A Mighty flop might sink sales

VERNON SMALL
Last updated 05:00 27/06/2012

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State asset sales were never going to be popular, and despite his formidable sales skills John Key must have always known that.

OPINION: Ministers have tried various ways to sell the idea to a sceptical public: as a way to cut debt and interest payments, improve performance, free up capital for other purposes, deepen the pool of investments for Kiwis – even avoid a descent into a sort of debt-haunted Greek hell.

If they ever hoped to convince voters of the fiscal wisdom of the partial sales, that was effectively put to the sword by Treasury when it crunched the numbers in February.

It showed an annual hit to the budget of almost $100million from 2014 and a clear conclusion: "The forecast finance cost savings are less than the forecast forgone profits."

In other words, the Government will be worse off by selling than retaining the assets. On top of that New Zealand's overall debt continues to soar, even with the $5billion-to-$7b sale proceeds.

Now the asset sales bill has passed its final reading, some of the heat should come out of the issue. As Mr Key said, the sun will still rise tomorrow. But the debate will rumble on.

The referendum will deliver an overwhelming "no" before being ignored by the Government. Nothing like the 60 per cent who say they are interested in buying will ever do so, or form a majority in favour of the sale. And the Opposition will never let it rest.

The best Mr Key can hope for is a sort of political rope-a-dope: roll with the punches and hope it does not knock out his winning chances in 2014.

The next challenge is to hit the "sweet spot" in the pricing of Mighty River Power shares: not so cold it leaves taxpayers out of pocket, but not so hot that it burns "mum and dad" investors. Ideally they will be looking for a small lift – say 5 per cent – after listing.

Fail, and a Mighty River Flop could spark the sort of backlash seen in the United States after the Facebook float.

That would sink the plan faster than any referendum ... and bring a new meaning to "partial asset sales programme".

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- The Dominion Post

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