Chocolate box-like footage of torrents of water cascading down a tail-race on the Waikato river; video of geothermal steam rising in the early morning sun on the volcanic plateau; an uplifting soundtrack designed to kindle feelings of patriotism; and finally the voice (maybe someone New Zealanders respect and trust) stressing just how simple it is to buy a parcel of shares in part of New Zealand's energy infrastructure.

It is not hard to envisage the hearts-and-minds pitch of the advertising agencies as they compete for the right to join the long line of banks, stockbrokers and other outfits poised to do very nicely from the share float in Mighty River Power.

How the coming marketing blitz will go down with the average punter is difficult to say.

The opponents of privatisation will have a ready reply: you are paying an awful lot for the privilege of allowing the Government to run advertisements which are asking you to buy something you already own.


For that reason alone, the Government must avoid overkill. However, while polls consistently show around two-thirds of New Zealanders oppose National's partial asset sales programme, a recent survey found nearly 60 per cent would like to buy shares in Mighty River Power and the two other state-owned generators to go on the block later, Genesis Power and Meridian.

A quick calculation suggests roughly a quarter of New Zealanders oppose the sales but want a piece of the action, given the floats will go ahead - barring Maori going to court and winning an injunction and bringing this convoluted exercise to a screaming halt.

The Prime Minister clearly sees this informal grouping as crucial to achieving one of the goals of the part-privatisation programme - encouraging new entrants into the sharemarket long-term.

It is no accident that Mighty River Power, the jewel in the crown when it comes to profitable and innovative state-owned enterprises, was the first choice for enticing middle and low-to-middle income earners to dip their toes in the sharemarket for the first time.

The motive is political as much as economic. It fits National's long held belief that boosting an individual's ownership of capital inevitably induces a slow, but perceptible transfer of political allegiance from left to right.

Thus the heavy stress on New Zealanders being "at the front of the queue". Hence, the introduction of a loyalty bonus to entice small investors to keep their Mighty River Power shares for three years. And hence the likely pricing of the shares to ensure they do not lose value on listing.

National is pulling out the stops to ensure the float is a success. Quite simply, it is putting politics ahead of maximising the return to the taxpayer.

As the critics point out, a lot of people do not have a spare $1000 with which to play the stock market. But these people are not the target of the forthcoming advertising blitz.


As always with Key, it is all about shoring up the centre for National by offering something which - when you strip it down - amounts to a tidy tax break in drag.

And with more to come. The subsequent floats will be crucial in maintaining the momentum in building National's "property-owning democracy". The phrase - borrowed from the mass privatisations of Margaret Thatcher-era Britain - is not one Key uses, however.

That may be because he used it some five years ago in Opposition to make what in hindsight were some pretty rash promises about making it easier for families to achieve their dream of home ownership - especially in the overheated Auckland property market.

According to a recent Productivity Commission report, low interest rates have improved housing affordability, though not in the Auckland market, while the ratio of house prices to disposable income generally remains "elevated".

In other words, little has changed under National, bar low interest rates which are largely beyond Government control anyway.

The housing market poses a bigger problem for Key than just reminding everyone of broken promises. Many financial advisers will cut across National's efforts to create a "shareholder democracy" by advising their clients to use their $1000 to pay off some of the mortgage instead.

Key is still expecting up to 200,000 retail "Mum and Dad" investors to buy parcels of shares. Just how many of these will be first-timers is a moot point - as is their likely stickability.

When a portion of Contact Energy was sold by National in 1999, the number of shareholders allocated fewer than 1000 shares totalled around 170,000.

Contact's most recent annual report shows those holding fewer than 1000 shares now number just over 40,000.

The conclusion to be drawn depends on whether you see the glass as half-full or half-empty. However, the figures suggest National is being over-optimistic in thinking most first-time investors will ignore the quick profit to be made.

Waiting three years for what will likely be a relatively small top-up of bonus shares may not prove to be that attractive.

If the price unaccountably nosedives after listing, those investors will hardly be thanking Key. Given the patchy performance of the sharemarket and the background gloom of the European financial crisis which constantly threatens to get worse before it gets better, this is not a remote possibility.

Some people will be tempted to buy shares in Mighty River Power simply to be on the other side of the equation with respect to seeming constant hikes in the retail price of electricity. The logic in that position evaporates when placed alongside the slippage in Contact's share price off earlier highs.

Contact is very much a case in point. Along with the float of Auckland International Airport a little earlier, Contact failed to spark the kind of revolution in "popular capitalism" Key is seeking.

If you really wanted to change savings behaviour you'd go for the heavy artillery like a capital gains tax. That National will not contemplate the introduction of such a measure only further underlines that the state asset sales programme is driven solely by politics.