Editorial: Mighty River right choice to start sell-off

New Zealanders will be at the front of the queue to buy shares in Mighty River Power. Photo / File

Opinion

The Government is, quite rightly, wasting no time in getting its part-sale of nominated state assets up and running. One day after being sworn in, the Cabinet has confirmed the programme and said Mighty River Power would be the first of the state-owned enterprises on the block.

Only unfavourable market conditions will prevent the state's stake being reduced to 51 per cent in a share offering in the third quarter of next year.

There is no reason to drag the chain. Critics who talk about a lack of mandate totally disregard the fact that the National Party put its plan to the electorate clearly and unequivocally. It won. Labour, which campaigned strongly against the part-sales, received only 27 per cent of the vote.

By any reasonable yardstick, there is a mandate for what the Government terms the "mixed-ownership model" for the energy companies Mighty River Power, Genesis, Meridian and Solid Energy, and a reduction in the state's Air New Zealand holding from 75 to 51 per cent.

The Government's attention now will be focused on ensuring the first initial public offering to shareholders is a success. Further details will be given early next year, but it has been confirmed that New Zealanders - notably the targeted mum-and-dad investors - will be at the front of the queue and will gain about 85 to 90 per cent of the shares. Further, no shareholder other than the state will be able to own more than about 10 per cent.

The Government's chief concern now will be that the shares perform well when the first of the companies is listed on the sharemarket.

In that context, Mighty River was always the obvious one to start the process, despite an initial suggestion by the Prime Minister to the contrary. While taking its name from its nine power stations on the Waikato River, it has diversified into geothermal power and used expertise in this field to good effect. An international joint-venture partnership for the development of geothermal power in Chile, California and Bavaria provides evidence of its entrepreneurship. It also suggests a solid financial underpinning.

The biggest of the trio of power companies is Meridian. It also has a renewable emphasis and is likely to follow Mighty River.

More problematic is Genesis. One of its main assets is the ageing, coal-burning Huntly power station.

It is also chaired by Dame Jenny Shipley. The former National prime minister is sure to become a focal point for political opposition to the sales.

Further, Genesis has a chief executive who, in his three years in the job, has proved to be somewhat publicity-shy. That will have to change because of the far greater transparency required of a listed company. Genesis is going to require a degree of burnishing not unlike that which will be needed for the later part-sales of Solid Energy, the state coal company, and Air New Zealand.

There should be no such problems for Mighty River.

As the first public asset to be listed on the stock exchange since Contact Energy in 1999, it will attract wide attention. Mum and dad investors have already shown their appetite for such shareholdings in New Zealand and in the likes of Britain, where mixed ownership is common and non-controversial.

A successful offering of shares in Mighty River would confirm that popularity, and show that New Zealanders are keen to put their money into something other than housing. The problem is that they have been starved of opportunities which carry the strong promise of steady income and long-term returns.

It will be up to Mighty River to set the tone for the part-sale of the other nominated assets over the next three years.