MOM vs SOE model

Stacey Kirk at Stuff reports:

If Solid Energy was partly privatised, it probably would not be in the mess it is in now, Prime Minister John Key says.

Continuing to defend the Government’s sell-down of state assets, Key said today a deal to bailout Solid Energy might not have been necessary had the company been partially floated.

“My own personal view is if we’d had the mixed ownership model applied to Solid Energy, it may well not have gotten itself in the mess it did,” he told Firstline.

“That’s because the external analysis would have rung a lot of bells and demanded a lot more accountability,” he said.

This is absolutely right.  Companies listed on the NZX have continuous disclosure obligations. They have a share price which indicates what the investment experts and shareholders think the company is worth. You get far far more accountability with an NZX listing than you do with an SOE.

He also said other state-owned assets such as TVNZ and NZ Post, had proven not to be good long-term investments to hold on to.

TVNZ and NZ Post will probably both be worth next to nothing in 10 years times. We should be selling them while we can get a cent for them.

“People look at it through rose-tinted glasses, but the reality is the SOE [State-Owned Enterprise] model is not actually a brilliant model,” he said.

“The mixed-ownership model is probably a better model,” he said.

I prefer a full private ownership model if the company is a commercial trading company, but MOM is certainly superior to SOE.

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