Crown IPOs - a preferred option to political interference in the Super Fund
The partial sale of a number of Government owned commercial assets would be a better way for the Crown to raise new funds instead of directing the New Zealand Superannuation Fund to invest a higher percentage of its money in the domestic economy. Crown owned companies – Ready for partial sale? Equity($m) Assets ($m) Comment Ontrack 11,628 11,907 KiwiRail - off limits Meridian Energy 4,205 7,198 Electricity Mighty River Power 2,258 4,058 Electricity Landcorp Farming 1,449 1,729 Owns 104 farms Genesis Power 1,407 2,707 Electricity Transpower 1,307 2,841 National grid owner New Zealand Post 667 8,037 Owns Kiwibank Christchurch Airport 563 757 Crown owns 25% Solid Energy 369 656 Coal Ag Research 193 246 Science & Technology
As at June 30 the New Zealand Government had total assets of $200.8 billion of which $14.8 billion was represented by the Super Fund. Thus only $12 billion or 6% of the total Crown’s assets were held offshore as most of the non-Super Fund investments are in the New Zealand.
The Super Fund was established to help partly fund the country’s escalating national superannuation bill. It also gives the Government the opportunity to diversify its asset base, particularly from a geographical point of view.
In addition offshore investments generate overseas earnings. These have a positive impact on the country’s bourgeoning balance of payments or current account deficits.
The preferred option would be for politicians to sell minority stakes in a number of state-enterprises to the New Zealand public. This would have a number of positive features;
- It would help maintain the independence and integrity of the Super Fund
- It would allow the Government to raise money to reinvest in the domestic economy
- It would boost the NZX
- It would have a positive impact on KiwiSaver schemes and give the Super Fund more opportunities to invest in NZX listed companies.
The table below contains a list of the ten largest Government owned commercial companies.
Many of these companies could be partially sold although a few are clearly off limits, particularly Ontrack. The sale of $2.5 billion worth of shares in these companies would have the same impact as a hike in the Super Fund’s domestic exposure from 23% to 40% of total funds.
Brian Gaynor, 21 October 2008
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