Treasury advisers appointed for SOEs

National's controversial proposal to partially privatise state-owned assets bounded forward yesterday with the announcement of the "immediate" appointment of Deutsche Bank and brokerage firm Craigs Investment Partners as sole financial advisers to Treasury.

While National has admitted the state-owned assets (SOE) sale proposal could become an election gamble, Labour has created its own even higher-stake gamble with confirmation due next week it expects to woo voters by announcing a sweeping capital gains tax, on second properties and possibly other investments.

At the heart of both proposals - and respective gambles - are National and Labour's bids to crack the same nut from different ends; New Zealanders' "love affair" with bubble-prone property investment and subsequent credit-fuelled borrowing and spending.

In both instances National and Labour want to steer the public out of property towards productive sharemarket investments, in National's case spearheaded by SOE investment.

Prime Minister John Key announced in late January the Government wants to offer shares to the public, while retaining at least a controlling 51% Government stake, in Mighty River Power, Meridian Energy, Solid Energy and Genesis Energy.

It also wants to reduce its Air New Zealand stake by up to 23%, from its present 74% to no less than 51%, following the 2001 $885 million taxpayer bail-out, which avoided bankruptcy.

It has been estimated that between $5 billion and $7 billion could be realised for the Government from the SOE privatisation, which has contentiously been allocated a $6 million working budget this year.

However, critics counter the move is akin to selling the family silver for short-term financial gains, leaving energy consumers facing more price hikes to keep shareholders in dividends.

While National mulls over keeping SOE ownership in domestic portfolios, the large utility, or public services companies which have a captured, bill-paying client base, are historically attractive to large institutional investment funds which eventually overwhelm minor "mum and pop" investors and wield more clout in company affairs.

In an unusual move just four months out from a general election, Deutsche Bank and Craigs Investment Partners announced their appointment yesterday, in a brief statement saying only that they would provide "advisory and project management services" on the proposed SOE privatisation plans.

The Deutch Bank Group, which holds a 49.9% stake in Craigs, said in the statement the pair offered a combination of local capital markets knowledge and also global "initial public offer" floats and government advisory experience.

- simon.hartley@odt.co.nz

 

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