Financial spur to asset sales
A renewed global economic down-turn threatens the Government's finances, making the case for partial asset sales early next year more urgent, Finance Minister Bill English says.
Cabinet yesterday decided to press on with a planned sell-down of Mighty River Power (MRP) in the second quarter of next year.
Cabinet will next week approve an order in council removing MRP from the State-Owned Enterprises (SOE) Act - a key step towards a float of 49 per cent of the company on the stock exchange.
Today, Prime Minister John Key said moving MRP out of the SOE Act and in to the Public Finance Act was "essentially the action that if someone was going to take court action would trigger that court action".
"I believe that the Crown's legal position is very strong but anyone is free to test that," Key said.
MRP had initially been lined up for a share float in the third quarter of this year, netting the Government around $1.8b in revenue.
English said today the Government faced more borrowing if the sale was further delayed, particularly because of the risks to other revenue sources caused by a renewed global economic slow-down.
"The outlook for the world economy looks to be slowing down. That may flow through for New Zealand having to borrow more money - we don't know yet - [but] we want to avoid debt as much as possible," English said.
"If the sales didn't proceed, we would have to fund capital commitments with new debt. If we are going to spend a billion on schools in Christchurch, we don't have much choice about that, we need to get the money in."
Government revenue was about $340m ahead of expectations in the Crown accounts for the year to June 30, released last week. However, English has warned revenue could soften up as growth slows.
Issuing the order in council gave a "clear intent" so that any potential litigants like the Maori Council "can get on with it".
"We just want to make sure that if there is going to be legal action, there is plenty of time for it to be dealt with appropriately rather than on the day before the sale."
The Maori Council is meeting today to decide on any potential legal action.
Maori Council co-chair Sir Edward Taihakurei Durie said court action was not the right way to solve the issue but it was now likely.
"It does appear that this matter is destined for the courts, not because that outcome is desired by New Zealand Maori Council, but because the Government is refusing to progress resolution of the central issue - residual Maori proprietary rights," Durie said.
Labour leader David Shearer said the risk of legal action would "seriously lower" the value of MRP in the eyes of investors.
"Forcing through the sale with the threat of legal action will ensure Mighty River Power is sold for a lot less than its true worth," Shearer said.
"The Government is forcing the Mighty River sale through just so John Key can save face. John Key's dignity is going to cost New Zealand millions of dollars in lost revenue and lost capital."
"Shares Plus" was ruled out yesterday by the Cabinet.
The Government had planned to float 49 per cent of MRP in the third quarter of this year but the sale was put on hold after a Waitangi Tribunal report recommended a delay. The tribunal suggested consideration be given to issuing special shares in the company to Maori.
"Shares Plus" would give Maori additional rights not available to other shareholders, when state-owned energy companies were partly sold.
English, who attended the six hui on "shares plus", said yesterday that they were "considered and serious discussions" but had not changed the Government's view. Maori did have rights and interests in water, but they could be addressed through a range of processes like Waitangi Treaty settlements and dialogue with iwi leaders.
Appointing directors and exercising shareholder voting rights in the new "mixed ownership" companies could be achieved in other ways with the Crown, which would remain the controlling shareholder.
Maori Council barrister Felix Geiringer said it was likely there would be legal action after interested people had discussed the matter this week.
"There are very few choices open to the council now except to litigate," he said."I would expect a decision within a week and, at the very least, maybe a discussion to start with the Crown and the court about timing in front of the courts."
The courts could issue an injunction against the sale or make a declaration about it. "If the court tells the Government that if you go ahead with this, we think you will be doing something unlawful . . . it puts the Crown in the position of risking everything."
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