COMMENT: Why doesn't Cabinet Minister Shane Jones simply get to the point and advocate using the MOM — or the mixed ownership model — for the future megaport he wants mashed together from three major North Island ports?
Jones has signalled New Zealand First will put the rationalisation of three key North Island ports on the agenda at the 2020 election with a pledge to form a mega-port authority as part of the price of a future coalition deal.
He is obviously keen to defuse investor anxiety. He stopped short of using the "N" word — nationalisation — in his response to the first report from the Working Group undertaking the review of Upper North Island Supply Chain strategy.
Nationalisation had been floated by NZ First at the 2017 election. But unsurprisingly it is not popular with either listed Port of Tauranga or Ports of Auckland which is council owned. The third member of the prospective megaport — Northport — already has diverse ownership.
Yet the mixed ownership model used by the previous National Government to privatise gentailers, such as Mercury with the Crown retaining 51 per cent stakes, could be an appropriate model for a listed megaport.
It is well understood by sharemarket investors and analysts.
Importantly, it could result in a significant listed company on the NZX. One with sufficient balance sheet size to leverage up to partially fund future port development and also with sufficient clout to negotiate with international shipping companies which can currently play ports off against each other.
Jones' planned election year proposal to reform all three major North Island ports will not fly without empowering legislation to create the single entity he wants.
As Jones told Newshub: "There's far too much rivalry, there's not enough collaboration, they operate in isolation and often to the detriment of New Zealand and as a politician I am going forward into the next election to bring that kind of behaviour to a halt."
"Unfortunately that is not the business of the Cabinet or the Government I'm currently a part of. But I am very aspirational of being a future key partner in future government."
Read from that Jones has not been able to persuade Finance Minister Grant Robertson that any hint of nationalisation would fly in the current coalition's first term in office.
The conundrum is that the ports mashup that Jones has in mind can not be achieved without either persuading the owners of the three major North island ports companies, Port of Tauranga, Ports of Auckland and Northport, to surrender ownership control voluntarily or via Government dictate.
Even getting voluntary agreement would be difficult given the competition issues that would emerge from moving towards reducing competition in the marketplace.
The ownership interests and issues are complex:
• Ports of Auckland is 100 per cent owned by Auckland ratepayers through Auckland Council, which (so far) is intent on retaining ownership and access to the company's dividend stream.
• Ports of Auckland is also a 19.9 per cent shareholder in Marsden Maritime Holdings, whose major shareholder is the Northland Regional Council (53.61 per cent) but also includes other minor shareholders such as ACC (2.18 per cent).
• Marsden Maritime Holdings and the publicly-listed Port of Tauranga each own 50 per cent of Northport.
• Port of Tauranga — worth some $4 billion on the NZX — is majority controlled by Quayside Securities with 54.14 per cent (this company's shareholder is Quayside Holdings, which is 90.92 per cent owned by the Bay of Plenty Regional Council).
It is one of NZ's best publicly-listed companies with some 13,000 shareholders who have done well from their investments.
Merging the varying combinations would spark takeover code thresholds and would inevitably trigger the Commerce Act through the merged entity having dominance of the container shipping sector.
Which is where legislation will inevitably comes into play and with it the prospect of nationalisation if the three companies could not agree on a path forward.
Would this be a bad thing?
The previous Labour Government essentially forced through the breakup of Telecom after it became concerned about its pricing and dominance of broadband.
While Telecom shareholders ultimately voted for structural separation making history as the "incumbent" telco in the world to voluntarily split in two, the proposal for the megaport is a move in the opposite direction.
If Jones is serious and not simply trying to bully an outcome, he should ask the Working Group chairman Wayne Brown to put it on his agenda, get the best advice in the business, and then look at all the options.
Better that than trying to jawbone through an outcome that will not fly.