Govt sets sights on Meridian

Sale of 49 per cent of hydro giant Meridian will net the Government about $3.25 billion in the coming year. Photo / Simon Baker

Budget allocates asset sale millions to hospitals, schools, Christchurch build.

Meridian Energy, New Zealand's biggest and most profitable power company, will be partially privatised later this year, Finance Minister Bill English confirmed in yesterday's Budget.

The sale of 49 per cent of the hydro giant's shares in October will net the Government about $3.25 billion during the coming year - more than twice the $1.52 billion of asset sales cash it has committed to invest in other sectors such as hospitals and schools over the same period.

Meridian, which was valued at $6.5 billion in 2011, owns nine South Island hydro power stations and four wind farms.

It generates about a third of New Zealand's electricity.

Mr English said the $1.7 billion partial sale of Mighty River Power, completed last week, "demonstrated that the Government's share offer programme works".

"Mighty River Power now has the benefits of greater access to capital, better monitoring and oversight, and the market discipline that comes from being a listed company.

"Meridian will benefit from that same process, and New Zealanders will once again have the opportunity to invest in the initial public offering of a large New Zealand company."

Meanwhile, Mr English detailed how the asset sale cash would be spent this year, including $426 million on Christchurch hospitals, and a further $94 million thrown at perennial problem child KiwiRail.

Irrigation projects will receive $80 million and $50 million will be spent on the broadband rollout to schools.

A further $700 million has been committed to "new contingencies" such as new schools, a new justice and emergency services precinct for Christchurch and financial support for the city's tertiary institutions as they recover from the quakes.

A total of $900 million of asset sales cash will be spent on the Christchurch recovery.

The $1.52 billion allocated this year makes it the biggest year for spending of $6 billion the Government hopes to raise from asset sales, and is on top of $569 million allocated last year.

Over the six years of the asset sales programme, $1 billion of the money raised would be spent on schools and another $1 billion on hospitals and other health projects, Mr English said.

Treasury estimates the asset sales programme will result in $780 million in interest cost savings over the next five years but the Crown will lose $960 million in profits, including $810 million paid to it in dividends.