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(Mar 08, 2012) On March 5, 2012, New Zealand's Minister for State-Owned Enterprises, Hon. Tony Ryall, introduced a bill that, if passed, will enable the partial sale of four state-owned energy companies. (Mixed Ownership Model Bill 7-1 (2012), New Zealand Legislation website; Mixed Ownership Model Bill, New Zealand Parliament website (last visited Mar. 7, 2012); Press Release, Hon. Bill English & Hon. Tony Ryall, Govt Introduces Public Share Offer Legislation (Mar. 5, 2012).) The government has stated that Mighty River Power will be the first of the four energy companies ready for a partial share float, currently planned for the third quarter of 2012. (Press Release, Hon. Bill English & Hon. Tony Ryall, Next Steps in Mixed Ownership Programme (Dec. 15, 2011).)
Features of the Mixed Ownership Model Bill
The legislation will permit a mixed ownership model for the energy companies, whereby the government will be required to retain at least 51% of the voting shares held in each company, and no other shareholders will be able to hold more than 10% of the shares. The government expects to raise between NZ$5 and $7 billion (about US$4.1 to $5.7 billion) from the partial share float, which will be designated for the building of priority assets such as schools, hospitals, and public infrastructure, as part of the Future Investment Fund. (Danya Levy, Asset Sales to Come with Treaty Clause, STUFF.CO.NZ (Mar. 5, 2012); Press Release, Hon. Bill English & Hon. Simon Power, Ministers Seek Mixed-Ownership Model Advice (Jan. 28, 2011); Press Release, Hon. Bill English & Hon. Tony Ryall, Government to Pursue Mixed Ownership Model (May 19, 2011).)
Shift from State-Owned Enterprises Act to Public Finance Act
The four companies currently fall within the scope of the State-Owned Enterprises Act 1986 (New Zealand legislation website). Under the new legislation, the government will be able, by Order in Council, to shift the companies to a new Schedule 5 of the Public Finance Act 1989 and subsequently conduct partial public share floats for the companies (New Zealand legislation website).
Maori Interests to Be Respected
The bill includes a clause regarding the obligation of the government to take into account "the principles of the Treaty of Waitangi"; a similar clause exists as a provision in the State-Owned Enterprises Act. The new provision to be inserted into the relevant part of the Public Finance Act will read: "[n]othing in this Part shall permit the Crown to act in a manner that is inconsistent with the principles of the Treaty of Waitangi. For the avoidance of doubt, [this] does not apply to persons other than the Crown." (Hon. Tony Ryall, Mixed Ownership Programme (Mar. 5, 2012); Adam Bennett, SOE Sales: Treaty Provisions Survive, THE NEW ZEALAND HERALD (Mar. 5, 2012).)
This provision will essentially ensure that Maori interests in memorialized land that is currently owned by the mixed ownership companies will be protected; however, debate remains regarding water management rights in relation to resources used by the energy companies. A claim currently before the Waitangi Tribunal seeks a determination of Maori water rights. (Protests Grow at Asset Sale Hui, ONE NEWS (Feb. 9, 2012), http://tvnz.co.nz/national-news/protests-grow-asset-sale-hui-4715134; Hayley Hannan, Waitangi Tribunal Claim Seeks to Halt Sales, THE NEW ZEALAND HERALD (Feb. 7, 2012); Press Release, Hon. Bill English & Hon. Tony Ryall, Government Completes Maori Consultation (Feb. 23, 2012).)
The Maori Party, which has a coalition agreement with the governing National Party, had threatened to withdraw from that agreement had the Treaty clause not been included in the legislation. (Kate Chapman & Danya Levy, Maori Party Threatens Split with National, STUFF.CO.NZ (Jan. 31, 2012).)
No Corporate Responsibility Provision
The bill does not include the corporate social responsibility objectives that currently apply to companies under the State-Owned Enterprises Act. "Like most large commercial entities, the mixed ownership companies will continue to build stakeholder trust and public support for their activities in a number of ways, including through their corporate social responsibility polices," Ryall said. ( Govt Introduces Public Share Offer Legislation, supra.) In addition, the mixed ownership companies themselves will not be subject to the Official Information Act and the Ombudsmen Act, but policy decisions by ministers as majority owners will remain subject to both of these Acts. (Id.)
Impact on Handling of Air New Zealand
The government is to make further decisions with respect to reducing its shareholding in Air New Zealand, which is already partly privately owned (26%) and therefore raises more complex commercial law questions. However, Ryall stated that the government is committed to replicating with respect to Air New Zealand the same mixed ownership model that is to be applied to the four energy companies. (Danya Levy, supra (video).)
The plan to partly sell some of New Zealand's state-owned assets has met with considerable controversy and was a major election issue in the November 2011 general election, which the National Party won despite reported widespread opposition to its asset sale proposals. (Tracy Watkins, Tough Talking on Asset Sales, STUFF.CO.NZ (Nov. 24, 2011); Audrey Young, Asset Sales: We Have a Mandate – Key, THE NEW ZEALAND HERALD (Nov. 28, 2011).) Other parties in Parliament are against the sales, but the bill is likely to pass with a single-vote majority with support from the ACT Party and United Future. (United Future Leader Says Asset Sale Law Must Be Clear, RADIO NEW ZEALAND (Mar. 1, 2012).)
The New Zealand government had undertaken significant privatization activities in the late 1980s and early 1990s, although some assets were partly bought back in later years and an approach of protecting "strategic assets" from sale was applied. (John Wilson, Short History of Privatisation in NewZealand (Dec. 2010); Income from State Asset Sales as at 30 September 1999, THE TREASURY (Sept. 30, 1999); Assets, THE TREASURY (last visited Mar. 7, 2012); Crown Ownership Monitoring Unit website (last visited Mar. 7, 2012).)
|Author:||Kelly Buchanan More by this author|
|Topic:||Economics and Public Finance More on this topic|
|Jurisdiction:||New Zealand More about this jurisdiction|
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Last updated: 03/08/2012