Government expects to gain $5-$7billion through sales

NZPA

Thursday 19th May 2011 1 Comment

The Government expects to reap between $5 and $7 billion through partial asset sales of state-owned energy companies and reducing its shareholding in Air New Zealand.

The issue will be a key election issue as Labour has already been actively campaigning against sales.

Finance Minister Bill English outlined the anticipated proceeds from the Government's "mixed ownership model" policy for Mighty River, Meridian, Genesis and Solid Energy plus reducing its 75 percent holding in Air NZ. The sales would happen over three to five years starting next year depending on market conditions.

"As we promised, we are now clearly setting out our policy to New Zealanders well before the election in November," English said.

"The Treasury estimates that extending the mixed ownership model to the four energy SOEs and reducing the Government's majority shareholding in Air New Zealand are likely to free up between $5b and $7b of capital -- depending on the final structure of the programme."

The move would help the Government reduce debt while also providing investment opportunities, he said.

The Government expected to have to spend more acquiring assets by 2015 requiring $21b.

"Rather than simply borrow this amount, the Government will use proceeds from the mixed ownership model to recycle existing capital towards high priority future investment in assets like schools, hospitals and broadband.

"The proceeds will fund about a third of the Government's new investment in core social infrastructure."

The Government had not decided exactly how much of each company would be sold or when other than that the Government would retain a majority shareholding.

"It's important to remember that the Government will remain a strong net investor in the next five years - it will accumulate an extra $34.3b of assets over the next five years alone. But we can't continue to fund these assets by building up more debt indefinitely."

Conditions for sales included that the Government maintained majority control in the companies, that New Zealand investors had the first opportunity to buy the shares, that sales created good investment opportunities, and that consumers would be adequately protected.

No other SOEs were being considered for partial sales.

Labour has accused the Government of selling the family silver and warned consumers would face higher charges while shares would end up in foreign ownership.

Comments from our readers

On 19 May 2011 at 7:28 pm Alberre Tross said:

Sounds good as long as everyone has the option of buying the shares or bonds on an even basis. Still haven't got any idea what Labour would do to get us out of the quagmire but in the most unlikely scenario of them getting power, then they would not have a mandate to do any of the things that National is proposing. That ought to make the electorate worried.