CORIN DANN INTERVIEWS TONY RYALL
CORIN Good morning, Minister.
TONY RYALL - Minister for State Owned Enterprises
Good morning, Corin.
CORIN When you set out on this process, you really wanted to get as many mums and dads investors, to use that phrase - not a particularly good one. You didn't really achieve that, though, in the end, did you? Bill English admitted in Parliament this week, you didn't really get that middle New Zealand you were looking for.
TONY Well, I certainly think 80,000 first-time investors is a very very good achievement; 113,000 everyday New Zealanders owning shares in Mighty River Power. Sure, it's not what we might have got if we'd got the level of interest, for example, that we've had in the Contact Energy float, but, actually, it's still 113,000 people. I think that's a very good number of new investors-
CORIN What went wrong?
TONY ...particularly when you consider the scare campaign
from the head-high tackle that the Opposition parties tried.
CORIN All right, let's deal with that scare campaign. When that power policy came out, we had talk of North Korea, there was going to be capital flight from New Zealand, the international community would give up on us, but, in fact, all the evidence from this float shows that international investors were dead keen on getting into Mighty River Power and weren't put off at all.
TONY Well, I certainly think those criticisms are quite valid that have been made of their proposal. What's also become clear over the last few weeks is that the Labour- Greens power proposal wasn't very well thought through. They didn't understand the consequences of what they're doing-
CORIN Just back to the question, Minister, with all due respect. The international investors were not scared off New Zealand by that policy. There is no capital flight because of that policy.
TONY Well, there's certainly a lot of interest from overseas in these shares in Mighty River Power. I think the damaging thing that the Opposition parties did was deny a whole lot of everyday New Zealanders an opportunity to participate in the Mighty River Power float. Look, we're in a very good position today. We've now got $1.7 billion of cash which we can use to control debt. We don't have to borrow that money any more. But more importantly, we've got New Zealand back on the radar as a place to invest in. We've got a very small sharemarket in comparison to what other countries might have in an economy the size of New Zealand.
CORIN Sure, but you do you accept perhaps-?
TONY So we do need to provide more opportunities for
investors, and that's what this is about.
CORIN Do you accept perhaps that your reaction- your reaction to Labour's policy might have actually made it worse?
TONY Oh, no, not at all. The Opposition parties have been campaigning for over two years against this float. They've thrown everything at it, including the kitchen sink, and they petitioned, which came up very short - a real fizzer. What this government's been doing is giving opportunities to New Zealanders. And I think the noise around the Labour-Green policy really did scare off a number of everyday New Zealanders from participating, but in the end, I think 80,000 first-time investors is a very good result, and I certainly think there's an opportunity for more New Zealanders to think about it as the further offers come down the pipe.
CORIN Will you with the next floats do this business where you offer-essentially you set the price a little bit low, you get a bounce after it lists, you're effectively giving those shareholders who do invest a little bit of a premium and make them feel good - will you do that for the next floats?
TONY Well, I think if you ask anybody who's involved in a
public float, they'll tell you that everyone tries to aim for a
small uplift on float. Certainly, the Government wants New
Zealanders to have a good experience in the number of partial
floats that we're looking at doing. That's because we want to
encourage more New Zealanders to invest in the share market.
And that was one of the main objectives that the Government's had -
widespread ownership, encouraging New Zealanders to look at the
opportunity of saving through the share market.
CORIN But do you think for Meridian or for Genesis, whichever one is next, that you will get that extra bounce in numbers because people see it go on the share market, it's gone up a few cents, they'll think, 'Oh, things aren't so bad,' and come back in - is that what you were hoping for?
TONY Well, look, that's a decision that investors will have to make at the time, and it's not appropriate for us to speculate on what the price might be or what the impact may be after the next floats. The Government's objectives have always been pretty clear. We want to get as many ordinary New Zealanders participating in these things as possible. We want more New Zealanders looking at the share market as an option for saving. And as I said, you know, if you compare with Australia, we've only got about two-thirds of the number of New Zealanders investing in the share market that the Australians have got. We need to provide more opportunities for New Zealanders, and that's part of what the partial sales are about.
CORIN But is it fair, Minister, that for the taxpayers who didn't buy in to Mighty River Power to effectively be handing over some money to those who did invest, who get a nice little bounce after the price- after the listing. I mean, you're giving them a gift.
TONY Well, I think that- Look, the New Zealanders who
haven't bought shares in Mighty River Power are in a very good
position today. They still continue to own 51% of the
company, and we've got $1.7 billion of cash that we don't need to
borrow from overseas banks any more, and that's going to be
invested in other assets in New Zealand, such as the Christchurch
CORIN Could I just pick you up on that borrowing?
TONY &which other people can participate in.
CORIN On the borrowing - look at the Crown accounts just until March this year, and your debt is $1.4 billion lower than anticipated within the space of, what, a few months - nine months - and you're talking about $1.7 billion dollars there. An improving economy means you don't have to borrow.
TONY Well, we're certainly on a trajectory to borrow more
money over the next year or so. That's the reason why we're
trying to get and we are going to get the economy into surplus, so
we don't have to keep borrowing. Very important to remember
that the sales proceeds from these mixed-ownership model companies
go into the Future Investment Fund. It means we don't have to
borrow from overseas banks to continue investing in important
social infrastructure like schools and hospitals.
CORIN You can borrow at 3.5%. It's never been cheaper. It's not an issue borrowing.
TONY Well, if that's the case, then why doesn't the Government go and borrow every dollar it can and buy every business? That's not a sensible argument. The Government's argument is that we've had these investments in these companies; we think there's a lot of opportunities in freeing up 49% of them. Today we've got $1.7 billion in cash from the Mighty River Power float, which allows us to invest elsewhere and not borrow that money.
CORIN All right, the next float - so, we're looking at August and then possibly October?
TONY Well, that's going to be announced in the Budget on
Thursday. I can tell you one thing - it is an energy company,
and I would expect that New Zealanders would have an opportunity to
buy shares in that company - minority shares - around about
CORIN Can you rule out Air New Zealand this year?
TONY No, I can't rule that out. Ministers are going to consider the Air New Zealand shareholding in the next few weeks, and then we'll take advice and make a decision on that.
CORIN So it's possible we could see that as the number three this year if conditions are right?
TONY Look, you'd have to look at some very favourable
conditions for the Government to get a number of floats away after
this one. We haven't yet made a decision on the Air New
CORIN It is different, Air New Zealand, though, isn't it, because airlines are very volatile. Do you want mums and dads - so-called mums and dads - investing in Air New Zealand when it's a lot more volatile than an energy company?
TONY Well, already we've got New Zealanders investing in Air New Zealand. It's already on the New Zealand Stock Exchange. That's what makes it somewhat different to-
CORIN First-time investors?
TONY Well, they may have an opportunity as well, so we
have yet to make decisions on Air New Zealand. The
Government's objectives still remain the same with Air New Zealand
- we want as widespread New Zealand ownership as possible.
CORIN Are you confident you can get more than the 113,000 next time round in the next energy company? The risks are still there. The same risks - Tiwai Point, Labour's power policy, Maori water rights - they haven't gone away.
TONY Well, those risks are all there, and I think what the Mighty River Power float has shown is that investors and the markets as such are able to accommodate all these risks and factor them in. Certainly, the Government's objective is we'd like to get more everyday New Zealanders participating in these companies directly on the sharemarket, and that again will be one of our big objectives.
CORIN What's the number?
TONY Well, I'm not going to give you a number on what we
might be expecting in the one.
CORIN You wanted 225,000-
TONY We want as wide as possible.
CORIN Can you get 225,000?
TONY Well, we're going to be working to make sure we get
as many New Zealanders as possible. I think that now that the
Labour-Greens ankle tap is out of the way, New Zealanders will be
able to assess how Mighty River Power's going and also assess the
opportunities of the next company that we'll be putting up for
CORIN Minister- SOE Minister Tony Ryall, thank you very much for your time.
TONY Thanks very much.