Silver lining a tad thin
The Government's programme of asset sales, which started as a headline-grabber in a prime ministerial speech early in 2011, is ending as an election promise that hasn't quite been fully delivered. In the speech, John Key said the Government believed it could free up as much as $10 billion by partially selling key assets including state-owned power companies and a stake in Air New Zealand. The Treasury would be asked to advise on the merits of selling up to 49 per cent of Mighty River Power, Meridian Energy, Genesis and Solid Energy.
The economics of this were always contentious. The Government's political opponents pointed out that the three big state-owned generators had a combined value of $11.75 billion and earned $700 million a year. Furthermore, the Government hadn't been keeping a close eye on Solid Energy. It was in no fit condition for sale. Public opinion was heavily against the partial privatisations, according to several polls and - more recently - a referendum. But the Key Government was returned to office and could justifiably claim to have been given a mandate to proceed with a key component of its policy agenda. Mighty River Power and Meridian Energy were partially privatised and now it's Genesis's turn, although private investors are being offered only 30 per cent of the shares. The Government can't claim to have collected enough money already to meet its needs. At Budget time last year, when Solid Energy was no longer part of the programme, the Treasury somewhat loosely expected the asset sales to fetch $5b-$7b. Early in December Mr Key told Parliament the Government had received about $4b so far. Analysts have figured the Genesis part-sale will raise between $600m and $1b. The Government's net debt was $392m higher on December 31 than had been forecast seven months earlier. Rather than rue the Government's failure to fetch top dollar from its sales, however, opponents of partial privatisation should take solace that this time around not quite as much family silver is being flogged off as on previous occasions.
Mind you, Mr Key has also ruled out further similar sales once the Genesis Energy deal is done because there are no more state-owned companies that could sensibly be partially sold. This suggests all the silver worth selling has gone.