Kiwiblog

Tony Ryall announced:

As at 8.30 this morning, 100,000 New Zealanders have pre-registered their interest in buying shares in the Government’s partial share offer of up to 49 per cent of energy company Mighty River Power. …

“This compares with the ten days it took for pre-registration to reach the 100,000 mark with the Contact Energy share offer in 1999.

Superb. And there are 16 days still to go.

I wonder when Labour will announce their policy on whether they will compulsorily acquire any shares purchased by New Zealanders and return the companies to 100% government ownership?

All will they say, after all their huffing, that in fact they will do nothing to change the level of private shareholdings if they win the next election?

If Labour are going to have a policy of compulsory nationalisation, they should make this clear before the offer document is tabled.

Bill English and Tony Ryall have announced details. They are:

• Pre-registration period will begin tomorrow
  
• Pre-registration period ends 22 March
• Offer document in mid April
• A 3 week offer period after that when individuals can apply for shares
• After the individual offers, institutional investors can apply
• Main listing on NZX and secondary listing on ASX, because some institutions with NZ investors could not apply without an ASX listing
• Sale process to conclude mid May
• minimum share application will be $1,000
• All NZers guaranteed at least $2,000 of shares without scaling back if they apply
• The loyalty bonus for NZ retail investors will be detailed before the share offer opens

I’m looking forward to buying some MRP shares, especially as I was banned from being able to buy Contact Energy shares when they were floated.

Likely to but Meridian shares also. Not so sure about Genesis, and also unsure about Air NZ.  Air NZ is one of the more successful airlines, but it is a very temperamental industry.

A for Solid Energy, I suspect I could buy it with my collection of loose change – a good reminder of why the Government shouldn’t own risky competitive businesses. Their jobis to regulate not own.

Kate Chapman reports:

An announcement will be made this afternoon after the Cabinet makes its final decisions.

One of those will be whether to dual-list stock on the New Zealand and Australian stock exchanges, as indicated by an Australian media report on Friday.

To do so would fly in the face of the Government’s promise that Kiwi mum-and-dad investors would be at the front of the queue.

It won’t, but it may be perceived as doing so. In reality dual listing is unlikely to greatly change the proportion purchased by New Zealanders. The impact is more likely to be on price.

Business commentator Rod Oram said the Government faced a dilemma.

“On the one hand it wants to get the best price it can for the shares, but in terms of stimulating demand, it’s going to run into political flak.”

Australians can buy shares on the NZX, but listing In Australia would make it easier and increase demand.

Rod Oram is correct. Dual listing will increase the price, but also that Australians can buy shares directly on the NZX also.

I own a number of shares that are listed on the ASX only – and I’m not Australian.

It would also create demand from institutional investors that did not trade in New Zealand.

That would drive up the price and ensure the Government got the maximum benefit from the sale, Mr Oram said.

“The counter of that is, in doing that, they would be guaranteed to increase the foreign proportion of shares held in the company.”

There would be some impact, but the Government’s allocation model will be the prime factor. They are very focused on over 80% being NZ owned.

Dual-listing would also seem to fly in the face of the Government’s argument that the asset sales would boost domestic capital markets.

“Listing in Australia does somewhat undercut that,” Mr Oram said.

A fair point.

Labour MP Clayton Cosgrove said the four state-owned energy companies that the Government planned to sell down would inevitably end up in foreign ownership.

A stupid point. This is literally impossible under the law passed by Parliament.

Ryan Boswell from Sky News tweeted:

Asset sales protest outside Parliament. Labour, the Greens and Mana were invited but a no show. pic.twitter.com/bR4S1kLX9O

Anyone have a count for how many turned up?

The Dom Post editorial:

The Government now has the authority to sell a 49 per cent share in the power company. To those who say the public are opposed to the process, Prime Minister John Key and his ministers can offer a simple rejoinder: “We said we were going to do it before the last election; if you really didn’t like it you shouldn’t have elected us.”

It’s a difficult argument to counter and the referendum the Green Party and Labour are promoting will change nothing. Nor should it. Whatever the pros and cons of selling state assets, governments are elected to govern. If governments were only able to do things that had popular support at the time they were done, New Zealand might never have given women the vote, decriminalised homosexuality or made the wearing of seatbelts compulsory.

The referendum is an abuse of what is meant to be a law to allow citizens to petition Parliament to get a referendum. It has been hijacked by the parties that lost an election to try and over-turn the election result.

Now the Supreme Court has cleared the sale of Mighty River Power, I expect the taxpayer funded gathering of petition signatures will be presented to Parliament, and Labour and Greens will call for no partial sales to occur until after the referendum.

The response to that should be when will Labour and Greens vote to repeal or amend the anti-smacking law, which 85%  of New Zealanders rejected in a referendum? You can’t claim referenda should triumph over election results in one case, but not in another.

Anyway what is the possible timing of the waste of money that Labour and Greens have forced on us. It is appalling that the Greens used taxpayer funding to hire peopel to collect signatures. CIRs are meant to be about citizens petitioning Parliament, not parliamentary parties using taxpayer funding to re litigate election results.

The Clerk of the House has two months to audit the petition, estimate duplicate or invalid signatures and certify if it has made the 10% threshold. It will of course make it, as the taxpayer funded collectors make it easy to do. If presented in March 2013, then expect certification in May 2013.

If for some reason they do fall short, then they have two further months to collect more signatures and repeat the process. So resubmission would be by July 2013 and certification by September 2013.

If it is certified in May 2013, the Speaker announces it to the House and the Government has one month to decide when the referendum will be held. The referendum must be held within 12 months of the Speaker’s announcement so no later than May 2014.

75% of Parliament could delay the referendum beyond 12 months.

The referendum would almost certainly be a postal referendum, which will mean a three week voting period starting and finishing on a Friday.

The Supreme Court has unanimously ruled all decisions on the share sales are reviewable for consistency with Treaty obligations.

Not yet clear though if the actions have been deemed legal. More to come.

UPDATE: But it appears they have said the sale will not materially affect Govt’s ability to settle Treaty claims. Hence it looks like the Government can proceed.

Note this is based on tweets from those in court room.

Yes, a number of sources are saying the Maori Council have effectively lost.

The Government will be very relieved.

Colin Espiner writes:

I admit I’m no expert, but it looks to me as if taxpayers lose either way under our current SOE model. We either pay through the nose for our power with little or no government regulation on price or we watch poorly performing SOEs bailed out with our money.

I know the sale of SOEs has always been a political hot potato, but let’s look at it rationally rather than emotionally. Why does the public need to own a coal mine? Or a power company? Or an airline? 

Here’s my suggestion: Sell the lot, but only after decent regulation to protect the consumer has been put in place. Here in New Zealand we pay high prices for monopoly services that are effectively government-owned. 

Former energy minister Gerry Brownlee talked tough a few years back about taking on the power companies, but of course nothing came of it. According to a study by Victoria University researcher Geoff Bertram we have some of the highest power prices in the OCED. Is it any wonder, when the government is both poacher and gamekeeper?

There’s no reason I can see why taxpayers should be exposed to risks taken by wannabe venture capitalists or price-gouged by our own companies. Selling them off is the only way to create a level playing field and provide any real competition for the poor old consumer. 

I basically agree. The correct role of Government is regulation, not ownership. When they are both and owner and a regulator, you get a conflict of interest and neither are done as well as they can be.

If people think ownership doesn’t matter, look at Solid Energy. The “collapse” has happened because they had a very ambitious expansion programme led by the then CEO.

Now I’d argue that the basic strategy of expanding away from just coal mining was not a bad one for Solid Energy. With the difficulty of getting a coal mine consented, the new safety focus post Pike, and a target of more renewable energy – the company didn’t have much of a future just as a coal miner.

However where it appears the company went wrong was the scale of the expansion plans were too ambitious, they required too much debt and risk, and not enough focus remained on the core business of coal. Hence projections were done on coal prices that were too high. Now globally all companies have been caught out by the 40% slump in coal prices including giants like BHP.

However Solid Energy has been more exposed, because they had taken on higher risk with more ambitious expansion plans. And this is where ownership does matter.

If the Directors themselves have shares in the company, and they represent shareholders whose actual money is at risk, then they will be more cautious about expansion plans. That is not to say they would not agree to them, but they would probably have been saying let’s do it slower, let’s keep our core focus on our current income stream and not borrow too much on this vision of huge expansion into lignite and other areas.

When it is your money at risk, not someone else’s money, you act differently. The price of failure is catastrophic when it is your own money.

I have absolutely no doubt that if Solid Energy was not state owned, it would not be in as dire a situation as it is now.

That is not to be an absolutist and say that all private sector companies succeed and all state companies fail. That would be ridiculous and obviously not true. But overall there is a reason the private sector does better – it is because you make better decisions when it is your own money at risk.

Going back to Colin’s column, I agree we should sell pretty much all our commercial companies, and not just 49% of them. Taxpayers should not be having to bail out mining companies or risking the expansion plans of the power companies. The best thing the Government can do is be an impartial pro-consumer regulator that ensures we have excellent competition. That is not compatible with ownership

Stuff reports:

The depth of Solid Energy’s financial woes have been laid bare with the Government confirming the company is in talks with bankers over its debt levels.

The Solid Energy board was working with Treasury, advisors and the banks about further restructuring options, with the aim of returning the company to a sustainable financial position, Finance Minister Bill English said.

“Despite restructuring, Solid Energy’s financial position has continued to deteriorate. It is in constructive discussion with banks,” English told a media briefing this afternoon.

He confirmed there had been differences of opinion for some time over the direction of the company.

“There will be the opportunity for us to go back and look pretty hard at the governance and the monitoring.”

The Government would not let the company go into receivership, English said. He would not directly answer questions about a taxpayer-funded bailout, but would not rule it out. …

State-owned Enterprises Minister Tony Ryall said a number of factors had weighed against the company, in particular world coal prices dropping by 40 per cent.

We should have sold Solid Energy years ago. Taxpayers should not be forced to be investors in risky commercial enterprises such as mining. There is no strategic need for the Government to own a mining and power company – just as we also don’t need to own companies that run hydro-dams.

Labour and Greens go on about all the dividends from these companies, and overlook the risk – as we have seen with Solid Energy.

We shouldn’t own a loss making rail company either.

Governments should focus on what they are good at – passing laws, developing policy, regulation etc. The private sector should run companies, receiving both the benefits of them when successful - but also having to foot the losses when not sucessful.

Sadly this means Solid Energy will probably never be sold, and potentially remain a taxpayer liability for some time.

I just hope the Supreme Court upholds the High Court decision, so the Government can get on with at least reducing its shareholding in these competitive commercial companies.

Jason Krupp at Stuff reports:

Mighty River Power says years investing in overseas geothermal projects have given it the confidence to go it alone internationally at a time when Kiwi development opportunities are drying up.

The state-owned energy company yesterday announced it had reached a deal with GeoGlobal Energy (GGE) to withdraw from the GGE Fund after five years.

Mighty River is taking two Chilean development projects and a minority stake in US firm EnergySource with it, currently held by the GGE fund. In exchange, GeoGlobal will take control of the fund’s interest in Germany, and other non-EnergySource related assets in the US.

Mighty River has been a big investor in the GGE Fund for more than five years, with the bulk of the US$250m committed to the venture already invested. It will also pay GGE US$24.8 million (NZ$29.1m) to exit the fund.

“The fund was a way to learn about the international market, and we learned about what works and doesn’t work, and it is timely for us to move on,” said MRP chief executive Doug Heffernan.

NZ taxpayers should not be having their money at risk in a company that is investing in risky projects overseas. I don’t think there is anything wrong with MRP investing as they have. Business always has a degree or risk. Only those with no business experience fail to understand this. They think business is a licence to print money.

The only companies the Government should own are those that provide some sort public service (Radio NZ but not TVNZ) or maybe monopoly infrastructure providers (Transpower – but once could actually have that as a club-type membershp).

Take Solid Energy. That used to be a profitable company. But it has been hit by two major external factors. A drop in the price of coal due to China over-supply and a global move away from coal as fracking has opened up shale gas as an alternative energy source.

If Solid Energy had been sold some years ago, then private owners would bear the risk of the business downturn. There is no strategic reason for the Government to own a mining and energy company.

But now the taxpayer is going to be left having to finance a likely bailout of Solid Energy. Rather than spend money on hospitals or schools, the taxpayer is going to have to bail out a mining and energy company that it shouldn’t even own. I doubt it will ever be sold now – the global market has changed fundamentally. So we will be left with a dog that will cost taxpayers money.

I want a Government that invests in schools and hospitals – not coal mines and hydro-dams. It’s a great pity they were not all sold many years ago.

Olivia Wannan at Stuff reports:

New Zealanders will have their say on asset sales this year after a petition to force a referendum reached the 300,000 signatures needed, campaigners say.

Since April, a coalition including Grey Power, the Council of Trade Unions, the Green Party and Labour have been collecting signatures for the petition.

They need 10 per cent of all registered voters, or approximately 310,000 people, to sign to force a referendum.

Grey Power national president Roy Reid said the group had collected more than 340,000 signatures, allowing for a percentage of signatures that did not meet the requirements under the Citizen Initiated Referendum Act.

It was inevitable they would get the signatures once the Greens used taxpayer funding to hire people to collect signatures. It makes an absolute travesty of a process which is meant to be about citizens initiating a referendum, not about taxpayer funded parliamentary parties purchasing one with taxpayer funding.

The hypocrisy of Labour and Greens in arranging the referendum is quite immense, when you consider their response to the last CIR – on the anti-smacking law. A massive 85% of New Zealanders voted that a light parental smack for correctional purposes should not be a criminal offence, yet they voted against a bill which would have done exactly that a few weeks after the 85% result.

Now you can have a legitimate view that parliamentary parties should vote on the basis of the policies they were elected on, not on the basis of referenda. That is my view for example. But it is hypocrisy to promote a referendum on one issue, and insist the referendum result must be followed – while you continue to oppose implementing other referendum results.

So at some stage in 2013 there will be a referendum. It will achieve nothing but posturing as the policies a Government gets elected on out-trump a non-binding referendum. The end result will just be a few million wasted on a referendum.

Alex Tarrant at interest.co.nz writes:

The fight to stop the government’s asset sales programme is heading to the Supreme Court.

The highest court in the land today granted approval for the Maori Council to appeal a High Court decision a week ago that the government’s decisions regarding moves to partially privatise four state-owned energy companies were not reviewable in court.

The Supreme Court also granted leave for the appeal to be heard by the Supreme Court, meaning the next decision could be the final act in the Maori Council’s bid to prove the sales would be unlawful.

The approved ground of appeal was whether the High Court was right to dismiss the application for review.

The Supreme Court said it would hear the appeal on January 31 and February 1 next year.

It is good that the Supreme Court granted leave to bypass the Court of Appeal. This means that if they do not uphold the appeal, the the partial sales can proceed on time.

Of course it is possible the Supreme Court may uphold the appeal. To do so they would need to find that Justice Young was incorrect both in ruling that the decisions were not reviewable, but also that even if they were none of the grounds cited were substantial.

Cynics might say that regardless of the merits, the Maori Council may start with one vote in their favour. So it could be up to how the other four Justices see it.

The 88 page decision is here.

English and Ryall say:

Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall today welcomed the High Court decision in favour of the Crown following last month’s High Court action regarding the sale of shares in Mighty River Power.

“The High Court decision confirms the Government can proceed to sell up to 49 per cent of shares in four state owned energy companies, in accordance with the legislation passed by Parliament earlier this year,” Mr English says. 

“The Government is 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.”

Mr Ryall says the Government’s share offer programme remains on track.

“The Government remains committed to an initial public offering of Mighty River Power Shares in the first half of 2013,” he says. “If the High Court decision is appealed, we hope this can be heard as soon as possible.

Will the Maori Council throw away good money after bad? Their lawyers will want them to, for sure.

Very pleased personally with the decision. I’ve regarded the legal action as an attempt to blackmail (in a legal not criminal sense) the Government into offering free shares or some such to those behind the Council action.

What is significant is that the High Court has ruled that the decision is simply not reveiwable. He also shoots down the shares plus proposal by the Waitangi Tribunal. On the main issue he concludes:

I am satisfied that the sale of MRP shares will not compromise the Crown’s ability to provide recognition of rights or redress for Māori for claimed proprietary interests in water.

There is little connection between the sale of shares in a company which neither owns nor has any property rights in water, but uses water for its business and Māori rights recognition and redress with respect to water.

The precise point that has been obvious to many.

On shares plus:

I cannot see that the shares plus concept is workable, all but one of the identified advantages are available after the sale and the shares plus concept is unlikely to provide the benefits to Māori identified.

Generally:

I have found that the actions of the Crown are not inconsistent with the principles of the Treaty of Waitangi in that those actions are not likely to materially affect redress or rights claims by Māori or redress with respect to its claims to a proprietary interest in water.

And on if the decisions are reviewable:

I am satisfied that the three proposed decisions of the Crown; the commencement decision; the amendment to the constitution of MRP decision; and the sale of MRP shares decision; are not reviewable decisions. …

No review of Parliament by the Courts is permitted in law. This is effectively what the claimants have asked this Court to do in these proceedings.

If you are interested in the detail, I suggest you read the full court judgement. I’d call it damning for the plaintiffs. Justice Young has not just said that the decisions are not reviewable, but even if they are they would fail on each and every ground submitted by the plaintiffs. It is a very strong victory for the Crown in my lay opinion.

Stuff reports on the Maori Council court case:

Justice Young said he did not understand why the Government needed to act before the transfer because water rights were determined under the Resource Management Act and the Government could change that any time in favour of Maori. ”I don’t follow why it matters who owns Mighty River Power.”

Exactly. Contact Energy was sold totally and this is no way impacted any rights around water. The mechanisms for recognizing water rights are not linked to the ownership status.

One can of course not judge the outcome off one possible isolated comment, but it is heartening to see the Judge identify the core issue.

Adam Bennett at NZ Herald reported:

Wealthy South Island iwi Ngai Tahu has split Maoridom by going in to bat for the Government against the Maori Council’s bid to thwart the partial asset sales programme, says the outspoken Labour list MP Shane Jones.

Some are furious at Ngai Tahu. They have dared to state their honest opinion.

But two months after Maori King Tuheitia’s national hui to promote a unified iwi approach to the issue, Ngai Tahu has supplied Crown Law with an affidavit in which it says any such rights would not be affected by the partial asset sales programme.

The affidavit from Ngai Tahu runanga’s principal adviser, Sandra Cook, says the iwi considered that it continued to have a full range of rights and interests in water as guaranteed under the Treaty of Waitangi.

“In Ngai Tahu’s view those rights and interests were not affected by the privatisation of Contact Energy in 1999.

“Nor does Ngai Tahu consider that its rights and interests will be affected by the proposed sale of shares in Mixed Ownership Model companies.”

The affidavit further undermines the Maori Council’s case by saying Ngai Tahu believed it was premature to resort to either the Waitangi Tribunal or the courts to deal with the issue.

It was an attempt to make the Maori Council more relevant.

Ngai Tahu is quite correct. The sale of Contact Energy has had no impact on the Crown’s ability to recognise water rights, and neither would the proposed part-sales.

Stuff reports:

Labour leader David Shearer said anything which stopped the sale of state-owned assets was a “good thing”.

So, for example, another massive earthquake which destroyed half the country’s hydro-dams and hence stopped the partial floats, would be a good thing?

I think it shows how unbalanced Labour have got on this issue.

As was almost inevitable, the Maori Council have filed in court.

Do not be surprised if there is some sort of agreement or injunction not to proceed until the substantive hearing. That is why the sale is schedule for March to June 2013, so that the substantive hearing can be held in time.

Hall said the council had not yet raised all the budgeted $400,000 to take the legal action.

It’s good money for lawyers, this work!

Bill English and Chris Finlayson have announced:

Iwi groups yet to complete their Treaty settlements will be offered the opportunity to participate in the Government share offer programme, Finance Minister Bill English and Treaty Negotiations Minister Chris Finlayson say.

“This is a result of our constructive engagement with Iwi leaders and their technical advisers,” the ministers say. “It is another example of how direct engagement with the Crown can produce pragmatic solutions that provide an opportunity for more New Zealanders to participate in the share floats and support Iwi and the Crown to settle historic Treaty claims.” …

As a result of today’s announcement, Iwi yet to settle their claims can choose to receive a percentage of their forecast settlement package “on account” in the form of shares in the Government share offer companies. Mr Finlayson says “on-account” arrangements were not new for Iwi in negotiations with the Crown. The facility has been used by many Iwi in the past.  They must pay the full issue price and any amount drawn down will be deducted from the final settlement.

This is the key point. All shares will be purchased at the same price as other New Zealand buyers.

Effectively what the Government has done is say some Iwi already have negotiated a settlement, while some have not concluded their negotiations – so we’ll allow those not yet concluded to purchase shares in advance of their final settlement.

They are limiting the amount they can purchase to around 10% of their likely settlement, so there is no danger of any share purchase being greater than the actual settlement.

“It does not change the total amount of Treaty settlements. It simply allows Iwi more flexibility about how their settlement money is invested, and we believe it will enhance the share offer programme,” Mr Finlayson says.

A key point also. There will be no extra money for share purchases. It is just basically a credit facility.

Mr English says the actual amount to be advanced as on-account payments for shares will depend on the level of take-up by Iwi. The Treasury estimates that if all Iwi take up their full entitlement, this will amount to $145 million over the entire Government share offer programme.

“Even if all Iwi take up their full entitlement and allocate all of it to the Mighty River Power share offer alone, it would still represent less than 5 per cent of the shares of Mighty River Power,” Mr English says.

I hope many Iwi do purchase shares. As a permanent part of NZ, Iwi owning shares will help keep more of them in NZ ownership.

John Key has announced:

Prime Minister John Key today outlined the Government’s next steps to prepare Mighty River Power for its partial sale in the first half of 2013.

“I’m pleased to announce today Cabinet made three decisions regarding our shares sales programme:

“First, the Government will not implement the Waitangi Tribunal’s ‘shares plus’ concept, or engage in further negotiations in relation to that concept, before the sale of shares in our energy companies.

Good. This will almost inevitably see the Maori Council go to court – which was also pretty inevitable. They have to make the case that the Government reducing its shareholding from 100% to 51% means they will be unable to resolve any claims around water rights. Considering Contact Energy was sold 100%, without any loss of ability, I think this is a hard case to make. The bigger danger is an injunction until the full case is decided. That is why the sale is delayed until after March next year.

“Second, the Government will proceed to remove Mighty River Power from the State Owned Enterprises Act. We will prepare an Order in Council for Cabinet and Executive Council to consider and approve on Tuesday 23 October.

“And finally, we will direct officials to continue to work towards a sale of up to 49 per cent of the shares in Mighty River Power between March and June 2013.”

Good. This was at the centre of the election campaign, and parties that said they would support this received the majority of seats in Parliament.

Mr Key says the Government’s position on water has always been very clear:

• In common law no one owns water.
• Maori do have rights and interests in water, and these will continue to be addressed through a range of processes such as Treaty settlements, the Government’s Fresh Start for Fresh Water programme and dialogue with iwi leaders.
• The partial sale of Mighty River Power does not impact on the Crown’s ability to recognise Maori rights and interests in water.

A nice summary.

Labour’s ideological obsession with state ownership rears up again. Stuff reports:

A Government plan to sell a state-owned asset considered vital to Pacific development is expected to be rubber-stamped this week.

The Sunday Star-Times understands an urgent meeting took place last week in Tonga, to be followed by another this week in Fiji, finalising plans to sell the 35-year-old Pacific Forum Line (PFL) to Singaporean firm Sofrana.

Founded in 1978, PFL was intended to encourage economic development in the islands and provide competition to ensure private shipping operators were unable to create a monopoly in the Pacific.

New Zealand and 11 island countries have equal voting rights in PFL, but practical control is exerted by New Zealand, Fiji and Papua New Guinea which between them own around three-quarters of the company’s shares.

So we only own 23% of it. But why is Labour insisting we own 23% of a shipping company?

McCully defended the decision to sell and said PFL no longer fitted its purpose.

“PFL was established to fulfil an important need, namely to offer regular shipping services that the private sector was not able to provide in the Pacific,” he said. “Since that time a great deal has changed, to the extent that the PFL no longer fulfils a number of its obligations. It now owns and operates no ships and participates in what is effectively a code share relationship with private sector shippers.”

Oh my God, so it is a shipping company that owns no ships! And this is an example of what we need to retain part ownership of? What next, an airline with no planes?

Despite once being a profitable enterprise, PFL has recently financially deteriorated, with losses totalling $14 million in the two years to June 2011.

Sounds like we’ll be lucky to find anyone to buy it. What would you pay for a shipping company with no ships?

Adam Bennett at NZ Herald reports:

The partial sale of Mighty River Power has been delayed until next year, Prime Minister John Key confirmed this afternoon.

Mr Key said the sale would now take place in the period from March to June and would be followed by the partial sale of either Genesis or Meridian later next year.

This is a significant decision. While MRP will still be floated, the chance of having all five sales before the 2014 election is diminished. National would ideally like them all completed so that 2014 is not about any further asset sales, but other issues. So Labour will be happy with today’s decision. They will also be more likely to get the signatures for their petition completed in time, so that the petition is validated before the first sale. They will then use that to call for a further delay (which of course will not happen).

I guess the Government wasn’t confident that if they did not delay, that legal action wouldn’t force a delay anyway. So this is probably a case of making a virtue out of necessity.

This is also a win for the Maori Party. They will use the delay as proof that being constructively engaged with Government, is better than total opposition to everything as Mana does.

One possibility for the Government is to only sell minority stakes in three SOES, not four (Air NZ is not an SOE), which could still be done before the 2014 election. There is a case for the time being very bad for Solid Energy, and also a case for not selling Genesis (which I will blog on later this week). Both of these companies are pretty small compared to the others.

Tracy Watkins reports:

The Cabinet is expected to press ahead today with the Government’s flagship asset sales programme after a landmark Waitangi Tribunal report.

But insiders are not ruling out a “short to medium” delay to the first share offering, as the Cabinet weighs up whether to push out the original timetable by just a few weeks – which would still allow for a pre-Christmas float – or delay the sale of the first shares until early next year.

Putting the part-float of state-owned energy companies on ice indefinitely is not on the table, sources say.

I never thought it was.

There were calls yesterday for the Government to delay the sales as Labour and the Greens step up their efforts to force a referendum on the issue before the next election.

They’re not quite there let. Obviously the Greens need to spend more taxpayer funding on hiring signature collectors.

I also look forward to the Greens and Labour announcing they are repealing or amending the anti-smacking law, as they have suddenly become fans of referenda trumping election outcomes.

In an urgent report a week ago, the Waitangi Tribunal called on the Government to put the first share float for Mighty River Power on hold until it had thrashed out a mechanism for recognising Maori proprietary rights and interests on waterways within power company catchments.

Controversially, the tribunal proposed a “share plus” option as one solution, possibly including super-dividends, board seats and even a right of veto for Maori.

But the Cabinet seems almost certain to balk at that option, given the power it would hand to iwi as minority shareholders to override bigger shareholders and management on strategic decisions. Government sources have confirmed there are concerns at whether the “shares plus” option is even workable.

What does that mean for the credibility of the Tribunal, if it has proposed an option that in workable?

Kate Chapman at Stuff reports:

The Government is under pressure to allocate Maori shares in the part-float of state-owned companies to keep its assets sales on track.

But a delay seems inevitable after the Waitangi Tribunal announced yesterday that Maori have proprietary rights in water and said the partial sale of state-owned energy companies should be put on hold to protect their interests.

Going ahead with the part-float of Mighty River Power, Genesis Energy and Meridian Energy without allowing for Maori rights would be in breach of the Treaty of Waitangi, it said.

Prime Minister John Key said the Government would consider the findings in good faith and respond after taking advice from officials and Crown lawyers.

“We’ll go through the merits of the argument and in the fullness of time we’ll come back with a response.” He has also promised to discuss the Government’s response with the Maori Party before making it public.

There’s two issues here. In my view the Tribunal has one issue right and one totally wrong.

There is little dispute that Iwi have some rights when it comes to water in certain areas. This has been recognised in settlements made by the Crown, and in fact the Government has been negotiating with the Iwi Leaders Forum on these rights for some time. The extent and nature of the rights is not clear cut (hence the negotiations) but no Government has ever said there are no rights.

Where the Tribunal has it wrong is saying that the partial sales should not proceed, as it may limit the ability of the Crown to settle such rights. With all respect (in fact little respect), this is nonsense. The Crown is the the Crown.  Parliament can pass a law on pretty much anything – as it does with other settlements. The Crown can allocate money for a settlement.

And in this particular case, the mixed ownership model arguably makes it considerably easier to settle any claims over water rights. You can simply buy some shares on the NZX and use them in a settlement. You can’t do that if they remain an SOE.

There is no barrier to settling any claims, by implementing the Mixed Ownership Model.

My NZ Herald column:

My initial reaction was that of course the Government should delay the float until it receives the Tribunal’s report, due in September. This might be a delay of a few weeks only, and what does a few weeks matter.

It seems the timing is more sensitive than one may initially think. The rules around issuing shares in a company require the most up to date set of financial accounts. If the flat is held too long after the annual accounts have been finalised, then the company has to prepare a special more recent set of accounts. This is no minor job and can take a month or two.

Preparing the accounts can’t really be done over the summer break, as too many suppliers and the like close down, so what this means is that if Mighty River Power is not listed by perhaps October, then the delay would have to be until March or April next year. So a delay of a few weeks may be a delay of six months or so. This is undesirable for the Government because they want the five partial sales done well before the 2014 election.

I conclude:

However there is a view by some in Government that the Maori Council is acting in bad faith. The Government has been negotiating with Iwi leaders on issues around water rights for some time, and they are committed to resolving those issues. They do not believe the number of shares they hold in an SOE is relevant to their ability to resolve those issues. This is why there has been little support from Iwi for the claim by the Maori Council. There is also some anger at the fact that the Maori Council waited until the last possible moment to go to the Waitangi Tribunal, considering the policy was announced 18 months ago.

What this leads to is the alternate view that the Maori Council are going to eventually go to court regardless of what the Waitangi Tribunal says. Hence, if that is your belief, then the sensible thing is to get them into court as quickly as possible. Therefore saying you will not wait for the Waitangi Tribunal report could be a way of achieving that. It is like demanding your competitor in poker show their hand. 

There are risks either way.

The Waitangi Tribunal has said it wants the Government not to proceed with any asset partial sales until it completes its report.

I think the politically smart thing to do is for the Government to agree to this, even though it will mean a delay. The reasons are:

• The delay is likely to be two months or so only, which isn’t critical. Selling MVP in say Oct/Nov instead of Aug/Sep is not a big deal.
• If he Govt declines a delay, I suspect it might annoy the Tribunal enough that they are more likely to make unpalatable findings in their final report.
• A refusal to delay would inevitably see court action.
• The Maori Party would be placed in a very difficult position if the govt refused the Tribunal’s request.
• The public might not agree the the claim made to the Tribunal, but they would find it hard to understand why one can’t wait until September for their final report.

Just to be very clear, if the final report comes out and says the partial asset sales should not proceed until all water rights issues have been resolved (which could take years), then I do not advocate that the Government should necessarily agree to further delays. That decision has to be based on what exactly the Tribunal says, and the quality of the reasoning for their recommendations.

But a delay until their report is done, is not an unreasonable thing, so long as their report is completed by September as indicated.