Are asset sales a go?

September 3rd, 2012 at 7:55 am by David Farrar

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?

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The Waitangi Tribunal decision

August 25th, 2012 at 9:00 am by David Farrar

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.

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Will the Government delay

August 2nd, 2012 at 1:17 pm by David Farrar

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.

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The Govt should wait for final Tribunal report

July 31st, 2012 at 12:00 pm by David Farrar

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.

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The Waitangi Tribunal

July 12th, 2012 at 1:11 pm by David Farrar

My NZ Herald column is on the Waitangti Tribunal. An extract:

The Government knows that its policy to sell minority stakes in the power companies isn’t the most popular of policies. It is tolerated by most of their supporters, rather than beloved. The one thing which could turn that tolerance to opposition would be the Government doing a deal with Iwi to give them cheaper or even free shares in the power companies. They are keen for Iwi to invest in them (as Ngai Tahu has indicated they are keen to), but paying the same share price as “Mum and Dad” investors.

So the Government would have to say that they will not accept the findings of the Waitangi Tribunal. Any Government which retreated from the principle that no one owns the water (and the air) would face political oblivion at the next election.

This would then put huge pressure on the Maori Party. Would their members and activists want them to remain Ministers in a Government that ignored a Waitangi Tribunal recommendation? Their fear is that if they do not do something, then Mana would use the issue to try and win seats off them in 2014.

On this issue, can I recommend this excellent Q&A by Joshua Hitchcock on the Maori Council water claim.

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