Bonus hint for loyal SOE investors

State-owned Enterprises Minister Tony Ryall. Photo / Glenn Taylor

Govt decides not to bar foreigners but will work to keep shares in this country

People are likely to be offered sweeteners to encourage them to buy shares in partly privatised state energy companies and to discourage them from selling them on to foreign investors, the Government indicated yesterday.

As reported by the Herald in May, Mighty River Power will be the first of the four energy companies to be put up for sale under National's mixed ownership model. The shares will probably be available in the second half of next year, the Government said yesterday.

"It's a company whose management and board are very well known to the market," said State-owned Enterprises Minister Tony Ryall.

"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."

The sale would go ahead subject to market conditions, but Finance Minister Bill English said the present market turmoil may be a positive factor as utilities such as power companies were seen as good stable investments.

The Government says the share offer to the public and large investment companies will be designed to ensure at least 85 per cent of the company remains in New Zealand hands.

However, Labour says that without a statutory limit on foreign ownership, which the Government says it will not implement, investors who buy shares will inevitably sell them to deep-pocketed foreign interests.

Mr English said a statutory limit on foreign ownership "could have quite an effect on the value taxpayers get" for the assets to be sold, but in terms of overseas ownership when the sale was complete, the Government was "happy to be judged by the result of the share allocation".

Mr Ryall said there were a range of options to ensure local ownership, "from making sure there's guaranteed allocations for New Zealand investors, through to whether you might have various incentives for people to hold the shares for a length of time".

He later told Radio NZ that might include "loyalty bonuses that further encourage people to be involved in the scheme".

Those were matters that would be considered next year by the investment banks contracted to arrange the sale.

Investment adviser Brian Gaynor said the kind of incentives suggested by Mr Ryall have been quite common overseas and the recent sale of Queensland Rail was one example.

Investors were given the opportunity to buy further shares at a discounted price if they held them for a set period.

Such "bonus issues" were generally limited to small "mum and dad" or retail investors with relatively small holdings.

Mr English said the Government would consult iwi over its privatisation plans in February.

MIGHTY RIVER
* Valued at $3.75 billion.

* Owns eight hydro dams on the Waikato River, four geothermal plants in the central North Island and the gas-fired Southdown plant in South Auckland.

* Generates 16 per cent of the country's electricity.

* Has 392,000 retail customers or 21 per cent of the market mostly via Mercury Energy.

* Net profit in 2011 $127 million.