public equity into the river. Thats not the Govt’s fault, but the value of the sale has been ravaged by the Labour-Greens policy. We shouldnt see these assets being sold in conditions that are beginning to resemble a fire sale.

    If the Govt borrows instead of selling these assets, it puts the ball into Labour’s court on how to manage if, God forbid, they come into office. They will need strong asset value from the power companies to give foreign markets confidence that NZ isnt overleveridged. They will also need strong dividends to service the increased debt, that National had to take on, so it will be a very big call indeed by Labour to implement its new Power distibution policy.

    Labour’s policy must make English and Co think about a complete sale, as opposed to a partial sale. That, at least, would enable the Government to realise the full value of these companies before Labour & Greens destroy it completely.

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  30. Mark (496 comments) says:

    Because of Labour and the Greens, overseas investors are rubbing thier hands in glee.

    However, I am still buying shares in Mighty River.

    From a policy and legal stand-point I think National and Act should look at drafting a law that no politican can legislate away people’s property rights to kiwisaver, other super schemes, bank account holding, shares, and other investments unless a 75% majority approve.

    It looks like your property if the Greens\Labour\NZ First get in will be thier own personal bank account to waste away.

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  31. lofty (1,317 comments) says:

    We will not be withdrawing our application(s), for the reasons outlined above, and with which we concur.
    Also because the message that bullies, charlatans and snake oil salesmen should never get away with their dishonesty, needs to be rammed home.

    As Akld Commercial Lawyer says above, “We deserve a better opposition than this.”

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  32. Nostalgia-NZ (5,283 comments) says:

    I must be coming increasingly pragmatic. There’s general agreement between part of the electorate that the Labour-Greens ‘initiative’ is ‘sabotage.’ That being the case, safe money surely indicates that the risk is increased, maybe even to the point of becoming more of a gamble. Or putting it another way, along the lines of ‘once bitten twice shy,’ who could predict that there may not be more attempts, or what they might be. It’s politics, so who expects a fair fight?

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  33. slijmbal (1,236 comments) says:

    It’s a utility – they generally provide strong, consistent, long term revenues and reasonable dividends. Hopefully, like Contact, they will have a DRP.

    As a long term investment with DRP it would not be unreasonable to expect to at least double your money in under 10 years.

    I don’t care if you think this is investment advice.

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  34. Raphael (88 comments) says:

    We had pre-registered, but will not be buying shares. Not because of the announcement, but because, having just bought a house so we can stop renting, we no longer have any spare capital available to invest.

    Maybe we will be able to do so with the next one.

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  35. scrubone (3,105 comments) says:

    I think the shares are the least of our concerns.

    This debarkle has exposed the fact that the population does not understand the advantages of capitalism and the incredible dangers of socialism.

    Sure, they live it, but those who are in charge of the country are temporary. Those in charge of the schools are there for the long term – and I’m not talking about teachers.

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  36. Neil (589 comments) says:

    I pre-registered and am going to try for around $5k worth. Won’t let those charlatans mess with the scheme if I can help.
    Much confusion and ignorance about the whole porocess. This new body the FMA has blocked any real public discussion about the issue. There are no NZ analyst reviews however there is one from Australia from Morningstar- http://www.morningstar.com.au/mightyriver power. It rates it as a good buy and says that it probably is the best of the energy companies for future dividends.
    Don’t let the pygmy brains change your mind !!!

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  37. A.J (4 comments) says:

    POSTED OUR CHEQES THIS MORNING, INCREASED THE AMMOUNT FROM INITIAL THOUGHTS.
    A
    FTER SEEING ON TVNZ WEBSITE YESTERDAY WHAT MUMBLEFUCK SAID THAT THEY ONLY ANNOUNCED THE POLICY LAST WEEK BECAUSE THE MAORI WATER RIGHTS APPEAL FINISHED EARLIER THAN EXPECTED.WHAT A LOAD OF SHIT.THIS WAS 6 DAYS LATER AND THE BUM BOY AND PUSHER PARKER MADE NO MENTION OF IT IN ALL THEIR INTEVIEWS OVER THE WEEKEND ,IT MAKES IT VERY CLEAR THAT IT WAS DONE TO AFFECT THE SHARE SALES.WHAT A LYING PACK OF BASTARDS.

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  38. Pete George (23,688 comments) says:

    A.J – yes, I blogged about Shearer’s excuses, they simply don’t add up. He sounds he is making them up.

    Shearer’s power policy timing defence

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  39. Fox (206 comments) says:

    I really doubt Labour/Greens are going to be bothered if people decide to go ahead and register for shares. So if this is one of your primary motivations towards persevering, you could end up rather disappointed.

    They are simply fulfilling their duty to give investors fair warning of their intentions. If investors decide to cast those warnings to the side, and gamble they won’t be successful in pushing through the reforms, or that National will retain power, fine.

    It also pays to keep in mind that the proposal to set up Power NZ is only one of many options they have to end the current price gouging practices in the electricity sector.
    So even if this particular plan is thwarted, I expect that this in itself won’t end their commitment towards delivering more affordable electricity prices, and that they’d immediately be looking for alternatives, most of which would probably also have an effect on future income projections for electricity companies.

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  40. Henry64 (83 comments) says:

    I have pre-registered and will go ahead and purchase shares in MRP.

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  41. Akld Commercial Lawyer (166 comments) says:

    Also, as an FYI, largely I suspect because there is a US component to the institutional offering, there is a black out period for some research reports.

    As a consequence, the NZ institutions who are managing the offer will be limited in what research reports that they can provide.

    The background to this is that policy for US markets is that analysts are typically prevented from publishing research reports on an IPO before the shares start trading on a stock exchange, and often for a period after trading starts. This (blackout) policy is aimed at preventing analysts from being seen to market new offerings.

    As a result, the Greens-Labour announcement got something of a free hit for a few days, probably while the the big brokerages were checking what they could and couldn’t say under the straitjacket of the blackout. As of this morning, it seems the shackles are off – with one research report (not Morningstar) saying in effect that the proponents of the policy should stand in a corner and wear a pointy hat.

    As the bone is being pointed directly at Labour’s finance spokesman – I expect any amount of PR noise to try to put the informed reader off the scent. Luckily, I suspect that the average taxpayer is a lot more savvy.

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  42. RightNow (7,013 comments) says:

    “I suspect that the average taxpayer is a lot more savvy”

    Certainly the average NET taxpayer.

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  43. OneTrack (3,237 comments) says:

    Fox

    So even if this particular plan is thwarted, I expect that this in itself won’t end their commitment towards getting themselves back on the treasury benches.

    There, fixed it for you.

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  44. meh (165 comments) says:

    Bought some for myself today, will buy the wife’s lot tomorrow and also will be buying a small parcel for my daughter as well.

    I agree that the idiot policy will likely never be implemented, but I’ve taken it into consideration.

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  45. GregM (3 comments) says:

    Despite the economic terrorism displayed by the absolutely inept opposition parties, I’m still in.
    Due to the fact the issue price will be lower, I will now get more shares for my money, which means more bonus shares after two years, which means more profit for me.
    #hey clint, thanks mate.

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  46. UpandComer (537 comments) says:

    Ah well, I’m still buying a big batch. Fuck them.

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  47. alex Masterley (1,523 comments) says:

    I am buying shares as well. The funds have already been paid over.

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