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Govt introduces public share offer legislation

Hon Bill English
Minister of Finance
Hon Tony Ryall
Minister for State Owned Enterprises

5 March 2012

Media Statement
Govt introduces public share offer legislation

The Government will today introduce legislation supporting its mixed ownership programme, which will help get on top of debt and pay for priority new public assets like modern schools and hospitals.

Minister for State Owned Enterprises Tony Ryall is introducing the new legislation and confirmed the Government is aiming to undertake the first initial public offering – for Mighty River Power – around the third quarter of this year.

“The rationale for the government share offers for Mighty River Power, Genesis, Meridian, Solid Energy and Air New Zealand is very clear,” Mr Ryall said.

"We must not get into the kind of debt trap the UK and Europe are in."

"The $5 billion to $7 billion we expect to free up by these partial share floats will go into the Future Investment Fund to build priority assets like schools, hospitals and infrastructure.

"The alternative is a lot more debt that we'd have to borrow on fragile foreign markets at a time when many other countries are struggling under too much debt.

"The public share offer of less than 3 per cent of the Government's assets is part of the larger programme to manage New Zealand through and out of the global financial crisis."

The legislation will require the Crown to hold at least 51 per cent of the voting shareholding in each of the mixed ownership energy companies, and restricts other shareholders from holding more than 10 per cent of the voting rights.

"Before making decisions about Air New Zealand, the Government is seeking further commercial advice on implementing its policy, because of the greater complexity around Air New Zealand's existing shareholding," said Mr Ryall.

The Government is also taking a number of other decisions to align the MOM companies in legislation with other listed companies on the New Zealand Stock Exchange.

Ministerial decisions as majority owners of the four mixed ownership energy companies will remain subject to the Official Information Act and departments will remain subject to the Official Information Act and Ombudsmen Act. However the companies themselves will be excluded – as already happens with Air New Zealand.

"The mixed ownership companies operate in a competitive environment, and, once listed, will have comprehensive continuous disclosure requirements under stock exchange rules," said Finance Minister Bill English.

"Customers have contractual and consumer law remedies available to them, as well as the ability to take their business to a competitor – the same rules applying to their private sector competitors."

Corporate responsibility objectives in the SOE Act will not be included in the new legislation. 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.

Through an amendment to the Public Finance Act, the legislation will also replicate section 9 from the State Owned Enterprises Act. The SOE Act will retain section 9.

“During consultation hui last month, Maori conveyed a clear view that section 9 should be retained in the new legislation," said Finance Minister Bill English.

Section 9, will be replicated in a new Part 5A of the Public Finance Act, with clarification that private shareholders are not affected.

It reads: “Nothing 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.”

Section 27A-D will be replicated in the new legislation to protect Maori interests in memorialised land owned by the mixed ownership model companies.

“We entered this process with an open mind," Mr English said. "Replicating section 9 into the new legislation ensures we can proceed with the mixed ownership programme without prejudicing the rights of Maori or the Crown’s ability to settle future Treaty claims.”

The Government received 208 written submissions through the consultation hui.

The legislation will be introduced today and will receive its first reading on Thursday, when it will be referred to the finance and expenditure select committee.

Mixed ownership Q and A (pdf)


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