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Key to give away another $40 million in Meridian sale

20 August 2013

Key to give away another $40 million in Meridian sale

The National Government’s plan to sell Meridian Energy shares includes a $40 million give away of public money to a handful of retail investors, Green Party Co-leader Dr Russel Norman said today.

National today announced the sale of 49% of shares in Meridian Energy will occur in November this year. Retail share buyers will only have to pay for 60% of their shares’ value up front and the remaining 40% in 18 months’ time, which amounts to a 18-month interest-free loan from the Crown to those investors. A recent poll shows only 3% of New Zealanders are likely to buy Meridian Energy shares.

“John Key’s 18-month interest-free loan to Meridian Energy buyers will add around $40 million to the already outrageous cost of his asset sales policy,” said Dr Norman.

“Mr Key has already wasted well over $100 million of public money on the asset sales programme, including a $30 million gift to Rio Tinto.

“Giving retail investors a 18-month interest-free loan on 40% of the value of the shares only adds to the cost to the Crown. The additional borrowing cost borne by the Crown as a result of this loan to investors will be around $40 million. On top of that, the sale of Meridian will cost tens of millions in fees to brokers, lawyers, and advertisers.

“Continuing the asset sales is just throwing away more public money for no good reason.

“While a small percentage will benefit from Mr Key’s $40 million interest-free loan, the rest of New Zealand will have to foot the bill. Kiwis will pay for Mr Key’s loan through higher public borrowing, they’ll lose half the dividend stream from Meridian to the Crown, and they’ll face higher power prices.

“Asset sales just don’t make sense. That’s why Kiwis are overwhelmingly opposed to them and why we will soon be having a referendum on the issue. It’s not too late for Mr Key to do the sensible thing – stop his asset sales and listen to New Zealanders,” said Dr Norman.

Additional information:
Costwatch: tracking of asset sales programme costs
Estimate of cost of additional borrowing by Crown due to deferred receipt of Meridian sale proceeds

Latest estimate of value of Meridian Energy$6,580,000,000
Value bought by retail investors (assuming 26.9% bought by retail as per MRP)$1,770,020,000
40% of value of retail investors’ shares$708,008,000
Interest cost to Crown of borrowing $700m for 18 months @ 4%pa$42,480,480


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