International market turmoil is not likely to prevent the Government from going ahead with its plan to sell off 49 per cent of Mighty River Power next year and may prove a positive factor in the sale, Finance Minister Bill English says.
Mighty River has been confirmed as the first state company that will have shares sold off under the Government's partial asset sales programme.
Having been sworn in just yesterday, Cabinet has moved fast to get the Government's "mixed-ownership model" going, with the issue a focus for Cabinet in its first meeting's agenda yesterday afternoon.
Mr English and State Owned Enterprises Minister Tony Ryall said Cabinet had agreed that Mighty River Power should be the first company prepared for an initial public offering (IPO), which would most likely happen in the third quarter of next year.
"It's a company whose managment and board are very well known to the market. It is a company that has a strong record of performance it's also a company that is of a good size to take as the first offering in this programme,'' Mr Ryall said.
Mr English said the current market turmoil from European debt problems that threatens to develop into a full blown global economic crisis "doesn't mean there will be negative conditions for a float'' of the company, but a final decision whether to go ahead would be made in March or April.
He believed market conditions by late next year were "likely to be reasonably positive''.
"Both because the demand for this kind of investment could well be greater when world sharemarkets are a bit more volatile - because these are companies people know about and they're utilities - and because interest rates are coming down around the world which could make the companies more attractive.''
In yesterday's Cabinet meeting it was also agreed that decisions about share allocations would be made during the design phase of the IPO early next year, and that Maori would be consulted.
The Goverment expects at least 85 per cent of Mighty River and other companies to be partially privatised will remain in New Zealand hand but Mr English said there would be no statutory bar limiting foreign ownership beyond a 10 per cent cap on ownership by any investor other than the Government.
Labour's State Owned Enterprises spokesman Clayton Cosgrove said Might River was the "guinea pig'' for National's partial privatisation plan.
"Treasury has already warned that restricting shareholding sizes will weaken National's debt reduction argument and not, as John Key claims, prevent the on-sale of shares to foreign buyers.''
Mr Cosgrove said Treasury had also argued that "there is little room to operate any of these companies more efficiently, meaning the only way to make profits will be through higher power prices. And that will affect every single one of us.'
"I am urging other political parties to stand behind the hundreds of thousands of Kiwis who have voiced their concerns over asset sales, and to hold the Government to account on this issue.''
Meanwhile, legislation would be needed to support the plan, including removing Mighty River Power, Genesis, Meridian and Solid Energy from the State Owned Enterprises Act.
The ministers said the advice Cabinet had received was that Might River Power was ready to go to the market, and that more detailed information about the IPO would be made public following discussions early next year.
National campaigned on the controversial partial asset sales plan, saying it would consider an election a mandate to go through with the programme.
Mr English and Mr Ryall defended the plan again today, saying the alternative was "a lot more debt" and that mixed ownership was a "win-win".
"It's an opportunity for New Zealanders to invest in something other than housing or finance companies.
"And it will free up taxpayers' money so the Future Investment Fund can invest in priority new assets like schools, hospitals and irrigation, without having to borrow from overseas lenders."
- APNZBy Amelia Romanos Email Amelia, Adam Bennett Email Adam