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Weldon backs banks with local links to win SOE mandates

NZX’s Weldon backs investment banks with local links to win SOE roles

By Paul McBeth

Aug. 31 (BusinessDesk) – NZX Ltd. chief executive Mark Weldon is backing investment banks with local offices to win mandates in the government’s plan to sell up to half of its stake in certain state-owned enterprises.

Firms wanting to tap the stream of fees on the government’s partial privatisation plan should have an office in New Zealand, and those companies that have supported local capital markets should be at the head of the queue, Weldon told the Institute of Financial Professionals New Zealand conference in Wellington.

The Treasury estimates those fees will be between 2% and 9% of the targeted sale price, though the government has said the department has overstated the likely cost.

“It’s interesting how some of these firms seem to believe they have entitlements and rights to cherry pick income streams without being long-term participants and contributors,” Weldon said.

“One of the things I would certainly hope to see out of the process here is that those who have made long-term meaningful and broad-based investment into the capital markets get rewarded and supported by Treasury and those who actually award the business,” Weldon said.

“It would be tremendously disappointing to see Morgan Stanley get a lead manager role unless they actually pony up and bring some people here.”

Earlier today, the conference heard State-owned Enterprises Minister Tony Ryall say the government was expecting to sell as much as 85% of its proposed sale to local investors, with a 10% cap on total holdings likely to be put on the SOEs.

The government hopes to raise as much as $7 billion by selling down minority stakes in Meridian Energy Ltd., Genesis Energy Ltd., Mighty River Power Ltd., Solid Energy Ltd., and Air New Zealand Ltd.

Tower Investments Ltd. chief executive Sam Stubbs told the conference the sales will attract a surprising amount of local demand from investors looking for attractive yields.

“We see a unique period where the government can actually sell sizeable chunks of assets to buyers that are very definitely kiwis,” he said.

Victoria University economics professor Lewis Evans rounded out the panel on the mixed-ownership plan, saying the primary benefit for the sell-down of state assets is to bring greater scrutiny, and thus commercial discipline, to the companies. That lack of oversight meant government-owned firms tended to be more opportunistic than profit-orientated companies.

NZX’s Weldon agreed, saying the sell-down will bring not just greater analysis of these entities, but also more investigation from the media, singling out New Zealand Post Ltd.’s $35.6 million loss announced last week as an example where it was under-reported.


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