Fran O'Sullivan

A columnist for the NZ Herald

Press on with partial privatisation - CEOs

Tim Bennett, CEO of the NZX. Photo / Listener
Tim Bennett, CEO of the NZX. Photo / Listener

There is huge support for the National Government's partial privatisation programme, with 84 per cent of chief executives saying the Government should ready other SOEs for partial sale.

Finance Minister Bill English and SOE Minister Tony Ryall are now preparing to put Meridian Energy on the block with up to 49 per cent of shares expected to be sold in a further IPO this year.

Deloitte CEO Thomas Pippos notes the Government's programme of partial privatisations will "unquestionably" lead to the deepening of the capital markets and expose large organisations to market scrutiny and pressure. "It has to benefit all stakeholders over time."

"I support this policy on economic and ideological grounds," adds a communications sector chief. "But National made a mess of the politics and that has spooked investors.

"Again, if you don't win the 'vision thing' it becomes all about the detail and we all know who lives there."

There were some concerns that the Mighty River Power sale had to some extent been derailed by the Labour/Greens NZ Power "ambush" and the post-float shareprice drop.

"The Mighty River Power IPO was soundly based but the price was impacted by the Opposition's desire to throw the asset sales programme off track," says Chorus chair Sue Sheldon.

"The Meridian IPO will be a test as to whether investors believe the regulatory environment will be subject to interference."

Mainfreight chief executive Don Braid says "it seems that the Government got the best possible price for MRP, however as an investor there appears to be a disconnect with the share price."

LGFA chairman Craig Stobo believes the MRP IPO was well priced for the taxpayer. "The remaining SOEs/assets should be prepared for sale.The Government should move from being an owner of these assets to being a best practice regulator."

There were some barbed comments:

•"Intrigues me why they are so determined to pursue privatising when they shy away from addressing the superannuation eligibility age. Not rational."

A number thought partial privatisation was too timid.

• "The Government should monetise these assets so that it can invest in the economy ... why use all the political capital to pursue a half way house? Proper privatisation of 100 per cent will yield the best results."

• "I have not been able to understand the rationale for selling these assets. It seems to be a strategy driven more by raw political ideology than logic."

• "I think the MRP price was set too high and therefore creates a difficult environment for the remainder of the MOM programme."

• "Did not agree with the tactic of Labour/Greens over the Mighty River Power IPO and they lost a lot of face to me in doing this."

• "Will broaden capital markets and gives quality alternative investment options for people. Also a sound way to put govt funds where they should be - into public policy initiatives or to repay debt."

• "The government should be out of commercial businesses."

• "Timing wasn't great for MRP. To maximise the returns on the other sales, they shouldn't restrict sales to NZers."

• "Selling 49 per cent raises $$ that can be used to reduce debt, they still have control. New investors will bring a sharper focus on performance. It should be a win win for the taxpayer."

• "Keeping Government out of business should be an objective."


Tim Bennett NZX

Tim Bennett has big plans for the NZX including turning nzx.com into a major portal to access the stock exchange. He says the current focus of the NZX is just for investors, to provide access to data.

"What needs to be done next is provide the data so that issuers can interact with us; companies can put up information and edit it themselves and make announcements, and do it in a more templated way.

"The portal will also enable participants to interact with each other and tools will be provided for investors to understand companies and their portfolios better. We need to facilitate providing better information from companies to investors."'

Fifty-eight per cent of CEO respondents to the Herald's survey said they were happy with the NZX's performance. "The market performing well will be the biggest driver of ensuring companies are able to raise equity capital," said a listed company chair.

"I think the NZX and the FMA as regulator have provided a robust platform, but convincing NZ mum and dad investors to participate in the sharemarket will continue to be difficult. "It's less about the NZX and more about politicians understanding the implications of political interventions that destroy shareholder value and inhibit foreign investment," added another.

More listings of current SOEs was one suggestion to make the overall market larger and more attractive. Suggestions to increase the NZX performance included: Less listing regulations and a halt to listing charge increases.

Bennett is optimistic about the state of the New Zealand capital markets.

"It has not been so conducive for IPOs in last 10 years," he says. "The growth in KiwiSaver is a structural change and provides a generational opportunity to reinvigorate the equity market and go forward in the debt market."

Bennett is in favour of setting up a holding company (or sovereign wealth fund) to hold the residual shareholdings of partially privatised state assets.

"One of big flaws of the SOE model is they are capital constrained ... if you have a Temasek they can allocate capital across the businesses, manage that much better and over time make strategic calls. They may want to sell down electricity overtime or increase in forestry."

CEO respondents to the survey broadly favoured such moves.

53 per cent supported a State holding company like Singapore's Temasek - to hold the Government's residual shares in partially privatised enterprises;

63 per cent said the State holding company should be allowed to make new investments and trade shares within set parameters;

55 per cent thought the NZ Super Fund should invest more in NZ- designated growth areas like agribusiness to enable companies to greater leverage opportunities in fast-growing export markets

61 per cent thought NZ should set-up a Norwegian style sovereign wealth fund to hold the royalties from oil and gas exploration to build national wealth.


To sell or not to sell

84 per cent Government should ready more assets for partial sale

87 per cent Government should proceed with Meridian Energy IPO

64 per cent Mighty River Power IPO soundly based and well-priced

- NZ Herald

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