KEY POINTS:
Two years ago, Cabinet minister Trevor Mallard made an interesting announcement in a speech to the Institute of Directors.
State-owned enterprises, he revealed, were going to be let off the leash a little more, as part of the Government's plan for economic transformation (ET).
The rationale was that
SOEs might take a few more risks, and therefore potentially reap a few more rewards.
SOEs, after all, are some of the biggest businesses in New Zealand, so why should we be solely relying on the private sector to save us, when the public sector might be able to do its bit, too?
Perhaps it's time for ET to phone home, because there are so far no signs ofSOEs going boldly where few have gone before.
It could be that most are waiting for a change of Government, in the hope that they might have the leash removed altogether. But despite much muttering over the past three years about allowing some to list on the stock exchange, that now seems unlikely for at least another three years, even if National wins the election, given its promise not to sell any state assets in its first term.
That promise could also hobble the taskforce set up to consider ways of boosting our capital markets. But there is still the possibility that partial floats might be squeezed on to the agenda.
The latest suggestion from the business sector is for some of the biggest SOEs to be folded into a holding company modelled on Singapore's Temasek. The idea is that it would raise $4 billion to $5 billion of fresh equity to grow those companies or others which might be added to the portfolio.
The proposal appears to have had its genesis in a body known as the Taupo Group, which includes a who's who of investment bankers and fund managers. Among other things, the group has suggested taking a broader perspective of what assets the state should own.
There are more than a dozen SOEs, in sectors as diverse as weather forecasting, telecommunications, educational publishing, post and banking, rail, pest management, food inspection, farming, airways navigation, energy and property valuation.
As portfolios go, the Government is probably overweight in energy companies, and they are the most likely targets in the near term. In the middle of last year, it commissioned ABN Amro and Macquarie to put a commercial value on its energy companies. The resulting reports estimated Mighty River Power at $2.8 billion to $3.2 billion, Genesis at $2.3 billion, and Meridian at $5.5 billion. Overall, the SOEs are valued at around $25 billion.
New Zealand's biggest private company, Telecom, has a market capitalisation of around $4 billion.
In the meantime, SOEs have been ordered by the Government to act in a socially responsible way, following the public outcry over the death of Folole Muliaga, whose power was cut off by state-owned Mercury Energy. Solid Energy's use of paid informants also upset ministers.
Mallard told the Cabinet in August that most were taking the task seriously. Genesis and NZ Post got a gold star, while Kordia (telecommunications and broadcast networks) and Ontrack (rail tracks) got a "could do better".
