The Government has delayed the sale of Mighty River Power and its first partial asset sale will now go ahead in March next year.
The decision follows a landmark Waitangi Tribunal a week ago urging the government to put the first power company sale on hold while it negotiated with individual iwi, which the tribunal considered had residual property rights over affected waterways.
Prime Minister John Key says the sale will be held over a four-month period ending in June and would be followed later that year by a second share float for either Meridian or Genesis.
"The Government's preference would have been for a share offer for Mighty River Power this year."
However, after careful consideration ministers had decided to undertake a short consultation period with iwi over a "shares plus" option put forward by the Waitangi Tribunal, he said.
Shares plus could give Maori particular rights in the company above other shareholders.
Key said since receiving the Tribunal's report 10 days ago, much of the legal and official advice to Government had been around that concept.
However, the Government's current view was that the shares plus option should not go ahead.
Key said that was for five reasons: it was not in the national interest for any group to be given such rights; almost every form of redress covered by shares plus could be achieved in other ways; aspects such as giving Maori shareholders the ability to make decisions on strategic issues were unworkable; it would make the company less attractive to investors and possibly lower the share price to the detriment of taxpayers; and after hui earlier this year it was decided Treaty obligations rested with the Crown, not the companies.
Cabinet accepted that there was a risk the Maori Council would still take court action against the Government even after it consulted on the shares plus option.
Ministers had considered but rejected the Tribunal's call for a national hui on water rights, Key said.
The tribunal's finding followed an application for an urgent hearing by the Maori Council, which said the Crown would be in breach of its Treaty obligations if it pressed ahead with the sale of State-owned companies, including energy companies Mighty River Power, Solid Energy, Meridian and Genesis.
The claim sparked two weeks of hearings.
In its interim report late last month, the tribunal said the Treaty guaranteed to hapu and iwi the exclusive right to control access to, and use of the water, while it was in their rohe (or territory).
It found that Maori still had residual proprietary rights over water and agreed that the claimants had established a case for recognition of iwi property rights, including payment for the commercial use of water and enhanced authority and control over how the water was used.
It said the first sale should be delayed while an accommodation was reached with Maori - one that was likely to include shares in conjunction with shareholder agreements and revamped company constitutions giving Maori enhanced power in the power generating companies and providing meaningful rights recognition.
Failure to delay while negotiating such an accommodation would amount to a Treaty breach, the tribunal warned.
The Maori Council has warned that it will mount an immediate legal challenge should the Government proceed with the sale of Mighty River Power this year.
Key said earlier today the Government had no control over that.
"If the Maori Council wants to lodge an application in the High Court or Court of Appeal, we can't stop that. It's for the courts to decide whether they want to hear an application to them."
Key said he "hoped" the Government would win a court challenge.
Who do you think will 'win' tonight's debate?Related story: Leaders' debate: And the underdog is....