'Shares plus' gone, asset sales timeline on track
"At last! Clarity and action. That's what local and foreign investors want to hear from this government."
Featured commentPrime Minister John Key is refusing to negotiate a "shares plus" arrangement with Maori over the partial sale of Mighty River Power.
The government is also working to remove the company from the State Owned Enterprises Act and is preparing an order-in-council for cabinet to consider and approve next week.
The decisions were made today after negotiations with Maori around the country.
Mr Key says the decisions may lead to legal challenges from the Maori Council and others.
But his intention is still to float the energy company sometime between March and June next year.
The government has spent the past five weeks in consultation with Maori over the "shares plus" concept.
Recommended by the Waitangi Tribunal, it would have essentially allowed certain Maori interests particular right and powers in relation to the power company which were above and beyond the rights of other shareholders.
Mr Key says the series of hui on "shares plus" was part of the government’s commitment to consult with Māori in good faith.
“Following analysis of the oral submissions made at hui, along with the written submissions, the government’s view is that no new information has come to light to change our preliminary view – which is, that the concept of ‘shares plus’ should not be progressed,” he says.
Mr Key says the series of hui came to a number of conclusions:
- Financial redress and input into resource management decisions can be provided in other – and in some cases better – ways.
- Appointing directors and exercising shareholder voting rights can also be achieved in other ways with the Crown, which will remain the controlling shareholder.
- The Crown does not believe providing iwi with special rights in making management decisions will work well and most submitters who considered the idea agreed.
- "Shares plus" would create a potential conflict of interest within and between different iwi groups. And it would potentially weaken existing relationships between iwi groups and the SOEs.
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Comments and questions23
Some sense, and some resolve, at last.
At last! Clarity and action. That's what local and foreign investors want to hear from this government.
It's good to see reality recognised before colliding with it. Now can we get on with scrapping the ongoing Treaty nonsense?
Good job. But you can bet, the judges will be complicit in providing for their colleagues further down the food change, to go the govt.t
any asset sales could still be considered illegal as we as taxpayers own it and have paid for all of our assets,the governments is only an administrator not an owner so whats happening is plain ol white collar theft of our tax paid assets.
I give no right for any sales
Do you not understand what "sold" means? You will have the same ownership of the proceeds as you had of the asset, and as you contributed to its establishment - zilch. Financial and economic illiteracy is a popular but insufficient qualification.
Mr Hood. I do not want to own any shares as currently I am forced to.
If you want to, just purchase some when they are available. Simple.
While a large majority of New Zealanders are going to salute the Government's stance and intended actions to scrap the 'shares plus' scheme, the media will continue to beat the drum as the matters are argued in court. At least overseas investors will no longer have to concern themselves with the ill-conceived notion of some shareholders having greater rights than others! Well done John.
Best thing the goverment has done not letting the Maoris walk all over them
Great govt stance, but would be more 'silent majority' friendly if coupled with abolishment of the Waitangi Tribunal, and the gravy train it hauls.
On one hand this is great news. But it's the first two bullet points at the end of this article that are still quite concerning. This essentially means we are not going to be privy to back room deals negotiated between government and Iwi (as has been the case recently) where we, the taxpayers and owners of these assets, have not given up our rights to Maori, namely any ownership or other rights over water, wind, et al. This space should be watched.
Too true - trust Key and his fellow travellers when it comes to his usual appeasement custom ?
No way.
No more pandering to filthy maori greedy parasitic leeches
Yeah now just pandering to filthy greedy National supporting leaches
I shower once sometimes twice a day (depending on activity), I pay taxes and rates and have never been on a benefit. I am about to signoff on a treaty settlement that is the equivilant to 2 cents in the dollar for what we have had stolen from us by the crown and her government agents. Why you ask? because to seek fair and just compensation would bankrupt the already overdebted nation. "Anonymous" by name and nature, fade away little man, the future is brown.
Now, hopefully, those that are the manipulating Maori treaty twisters will start to get the message
YOU DON"T OWN THE WATER!
The people of this country will not allow it.
One of the fundamental issues that seems to have been lost in this debate is: what is the point of selling an asset with what seems to be a reasonable return on capital invested (that is: a good investment) to be used to pay off debt, if there is not some control in place for future governments not to re-borrow. Lets have some financial governance on future government. Otherwise we are just selling productive assets to clear the bankcard for potentially future non-productive borrowing.
Would someone please advise: what is the governments cost of borrowing versus the return on that borrowed capital that is invested in Mighty Power. In other words: is the return on investment in Mighty Power greater or less than the interest the country will save by using the proceeds to pay off the debt. Just want to check that financial literacy is actually operating at a government level.
On an asset such as MRP, you'd be looking at a WACC of 9-11%. In other words, it needs to be returning 9-11% of what its market value is (what it could be sold for). If you rule out selling, then the only return to Govt is the cash dividend (you can't use retained earnings balance sheet entry to buy school books for our kids).
The SOEs have a dividend yield of about 3%, odd. The fact that the Govt can borrow 10 years at 3.5% is irrelevant is cost of debt is not the same as cost of capital. You also need to look at what 'social' return or hurdle rate the Govt puts on social spending - how does this compare with the dividend yield, the cost of debt, the SOEs' cost of capital?
In reply to anonymous - thank you, you are correct; i was trying to simplify it for readers. In deriving a WACC of 10-11% what assumptions are you making in your CAPM, for the RE component of the calc.
I would also like to hear your intelligent response to my earlier post: How do we constrain future governments from not just running up the credit card because while you correctly say that retained earnings do not buy school books for our kids - using capital not revenue to pay for these items breaches basic accounting principles...at least while it is sitting in retained earnings IT CANT BE SPENT. The fact that you would suggest that we should use an asset (and that is what retained earnings are: accumulated profits which are reflected as increases in equity) to buy school books for kids (basically a rapidly depreciating item in todays knowledge economy) is a concern. Though maybe you too were trying to simplify matters for readers, having said that it was the MOST robust response on this blog. Look forward to hearing more. New arrival
Are the Maori going to claim ownership of the relative humidity in air? What about oxygen? What about sunlight? Are they claiming gravity effects on flowing water too?
Koata Your attitude summed up in your last comment clearly demonstrates yours and many other mixed race kiwis. I would suggest you are more European than Maori (blood quantum) Factually you are so wrong; the future is not brown... the population is becoming fairer by each generation.
I am so impressed that you are signing off on a treaty settlement.....LOL. You must be of great standing in the Treaty Gravy Train....I and other fair minded Kiwis owe you and your lot Nothing!
Those Maori with mixed ancestry choose to be Maori for a number of reasons, which you could never ever comprehend. Regardless of the fact that some Maori are of mixed ancestry they are still seen as Maori (thus dole bludgers and criminals) by the likes of you and your kind. To be accepted by you and your kind a Maori would have to divest themselves of all those things that make them Maori e.g. Simon Bridges MP. I have nieces and nephews who are blond haired and blue eyed, and guess what grundle? They are Maori.