However, we’ve got several great examples of partial asset sell-downs that have proved a win-win for all stakeholders.
Port of Tauranga is an obvious one. While the local council retains a majority stake of 54 per cent, the company has been listed on the sharemarket since 1992.
It’s grown to be the only New Zealand port able to accommodate the largest vessels and it handles a third of all New Zealand cargo, nearly 40 per cent of our exports and almost half of all shipping containers.
The company’s performance has trounced that of its peers, both financially and in terms of operational efficiencies.
I’d argue a key reason for this has been the stronger governance that comes with being a listed company.
The “mixed ownership model” was a phrase used ahead of the partial sale of the three state-owned electricity companies a decade ago.
During 2013 and 2014, John Key’s National-led Government sold just under half of Mighty River Power (now known as Mercury NZ), Meridian Energy and Genesis Energy and listed them on the NZX.
A few years after that, I recall asking the chief executive from one of those companies about the biggest change he’d noticed since the sharemarket float.
Without hesitation, he said “scrutiny” because of the added pressure to manage the business sensibly, spend every dollar wisely and have a clear strategy.
There’s nowhere to hide when you have an army of experienced analysts and savvy investors watching and judging your every move.
Those three companies are much better businesses today than they were 10 years ago and that’s reflected in the earnings and share price growth we’ve seen since.
Contrary to popular belief, this success hasn’t come at the expense of consumers.
According to MBIE, electricity costs per unit have increased at less than half the rate they did when these companies were in government ownership.
The Crown still owns 51 per cent of each of them, as is the case with Air New Zealand, so the taxpayer has continued to benefit from any further success while also retaining control.
The rest of the profit has largely stayed in the country too, with KiwiSaver funds and private New Zealand investors well-represented on the share registers.
This approach allows central or local government to reinvest the proceeds in other priorities, which means it can either generate returns elsewhere or won’t need to borrow as much.
Other assets in local or central government hands wouldn’t look out of place listed on our sharemarket, including the likes of Kiwibank.
We’ve recently seen a string of uncomfortably impressive profit announcements from the big New Zealand banks, all of which are headquartered in Melbourne or Sydney.
If Kiwibank was listed, it would have a better chance of becoming a genuine competitor to these Aussie giants, with the bulk of its earnings remaining here.
The mixed ownership model has been a huge success in New Zealand, providing the best of both worlds to the taxpayer.
It’s fostered stronger businesses and broadened the range of options available to local investors, helping keep more of our investment capital within our shores.
Forward-thinking politicians (both central as well as local) would be wise to shelve any misconceptions about the term “asset sales” and embrace these opportunities.
Mark Lister is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.
