Fran O'Sullivan: Day of reckoning for MRP ... and the left

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Public acceptance of the Labour-Green intervention plan will be measured by IPO's success or failure

Greens co-leader Russel Norman (left) and Labour leader David Shearer propose to intervene in the electricity market if their parties become the government next year. Photo / Mark Mitchell
Greens co-leader Russel Norman (left) and Labour leader David Shearer propose to intervene in the electricity market if their parties become the government next year. Photo / Mark Mitchell

New Zealand's leading business lobbyists tread a fine line as they publicly amp up their anger at being "ambushed" by the Opposition parties' plan to intervene in the electricity market.

It's blatantly obvious that Labour and the Greens have been attempting to short the returns the National-led Government expects to receive through next week's Mighty River Power float.

Despite referendums, court actions and now their attempt to undercut the Government's first power company float through their announcement they will slash electricity prices if they take power, it hasn't stopped the listing.

There certainly are genuine business concerns at the precedent the two parties have set by their announcement to set up NZ Power to constrain electricity market prices, without even discussing the proposed and complex policy with key players.

But tilting at the style of the political intervention and asking the two parties to withdraw their interventionist plan is a waste of space. Not because of their own rationale in doing so (this was soundly based). But because Labour leader David Shearer and Greens leader Russel Norman don't give a damn about such requests at the midway point of the electoral cycle.

The 10 leading business lobbyists - including major leaders such as BusinessNZ's Phil O'Reilly and the Chamber of Commerce's Michael Barnett - who sent a public letter to Labour and the Greens this week - know this in their bones.

They know that the two parties are "not for turning" (at least in the short term). It makes political sense for the politicians to damn the power companies as rapacious commercial beasts, led by overpaid directors and chief executives who will suck all the spare cash out at consumers' expense.

This tactic works well for Labour and the Greens with their own political power base. Their supporters hate fat cats. Demonising the power company bosses could rile them enough to ensure more of Labour's and the Greens' voting base actually turn up to cast a vote in 2014. Or so the hope goes.

As the election gets closer (particularly if the two opposition parties do manage to get consistently ahead of National and its allies in the political polls), pressure will come on them to spread the message behind the scenes that an incoming Labour/Greens Government will try to make sure any resultant scheme is workable.

It's called defusing the substantial risk of the kind of post-election backlash that has hampered relations between Australian Labor Prime Minister Julia Gillard and the business community across the Tasman.

The New Zealand business lobbies are on the button when they point out the risk to confidence and savings through the Labour/Greens shenanigans.

But there is also a risk that if these lobbies over-egg matters, they might end up launching another proverbial "winter of discontent", when the Labour/Greens machine is not even in the position to operationalise its decisions and the next election is still 18 months away.

The Mighty River Power issue closed at 5pm yesterday. Late next week, we'll all know whether the Government's first IPO (initial public offering) in its partial privatisation programme has been a success. Or whether the decision by Labour and the Greens to flag their plan to re-engineer the electricity market has knocked much of the top off the stock price and undermined the proceeds for the subsequent floats of Meridian Energy and Genesis Energy.

There's been plenty of back-of-the envelope estimates suggesting the Government could lose out on at least $400 million and possibly a much higher amount if the MRP float bombs and the shares don't reach the predicted price band. Other estimations - including that relayed by the business lobbies - suggest $1.4 billion could be wiped off the value of private power companies and a similar amount from the taxpayer-owned companies which will go on the block.

Next week, it will be apparent to what extent the Opposition's proposed intervention has affected values.

That is the point when the lobbies might well consider making a more coherent study of their own into the impact of the opposition parties' intervention on New Zealand's capital markets.

But Labour and the Greens should pay attention to the impact of proposed policy changes on our capital markets.

It has been a long, slow climb back for many New Zealand companies since the post-global financial crisis credit crunch. Now the capital-raising door is open again, they should be careful not to jeopardise confidence.

There is also another risk.

In 1999 - as Labour's chances of taking office materially improved as the election drew closer - jumped-up MPs let it be known it was "too late" coming to Labour to forge cordial relations after it assumed office.

Professional firms hosted plenty of in-camera lunches for Helen Clark and Michael Cullen so they could get acquainted with leading business people.

It's 13 years since the last "winter of discontent" when Helen Clark's Government was reduced to having to launch a charm offensive with the business community (labelled as the "smoked salmon offensive") to try to get business onside with her administration.

Shearer and Norman do not want to suffer a similar fate.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

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