All the attention in the asset sales process over the past few weeks has been on Maori rights and interests in freshwater.

Yet an issue of potentially similar significance for the sale of MightyRiverPower has been bubbling under the Waitangi Tribunal hearings and their aftermath.

The issue is the fate of Maori claims to geothermal resources. MRP has invested heavily in geothermal generation in recent years and its privately owned competitor, Contact Energy, is also a major player in the sector.

Geothermal energy has become the fashionable new source of baseload generation, joining and displacing gas-fired and hydro power stations which have provided the electricity system's traditional backbone.

The impact on MRP's electricity production has been dramatic. In its results announced this week, almost a third of its total generation last year was from geothermal sources, compared with about 10 per cent in 2007/08.

Hydro accounted for 61 per cent of its output. With the 82-megawatt Ngatamariki geothermal station under construction, the geothermal contribution will only become more important.

Unlike the hydro stations it runs on the Waikato River, most of MRP's geothermal power stations have been built in joint venture, commercial partnerships with Maori iwi incorporations, whose land sits atop the geothermal resource.

In fact, about $8 million of MRP's $163.7m underlying net profit for the year to June 30 came from booking the sale of a further 10 per cent of its Nga Awa Purua power station to its Maori joint owners, the Tauhara North No 2 Trust.

Likewise, Contact has been nurturing its relationships with the Ngati Tuwharetoa iwi, whose paramount chief, Sir Tumu te Heu Heu, also heads the Iwi Leaders' Group on freshwater, and this week gave rare media comments supporting negotiation rather than court action to settle Maori water claims.

Meanwhile, since 1991, the Crown has had the right to charge royalties on geothermal steam extraction, although it has not been doing so.

No such similar right exists for water but the rules and practice governing geothermal resource extraction may yet prove most instructive for the progress of the MRP sale, especially if the Government sees a localised, central North Island deal as a way to allow the share float to go ahead.

As an experienced resource management consultant, Wayne Mills, wrote in his blog, The Fox Bugle, this week: "Most of MRP geothermal and hydro operations are located in the rohe of Tuwharetoa and Tainui.

"Tellingly, both Tainui and Tuwharetoa released public statements . . . saying that they enjoyed an excellent dialogue with the Crown, that a settlement seemed very achievable, and that litigation was not the way forward."

This is almost certainly why Prime Minister John Key remains so apparently unfazed about the prospect of the New Zealand Maori Council mounting court action to try to block the partial sale of MRP if, as expected, the Government decides to press ahead rather than heed the Waitangi Tribunal's call for a halt.

He simply doesn't expect such court action to succeed, despite the Waitangi Tribunal's view that a vital route for settlement of those claims will be lost when shares in state-owned power companies are sold.

That's because of processes already under way, outside the sale process, to address water claims. These include the co-management of the Waikato River by the Crown and Tainui, the Land and Water Forum consensus policy-making process, and the long-running discussions with the freshwater iwi leaders' group, which began in 2007.

These processes may yet lead to electricity companies having to pay a resource rent for the water they use to produce electricity - a prospect they find rather chilling and which would create political headaches by threatening to boost power prices. Some or all of that rent might go to Maori interests.

But Crown lawyers discounted this in the tribunal's hearings, saying the potential for water rents was already on the table thanks to the forum process. That means it will be a political headache whether or not state power companies are part-sold.

The Crown may also be relying on the many caveats and acceptances of willingness to settle freshwater claims in the tribunal's report as further ammunition for the courts to reject an injunction on the sale process.

If Key and his advisers are right, the Maori council's day in court could be a short one, albeit still perhaps capable of delaying a MRP float.

However, it's clear it will take more than the Waitangi Tribunal to kill off the asset sales programme. BusinessDesk

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