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Strong NZ demand expected for SOE shares

Published: Wed 31 Aug 2011 09:44 AM
Strong NZ demand expected for SOE shares
A large and growing pool of New Zealand investment funds will ensure strong local demand for the Government's $5 billion to $7 billion mixed ownership programme, Finance Minister Bill English says.
As a result, ministers expect New Zealanders to own at least 85 to 90 per cent of the companies in the mixed ownership programme, including the Government's majority shareholding, he said in a speech prepared for delivery at the Institute of Financial Professionals of New Zealand conference in Wellington.
At the same time, the Government will acquire around $78 billion of other assets over the next five years, on top of the $220 billion of assets it currently owns on behalf of taxpayers.
"The mixed ownership model is a win-win. New Zealand savers get to invest in good Kiwi companies. And the Government frees up $5 to $7 billion over three to five years to buy new assets like schools, hospitals and ultra-fast broadband, without having to borrow from overseas lenders and increase our debt.
"We would rather pay dividends to New Zealanders than interest on rising debt to foreigners."
The Government will retain at least 51 per cent control of the five SOEs on behalf of all New Zealanders - the same model used successfully for Air New Zealand for nearly 10 years.
"We have also promised that New Zealanders will be at the front of the queue for shares.
"In total, we expect New Zealanders will own at least 85 to 90 per cent of these companies - including the Government's cornerstone shareholding."
There are strong reasons for expecting a high New Zealand shareholding, Mr English says:
* New Zealand investors currently have more than $300 billion of investments excluding their own homes, ranging from money sitting in term deposits to financial assets and investment housing.
* The 34 registered KiwiSaver providers have about $9 billion invested and will double in size over the next four years.
* New Zealand institutions (excluding KiwiSaver) have about $59 billion under management.
* Crown financial institutions (including the NZ Super Fund, ACC and GSF) have almost $40 billion under management.
* Iwi are estimated to have over $10 billion of assets.
"So the mixed ownership model, spread over three to five years, is small compared with the size of the local capital pool," Mr English says.
"New Zealanders are also telling us that they are hungry for other investment options, particularly with the shine having come off the investment property and finance company sectors."
Final arrangements for the mixed ownership programme will be made next year, after the Government takes the policy to voters in the election.
"But it's the Government's intention to impose a maximum shareholding cap on the mixed ownership companies. That cap is most likely to be 10 per cent."

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