English talks dirty on foreign ownership

Finance Minister Bill English says the Government wants to reallocate some capital funding rather than take on more debt. Photo / Mark Mitchell

Limits on foreign ownership in the State-owned enterprises the Government plans to partially privatise are a possibility, Finance Minster Bill English says.

The Government plans, if returned to office in November, to sell down its shareholdings in the State-owned electricity companies Meridian, Genesis and Mighty River, coal miner Solid Energy and Air New Zealand, which already has some private shareholders.

It would retain a majority stake and has said it would "need to be confident of widespread and substantial New Zealand share ownership".

When English appeared before Parliament's finance and expenditure select committee yesterday Labour MP Shane Jones asked him what percentage of the privately held shares he would be comfortable with being held by foreign investors.

The Government had not considered that in detail, English said.

Had it considered a "dirty float" [in which there would be some restrictions on foreign ownership], Jones asked.

"That's a possibility. It already applies in the case of Telecom," English said.

"That has been looked at but the Government hasn't considered in detail foreign ownership restrictions."

Last month's Budget, when discussing the Air New Zealand-style mixed ownership model for the energy SOEs, said one way of ensuring widespread and substantial New Zealand ownership would be "hard ownership restrictions, such as individual or total ownership caps, or separate domestic shares".

Since Telecom was privatised 20 years ago there has been a restriction preventing any single foreign entity from acquiring more than 49.9 per cent of the company, and a requirement that any shareholding above 10 per cent requires Government approval.

Those restrictions will pass through to the network company Chorus, which is to be split from Telecom now it has the lion's share of the Government's ultra-fast broadband contract.

When Air New Zealand was privatised in the late 1980s it had two classes of shares, A shares which could only be held by New Zealanders and B shares for which there was no restriction on nationality of ownership.

English said the Government expected to undertake $35 billion of capital spending over the next five years. It would be restrictive if it could only fund that by taking on more debt, rather than reallocating some existing capital.

"So it's a case of trading hydros for new prisons?" Jones said. "What a dismal view of the future."

"Let's call it trading them for new schools then," English replied.

Prime Minister John Key said later the Government had asked the Treasury to advise it of the options available.