BUSINESSDESK: The proposed loyalty scheme for retail investors who hold on to shares in part-privatised power companies will reduce the government's take from its asset sales programme by an unspecified sum.
While details of the scheme are unresolved, Prime Minister John Key told his post-Cabinet press conference yesterday afternoon that it was "likely that a portion of the 49% (of the company to be offered to private investors) will apply to the loyalty scheme."
The alternative would be to issue new shares, effectively diluting the value of existing shares, to both the government and private investors in order to maintain the government's controlling shareholder.
Mr Key did not rule out a bonus share split option, but officials are indicating this would be a complex option by comparison.
Australian and British examples of similar loyalty schemes have seen small-scale investors rewarded for holding their shares for an extended period, costing $A360 million in lost revenue for the Queensland government in the case of the sale of the state's railways system.
Mr Key has indicated that small-scale investors would need to hold their shares for as much as three years before qualifying for the bonus top-up, which is being offered as a sweetener to encourage retail investor participation in the otherwise unpopular share floats.
He scoffed at Labour Party suggestions the loyalty scheme could cost as much as a billion dollars, given that the total value of the 49% stake in the first power company to be offered, Mighty River Power, was valued at around $1.5 billion and the loyalty shares would be a small portion of that.
Trying to pressure Mr Key into revealing more sale details yesterday, Labour leader David Shearer warned of a potential cost of $1 billion from the bonus scheme.
Greens co-leader Russel Norman also warned that taxpayers would pay for it.
"The retail syndicate will be a much smaller proportion," Mr Key said. "There will be some cost, but it's an investment worth making. Labour's argument is that we are being irresponsible encouraging to invest in a company like Mighty River Power."
Mr Key's comments mirror a marked shift in government rhetoric on the reason for the asset sales, which were initially defended as to way control government debt and to fund new public infrastructure.
However, with the sales approaching and the details of offers available for small and first-time investors emerging, the government is increasingly talking up the programme as a way to spur a savings culture among New Zealanders, based on more than the traditional preference for bank deposits and residential property.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- 'Real housewife' lawyers up, accuses Devoy of bullying, defamation
- Where polls stand on the eve of the first US presidential debate
- Former Fonterra director gives new governance proposal the thumbs up
- John Key: I won't take a traditional role after being PM
- Affco tried to gag union badmouthing Talleys as condition of meat contract talks
Most listened to
- Knewe Biosystems founder Dr Graeme Coles discusses the future of his product
- Media Snapchat: NBR’s Nick Grant ponders the Human Rights Commission’s role in RHOAKL racism row
- Craigs' Mark Lister on good equities returns for the September quarter to date
- 'It had become far too complicated so we threw it all out the window' – Jane Wrightson on NZOA's new funding model
- Matthew Hooton's picks for Key's next cabinet