Fran O'Sullivan: IPO could easily go ahead on time

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The Maori Council had repeatedly asked the Waitangi Tribunal to make an interim recommendation to the Government to call a halt on the Mighty River Power IPO. Photo / APN
The Maori Council had repeatedly asked the Waitangi Tribunal to make an interim recommendation to the Government to call a halt on the Mighty River Power IPO. Photo / APN

John Key used a telling term to describe where his Government sits on the Waitangi Tribunal's direction to halt share sales in four state-owned enterprises until it delivers its report.

"We have reached a decision point," Key said to media this week.

Students of international politics will immediately recognise this term (the title of President George W. Bush's memoir was Decision Points).

Like Bush, Key's leadership has been defined by his response to national emergencies.

Bush's response to September 11 - the Iraq invasion and Afghanistan war - was subject to immense criticism.

But the United States stayed safe from terrorists. Then there was Hurricane Katrina, then the fiscal adrenalin of the Bush tax cuts which his successor has not been able to unwind.

Key had February 22 - a devastating earthquake which knocked the New Zealand economy over again at a time when it was poised to come out of the doldrums caused by a lengthy domestic recession and the global financial crisis.

Then there was Pike River. Rena. And now the Waitangi Tribunal is poised to toss him a curve ball which will be every bit as frustrating for him to deal with as Helen Clark found the foreshore and seabed issue.

The Key Government has come in for plenty of criticism over its response to all of the disasters.

This week's redevelopment plan for the Christchurch CBD is positive. But without the funding details it remains a work in progress.

Both Key and Bush are cheerleaders. Both are relatively lacking in guile (on the surface), and both had successful business careers before entering politics.

But in the complex world of political decision-making, their style was and has been that of a chief executive.

So, why does Key believe he has reached a decision point - one of several major decisions that will set the political course for his Government?

Key would clearly have calculated that the Maori Council's claim would emerge before the Government could get the IPO programme under way.

The tribunal's response was also predictable. As a quasi-judicial body it is not biased towards the Crown.

The Maori Council had repeatedly asked it to make an interim recommendation to the Government to call a halt on the Mighty River Power IPO (though all four companies outlined in its claim are covered).

The council has also flagged that it intends High Court action if stymied, threatening to fight it all the way to the Supreme Court.

Funnily enough, no one accuses the Maori Council of bad faith when it indulges in such histrionics before the tribunal has even delivered its report.

That is just standard operating procedure for some iwi - otherwise known in the commercial world as the "I want it" camp - who take legal action to extract benefits from companies and local authorities which are pursuing development projects.

Nobody appears to have measured the deadweight costs of what some call "brownmail" on New Zealand business and the New Zealand economy.

But it will be hefty.

In Key's case he has to exhibit good faith, even though deep inside he will also view the whole process as akin to greenmail in commercial terms.

The problem is that business is relatively cowardly when it comes to commenting on such issues, so the vacuum gets filled by the profile-seeking lawyers who either commercially clip the ticket for prosecuting Treaty of Waitangi claims or charge hefty retainers for helping commercial clients deal with this complex reality.

It's in their interests for the Treaty industry to prevail.

Again, this is something Key will not be able to comment on publicly at this stage. He will have to bite it back.

The Prime Minister also has to deal with the political ramifications of his decision.

He has to consult the Maori Party. But the Maori Party does not represent all Maori.

He also has to deal with the commercial ramifications of his decision.

Fundamentally, the tribunal has delivered a rather naive commentary on the effects of delaying the Mighty River IPO.

The Government said at the tribunal hearing it could repurchase any shares sold in the mixed ownership model companies.

The tribunal said this week that it was, however, only a partial factor in weighing the balance of convenience "as the shares, once sold, can only be repurchased from a willing seller and may require a prohibitively expensive outlay".

"The only other option available to the Crown, were it to wish to return the mixed ownership model companies to full Crown ownership, would be to pass legislation compulsorily reacquiring the shares sold in the companies."

The tribunal went on to say the sale of shares could therefore cause a "significant disadvantage to the claimants were their claims to be determined to be well founded".

The tribunal then danced around timing issues.

Key's eyes will have rolled here at the tribunal's fundamental lack of commerciality.

The answer is quite obvious.

Simply hold back some more of the Government's quantum to ultimately use to settle the Maori Council claim (if - and only if - it can legally prove it has "title" to the water) and proceed with the IPO on its current timetable.

This may mean the Government would simply float 40 per cent of Mighty River Power at this stage instead of the full 49 per cent that will ultimately end up in private hands.

The Government is expected to hold back a considerable number of shares for the bonus share allocation it will use to entice retail investors to hold on to their Mighty River Power shares for three years.

If Key takes this very simple step - in good faith - there is surely no reason that the IPO should be delayed.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

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