Govt lowers asset sales estimate
Finance Minister Bill English insists the asset sales programme has been a success, despite cutting the estimated proceeds by hundreds of millions of dollars.
Appearing before the finance and expenditure select committee in Parliament this morning, English said the half-year Budget update, to be delivered on December 17, would show the Government now expected to raise between $4.6 billion and $5b from the partial sale of a string of state-owned companies.
It was previously estimated the Government would raise $5b-$7b from the sales.
English told the select committee the lower selldown proceeds reflected the withdrawal of mining company Solid Energy from the sales process because of financial difficulties, the value of Meridian being cut because of a renegotiation of its contract with Rio Tinto for the aluminium smelter at Bluff, and political concerns because of the Labour-Greens proposals for the electricity market.
But the deputy prime minister maintained the asset sales process had been a success.
"We don't accept the contention that the assets were sold for some lesser prices than they quote 'should have been'," English told MPs.
He said some of those who had invested in the companies were claiming they were sold for too much.
"In terms of the wider objectives, these have also been achieved, as well as [being] good value for taxpayers' money [and achieving] widespread New Zealand ownership," he said.
"It could have been a bit more without the political risk hanging over these companies."
Unsophisticated investors were put off by the threat "of nationalisation", English said, referring to the Labour-Greens plan to create a single state-owned buyer of wholesale electricity.
"We've got nearly $4 billion in the bank, and at a time when we're trying to limit the increase in our debt when we have an expensive programme of investment in our infrastructure, and other public assets," he said.
"That's pretty handy to have."
Today shares in both Meridian Energy and Mighty River Power plunged to fresh record lows. Instalment receipts in Meridian Energy, which listed on the NZX in November at $1, dropped 1c to trade at 94c just before 11am. Shares in Mighty River Power meanwhile dropped 6c to $2.00.
Labour's state-owned enterprises spokesman Clayton Cosgrove said the government had "stuffed up" the valuations of the companies.
Since back in 2011 the Government had been seeing advice that Solid Energy was "a basket case" and yet it was blaming it for the latest cuts, he said.
"You were still forecasting outrageous proceeds even though you have a plethora of advice . . . as far back as 2011, that Solid Energy was basically on the rocks. So why do you keep using it as an alibi?," Cosgrove asked.
"I'm saying, you stuffed up the valuations. They're your valuations. Either Treasury gave you bad advice . . . or you over-inflated the valuations. You're the ones with the books, you're the one with the information. We don't."
English said the proceeds from the sales of electricity companies showed they were vulnerable to changes in the electricity market, and not the cash cows the Opposition had claimed.
"There was a perception cultivated somewhat by the Opposition, as well as others, that these electricity companies were semi-monopoly cash cows," the finance minister said.
"I think people who've invested in them might have a different view now if they ever believed that one."
After the committee hearing, English signalled that while lower proceeds from asset sales would see less in the future-investment fund, this did not mean the Government would trim its programme to build infrastructure from the proceeds.
"If there's a bit less in it [the fund], it'll meet the [capital spending] needs for a little less [time]," he said.
The finance minister had earlier signalled that the half-year update would show the Government was still on track to bring the Crown accounts back into surplus by 2014-15, as signalled.
The Government continued to have net borrowings of $110 million a week, down from $260m a week in 2010-11.
He signalled that the update was also likely to show stronger forecasts for economic growth.
"I would expect the forecast to reflect the general uplift in forecasts across the market," English said.
A number of economic indicators have pointed to New Zealand this year having some of the strongest economic growth in a number of years.