web analytics

How low will they go?

Written By: - Date published: 11:53 am, February 20th, 2012 - 11 comments
Categories: privatisation - Tags:

The Nats are looking to Queensland for lessons in privatisation. They want to see how incentives for locals to hold on to their shares work. But you don’t pay for incentives with magic beans. Any incentives for the few locals who can afford to buy shares just means a diminished return to the government, making the economic and fiscal rationale for selling even weaker.

When Queensland sold its railways in 2010, they offered shares to locals at $2.45 compared to $2.55 for institutional buyers – a 4% discount for ‘mum and dad’ investors. Now, say National did the same and half the shares they sold went to ‘mum and dad’ (not most mums and dads, of course, the mums and dads with a few spare G laying around). A 4% discount on half of $5.2 billion (the book value of the shares to be sold, note the difference from English’s $6 billion “guess”). Well, there’s $100 million down the drain just there.

Then, the Queensland government told locals that they would get one bonus share for every 15 they own if they held on to them for a year – a 6% bonus. That’s $150 million.

Just those two incentives, which, at best would see a few hundred thousand wealthy Kiwis own shares for a year and a day, could cost a quarter of a billion dollars. I didn’t see that number in English’s dodgy sums last week.

After the Queensland government sold the 60% stake in QR National, the shares rapidly appreciated in a matter of months from $2.45/$2.55 at launch to around $3.50. That was hailed as a ‘win-win’ but common sense tells you it was still the same company before the sale and a few months later, just the float price was 30% below true value.

The Nats will very likely go for a low price on the initial share float, too. They will view it as politically important to have a well-oversubscribed float with lots of ‘mum and dad’ wannabe buyers (‘see, everyone loves privatisation, we can’t sell enough of these shares!’), which means s float price well below the market clearing price. Loss for you and me as owners of public assets – slight political point for National. Cost: $1.5 billion if the float price is 30% under market price.

And when the value of the government’s 51% climbs as the shares go to their true value, the Nats can claim to have made a profit thanks to the ‘efficiencies of mixed ownership model’, when all they’ve really done is sell the other 49% too cheap.

So, if National imitates Queensland’s sale ‘incentives’ it could wipe $1.75 billion off the net proceeds of the sales. That’s $3.5 billion the government would actually get to bank at the end of the process. Maybe that’s why Treasury has only let National book $3.86 billion in sales revenue in the Budget documents, not the $6 billion that English made up last week (check it out in the PREFU p91, they call it ‘balancesheet funding’).

Is $3.5 billion net a good price for 49% of our energy companies and a hunk of Air New Zealand that, combined, returned $2.1 billion in dividends to the taxpayer in the last six years, not to mention retained profits?

Doesn’t seem like it from here. Which raises a question: what is the minimum net return that National is prepared to sell for? Is there one? Or are they determined to sell our assets no matter what because this is about ideology, not good government?

11 comments on “How low will they go? ”

  1. lprent 1

    The more you look at National’s asset sales strategy, the harder it is to see any reason for it apart from simple minded ideological stupidity.

  2. Kotahi Tane Huna 2

    What about money? The Pengxin donation shows us that they are well paid for their services, and I’m sure there will be finance company and other directorships up for grabs later.

    Speaking of the Pengxin donation, and given the widely-accepted fact of CCP cheap loans and links to property development companies, to what extent can the National Party be said to be financed by a foreign government?

  3. vto 3

    .

    With Crafar, asset sales and now ACC privatisation …..

    They are entirely like the emperor with no clothes just before he was sprung.

  4. Draco T Bastard 4

    Or are they determined to sell our assets no matter what because this is about ideology, not good government?

    They’ll sell our assets no matter what and it’s not even about ideology – it’s about transferring the communities wealth into the hands of the rich and making all the rest of us serfs.

  5. felix 5

    “Which raises a question: what is the minimum net return that National is prepared to sell for? Is there one? Or are they determined to sell our assets no matter what because this is about ideology, not good government?”

    John Key was asked that very question in the house last week. His answer was that it’s good for NZ to sell the assets regardless of the price.

    Entirely ideological, stated very clearly.

    ps I’ll find the video in a minute cos some dweeb (hi Gos) is sure to question the precise wording.

    • felix 5.1

      Here ’tis:

      The money shot is at 2:30, but the whole thing is worth a look if you enjoy that softly pathetic and unconvincing “feigned innocence” look that John Key gets when he’s lying through his teeth.

      David Shearer: Is there a bottom line below which he would not sell our profitable assets; if so, what is that bottom line?

      Rt Hon JOHN KEY: The bottom line is that it has got to be the right thing for New Zealand, and it is.

      And that’s that. Pure ideology, no bottom price.

      • aerobubble 5.1.1

        Key does not believe that NZ has any significant National sovereignty at stake. Why would he, the banking system is already overwhelmingly foreign owned? Even the Government banks with a foreign owned bank. We’re already serfs…

        • marsman 5.1.1.1

          Well, we need to fight to slough off this serfdom and we need to fight with everything at our disposal to prevent the thieving Nact parasites from selling OUR State Assets.

      • Bored 5.1.2

        Has anybody cared to think this thing through with regard to our position as a client of the international banking system?

        The Nats have chosen to give 4 years worth of tax cuts that have since inception NEVER been revenue neutral. They have created a debt level as a consequence that places the NZ citizens at the mercy of these offshore banks.

        Have no doubt the economics of this from an NZ viewpoint are completely subsidiary to the bankers wishes to recoup the money borrowed and / or take a stake in our productive assets at the same time. This sale process is a sure sign that Key has blithely given away economic sovereignty for electoral success.

  6. bbfloyd 6

    after all the technical stuff has been debated ad infinitem…. we are still left with the reality that this is just the aristocracy taking back what we shed blood to gain….. dignity in our work… a future for our kids…a balanced, healthy, democratic society that works for the whole of society…..

    they were never going to accept that they had to share any of the loot in order to create a better reality for the masses… they are the masses after all… no explanation required……

    why spend time debating minutiae when we should be planning round three of the revolution?

    whether we want to face it, or not, we are at war with those who would have us in chains working as they see fit for as little as required to keep us alive so that we can keep working for as long as it takes to replace us with younger, healthier, slaves….

Recent Comments

Recent Posts

  • Twenty highlights of 2020
    As we welcome in the new year, our focus is on continuing to keep New Zealanders safe and moving forward with our economic recovery. There’s a lot to get on with, but before we say a final goodbye to 2020, here’s a quick look back at some of the milestones ...
    2 weeks ago

  • Cook Islanders to resume travel to New Zealand
    The Prime Minister of New Zealand Jacinda Ardern and the Prime Minister of the Cook Islands Mark Brown have announced passengers from the Cook Islands can resume quarantine-free travel into New Zealand from 21 January, enabling access to essential services such as health. “Following confirmation of the Cook Islands’ COVID ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Supporting communities and landowners to grow employment opportunities
    Jobs for Nature funding is being made available to conservation groups and landowners to employ staff and contractors in a move aimed at boosting local biodiversity-focused projects, Conservation Minister Kiritapu Allan has announced. It is estimated some 400-plus jobs will be created with employment opportunities in ecology, restoration, trapping, ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Border exception for some returning international tertiary students
    The Government has approved an exception class for 1000 international tertiary students, degree level and above, who began their study in New Zealand but were caught offshore when border restrictions began. The exception will allow students to return to New Zealand in stages from April 2021. “Our top priority continues ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Tiwai deal gives time for managed transition
    Today’s deal between Meridian and Rio Tinto for the Tiwai smelter to remain open another four years provides time for a managed transition for Southland. “The deal provides welcome certainty to the Southland community by protecting jobs and incomes as the region plans for the future. The Government is committed ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • New member for APEC Business Advisory Council
    Prime Minister Jacinda Ardern has appointed Anna Curzon to the APEC Business Advisory Council (ABAC). The leader of each APEC economy appoints three private sector representatives to ABAC. ABAC provides advice to leaders annually on business priorities. “ABAC helps ensure that APEC’s work programme is informed by business community perspectives ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Govt’s careful economic management recognised
    The Government’s prudent fiscal management and strong policy programme in the face of the COVID-19 global pandemic have been acknowledged by the credit rating agency Fitch. Fitch has today affirmed New Zealand’s local currency rating at AA+ with a stable outlook and foreign currency rating at AA with a positive ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Additional actions to keep COVID-19 out of NZ
    The Government is putting in place a suite of additional actions to protect New Zealand from COVID-19, including new emerging variants, COVID-19 Response Minister Chris Hipkins said today. “Given the high rates of infection in many countries and evidence of the global spread of more transmissible variants, it’s clear that ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • 19 projects will clean up and protect waterways
    $36 million of Government funding alongside councils and others for 19 projects Investment will clean up and protect waterways and create local jobs Boots on the ground expected in Q2 of 2021 Funding part of the Jobs for Nature policy package A package of 19 projects will help clean up ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Zealand Government acknowledges 175th anniversary of Battle of Ruapekapeka
    The commemoration of the 175th anniversary of the Battle of Ruapekapeka represents an opportunity for all New Zealanders to reflect on the role these conflicts have had in creating our modern nation, says Associate Minister for Arts, Culture and Heritage Kiri Allan. “The Battle at Te Ruapekapeka Pā, which took ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Better care for babies with tongue-tie
    Babies born with tongue-tie will be assessed and treated consistently under new guidelines released by the Ministry of Health, Associate Minister of Health Dr Ayesha Verrall announced today. Around 5% to 10% of babies are born with a tongue-tie, or ankyloglossia, in New Zealand each year. At least half can ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Prisoner disorder event at Waikeria Prison over
    The prisoner disorder event at Waikeria Prison is over, with all remaining prisoners now safely and securely detained, Corrections Minister Kelvin Davis says. The majority of those involved in the event are members of the Mongols and Comancheros. Five of the men are deportees from Australia, with three subject to ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Pre-departure COVID-19 test for travellers from the UK and the US from 15 January
    Travellers from the United Kingdom or the United States bound for New Zealand will be required to get a negative test result for COVID-19 before departing, and work is underway to extend the requirement to other long haul flights to New Zealand, COVID-19 Response Minister Chris Hipkins confirmed today. “The new PCR test requirement, foreshadowed last ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • PM congratulates New Year Honour recipients
    Prime Minister Jacinda Ardern has added her warm congratulations to the New Zealanders recognised for their contributions to their communities and the country in the New Year 2021 Honours List. “The past year has been one that few of us could have imagined. In spite of all the things that ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • David Parker congratulates New Year 2021 Honours recipients
    Attorney-General and Minister for the Environment David Parker has congratulated two retired judges who have had their contributions to the country and their communities recognised in the New Year 2021 Honours list. The Hon Tony Randerson QC has been appointed a Companion of the New Zealand Order of Merit for ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Year’s Honours highlights outstanding Pacific leadership through challenging year
    Minister for Pacific Peoples Aupito William Sio says the New Year’s Honours List 2021 highlights again the outstanding contribution made by Pacific people across Aotearoa. “We are acknowledging the work of 13 Pacific leaders in the New Year’s Honours, representing a number of sectors including health, education, community, sports, the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Supporting seniors to embrace technology
    The Government’s investment in digital literacy training for seniors has led to more than 250 people participating so far, helping them stay connected. “COVID-19 has meant older New Zealanders are showing more interest in learning how to use technology like Zoom and Skype so they can to keep in touch ...
    BeehiveBy beehive.govt.nz
    2 weeks ago