Power shares priced to entice

Labour MP Clayton Cosgrove
Labour MP Clayton Cosgrove

Kiwis with $1000 or more to spare are being targeted in the Government's first big power company float - with the promise of bonus shares if they hold on to them.

But Labour is telling Kiwis to use the money to pay off their credit cards instead - and says while well-off New Zealanders might clean up, it will be at the expense of low-income families.

Prime Minister John Key announced the long-awaited package of asset sales sweeteners yesterday - and confirmed the price of a minimum share package would be pitched as low as possible so more people could buy.

The Government says it expects 85 to 90 per cent of the four state-owned power companies to remain in New Zealand hands once shares are offered on the open market - through a mix of household, KiwiSaver, Superannuation Fund and iwi investors.

But measures announced yesterday by Mr Key were firmly targeted at households and small investors, including a minimum $1000 share parcel, a move to push Kiwis to the front of the queue by guaranteeing that anyone who wants up to $2000 worth of shares will receive them, and a loyalty scheme to reward people for holding shares long-term.

Mr Key said an analysis of the Contact Energy share float and others showed about 90 per cent of people applied for about $1000-2500 worth of shares. “So we think that's in the sweet spot.”

He believed $1000 was a level that was “affordable to many New Zealanders”.

“If we go under $1000 then the transaction costs really are just so high it's not worth it.”

Details of the loyalty share scheme are still to be decided but Mr Key said it would probably be similar to schemes overseas which offered a bonus share for every share held after three years.

The move is designed to answer fears that most shares will end up in foreign ownership.

People will have to provide a declaration that they are a New Zealand citizen or permanent resident, a valid IRD number, a valid New Zealand bank account and a New Zealand address.

The Government expects as many as 200,000 people might buy parcels of $2000 or more in shares, around a quarter of the estimated $1.5 billion to $1.8 billion which Mr Key said yesterday was expected from the sale.

It will sell a 49 per cent stake in the four state-owned power companies, starting with Mighty River Power, and will also sell more shares in Air New Zealand.

But the Government can't say for sure when the first share float will take place, and after previously signalling a September date, Mr Key would not offer any assurances yesterday, in a sign that potential legal action by iwi could derail the process.

The Government has battled public opinion over the asset sales, and polls show they are deeply unpopular. But opponents managed only a lacklustre protest outside the National Party conference yesterday where Mr Key announced the new measures.

But Labour and the Greens say poorer New Zealanders will be subsidising others who can afford to buy the shares.

Labour MP Clayton Cosgrove said the loyalty shares would be paid for by low-income New Zealanders through their taxes.

It is estimated that the cost of the loyalty scheme could be hundreds of millions of dollars.

Mr Key yesterday confirmed the Government would hold back some shares from the initial float in order to retain the Crown shareholding at 51 per cent.

Mr Cosgrove said: “Why should those who don't plan to buy shares, for whatever reason, have their taxpayer dollars spent subsidising those who can?

“People with a couple of thousand dollars to spare would be better off paying down their credit card debt."

Green Party co-leader Russel Norman said the Government had not budgeted for the scheme.

“We know from overseas examples such as Queensland that it can cost tens or hundreds of millions of dollars. We also know from the Queensland example that loyalty schemes don't work. When the price of shares went up, the shares got on-sold.”

The Dominion Post