SOE sales 'economic idiocy' - Labour

HAMISH RUTHERFORD
Last updated 11:00 20/12/2012

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Selling three state-owned enterprises next year will ''flood the market and depress demand'' for shares, Labour state owned enterprise spokesman Clayton Cosgrove claims.

The comments came in response to a Fairfax report that rather than sell two state-owned energy companies as previously signalled, the Government is considering selling all three electricity companies in 2013.

''We'd certainly do two [sales in 2013], the question is whether we do three. Some people have suggested it,'' Finance Minister Bill English said in an interview on Wednesday.

''I don't want to get ahead of ourselves, [but] the market's suggesting it might be possible. That will all get tested if we get through the Supreme Court case.''

Earlier this month the High Court dismissed a bid by the Maori Council to delay the float of Mighty River Power, now scheduled for the first half of 2013.

The council is appealing to the Supreme Court, but the matter could be resolved in February.

English linked the possibility of three sales to buoyant financial markets, and the plan would also mean the most controversial sales were over before election year.

The benchmark NZX-50 is up more than 20 per cent so far this year, Fonterra's historic first sale of units from its shareholder fund was 14 times over subscribed, and Fairfax was able to offload a majority stake in Trade Me within days.

Cosgrove attacked the possibility as ''economic idiocy'' this morning.

"There simply isn't the demand for three energy companies in the share market. Low demand means low share prices, which means the companies are sold off for a pittance. This is basic economics.''

Cosgrove, who previously worked at companies preparing for floatation said the strategy was usually one of sorting out the risks facing a company and picking optimal market conditions.

The SOEs, meanwhile, faced ''the worst financial conditions''.

''I don't agree with any sale but if you're trying to maximise the return to the shareholder, that is the taxpayer, surely you would want to present these companies when market conditions are at an optimal time and all the risks are tied down.''

Cosgrove's view of market conditions are not necessarily in line with the prevailing view.

Craigs Investment Partners' head of research, Mark Lister declined to talk about the SOE sales because of his firm's involvement in the process, but said in general times, markets had strong appetite for quality companies.

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There was $100 billion sitting in New Zealand bank accounts, earning little interest, Lister said.

''Market conditions are great for floating a company at the moment. Sentiment for shares is high, interest rates are going to be low for a year if not more. The environment is great.''

- The Dominion Post

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