6. Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this
to the Prime Minister
Does he stand by his statement, in relation to the partial sale of SOEs, that “New Zealand investors would have to be at the front of the queue for shareholdings”?
Rt Hon JOHN KEY (Prime Minister) Link to this
Yes. That was one of the tests I set out for the mixed-ownership model: that “New Zealand investors would have to be at the front of the queue for shareholdings”, and that we would have to be confident of widespread and substantial New Zealand share ownership. Treasury’s advice is that these tests can be met. In particular, there is likely to be significant demand from the likes of KiwiSaver funds, other institutional fund managers, Crown financial institutions like the Superannuation Fund and ACC, iwi, and mums and dads who are looking for good, solid investments.
Hon Clayton Cosgrove Link to this
Given that the then Minister for State Owned Enterprises, Tony Ryall, said in 1999 that the sale of Contact Energy had been “a great success” after claiming that 225,000 mums and dads had invested in the company, can we now conclude that that float was actually a great failure, given that the number of mum and dad investors has fallen by two-thirds to around 70,000?
No. The first thing I would point out is that it was a very different model back in 1999. The Government is proposing—if it continues to be the Government post - 26 November—to have a 51 percent minimum shareholding held by the Government, then for New Zealanders to be at the front of the queue for the other 49 percent of shares. I refer the member to a story written by Pattrick Smellie in relation to Contact Energy’s Kiwi shareholders. He called them a loyal bunch, and said: “One of the least defensible criticisms of the Key Government’s partial privatisation plans have been regular references to Contact Energy as an example of a privatised company which lost control to foreigners. Yet nothing could be further from the truth.” I could go on, but I think I have made reference to the article before in the House.
Hon Clayton Cosgrove Link to this
Given Treasury’s advice that “significant participation by foreign investors will be essential to achieve the Government’s overall objectives”, can he provide the House with an estimate of the proportion of State-owned enterprise shares that foreign investors will end up owning?
My estimate is that that proportion will be quite low, for a number of reasons. Firstly, as I have said, we will be putting New Zealand investors at the front of the queue, and it is very likely, as Treasury’s advice has said, that huge demand will come from these areas. Treasury is working on ensuring that those tests can be met, and I am confident that we will meet them.
Rahui KateneWhat assurances does the Prime Minister have that hapū and iwi will be at the front of the queue for shareholdings in State-owned enterprises, and what progress has been made to this effect?
I cannot give them an assurance that they will be at the front of the queue, but I can give them an assurance that they will be treated like all other New Zealanders.
Hon Clayton Cosgrove Link to this
How does he propose to prevent mum and dad investors from onselling their shares in State-owned enterprises to foreign investors, which is something Treasury has said will happen, and is something that clearly happened in the case of Contact Energy?
I go back to what I said earlier: in the case of Contact Energy the model was very different. Treasury is looking at that model, and there could well be a lot of examples—I think in Australia, for instance—of sales where loyalty bonuses and the likes were used.
Hon Clayton Cosgrove Link to this
Is the projection accurate that $300 million in fees will be paid to lawyers, investment bankers, and other advisers?
I have not seen that projection. I can say the Minister of Finance is working closely with Treasury to ensure that the fee structure is low. I know that the Leader of the Opposition asked for some information from my office just this week in relation to what the fee structure was for Contact Energy. I am sure the member has seen that. From the top of my head, the fee structure was 1.9 percent. That is very low, relative to what we have seen in the private sector, where it runs at anything up to 7, 8, or 9 percent. These are billions and millions of dollars’ worth of assets, so my expectation is that the fee structure would be low, relative to what we have seen in the private sector.