Supreme Court given asset sale IPO deadline

Preparing Mighty River Power for public listing will not begin before February 18.

The Supreme Court has been told the date will be the final window of opportunity to start the partial sale process of the state-owned enterprise.

Chief Justice Dame Sian Elias and Justices John McGrath, William Young, Susan Glazebrook and Robert Chambers have reserved their decision after two days of hearing on water rights issues.

The Maori Council has been trying to halt the sale of up to 49% of Mighty River Power, which the government is planning for the first half of this year.

Queen’s Counsel David Goddard told the Supreme Court the Crown would not be undertaking any preparation or behind-the-scenes work on the sale process before February 18. This would give the Supreme Court a little over a fortnight to make a decision.

In closing arguments, Maori Council lawyer Colin Carruthers QC repeated his concern the government’s decision to sell shares to a third party would restrict its obligation to look out for Maori customary rights in the water resource.

He said those rights dated back to 1840, when the Treaty of Waitangi gave them full, exclusive and undisturbed recognition.

Mr Carruthers questioned Mr Goddard’s concern Maori had never made their claim clear. “What they want is a remedy or compensation if all else fails.”

Justice Chambers challenged Mr Carruthers on the water rights issue and said the dams were likely to stay in place beyond the life of the 35 year consents.

“It’s extremely unlikely the infrastructure would be closed unless we give up hydro-electric power. The use of the dams is likely to continue in some way or another."

Earlier in the day, Mr Goddard conceded any investment prospectus sent to investors would need to disclose the possibility of the 35-year consents not being renewed.

"There are downside contingencies and there are upside contingencies. The potential for regulation changes is one of those downsides."

But he assured the Supreme Court the sale proceeds are still on track to return between $5 and $7 billion to be reinvested in schools and hospitals, roads and rail.

He said the government does have the power to transfer the SOEs back from the mixed-ownership model structure if the share price was not suitable or the marketplace changed.

When that was questioned by Mr Carruthers, Chief Justice Elias said getting the largest amount of money was at the forefront for the government.

“Why isn’t the Treaty as important as the price you’ll get,” asked Mr Carruthers.

Yesterday, Mr Carruthers argued the transfer of shares will result in the impairment of the Crown's abilities. It would be unable to deal with river consent issues easily and would instead need to consult with the private shareholders.

“At present the Crown can exert considerable control over the state-owned enterprise but this control will significantly diminish once each SOE is turned into a MOM (mixed-ownership model) company.

"Giving Maori direct and meaningful involvement in the power-generating SOEs after privatisation will not be possible.”

After questioning Mr Carruthers, Chief Justice Elias floated the prospect of the Supreme Court limiting share sales to no more than 25% of the companies.

"A protective mechanism could be that the Crown will only divest 25% until there's some resolution.”

bcunningham@nbr.co.nz