Shane Jones, Grant Robertson, and Winston Peters were involved in a year long work programme that looked at merging SOEs.
Before the Government decided to consolidate all its DHBs, before it decided to consolidate water entities, or town planning, it was laying plans for another, massive amalgamation.
Under the previous Labour-NZ First coalition Government, ministers laid the groundwork for a merger of its $15 billion dollar portfolio of state-owned enterprises (SOEs).
Officials even contemplated part or fully privatising the portfolio of companies, which includes Kiwirail, NZ Post, as well as grid operator, Transpower, and state farm, Landcorp. It would have been the biggest shake-up of SOEs since the SOE model was established by the Lange Government in the 1980s.
The work programme was well advanced - a dedicated team within Treasury produced multiple rounds of advice for ministers, and then-associate SOE Minister Shane Jones was even dispatched to Singapore on a fact-finding mission.
Instead, before the pandemic, the plug was pulled. Treasury officials were pushing a model that would allow the SOEs to be part or fully privatised - a bridge too far for NZ First and Labour.
The story can now be told thanks to briefings released to the Herald under the Official Information Act.
In 2018, the new Government, less than 1-year-old, sought advice on lifting the performance of its ailing SOEs.
The problem was built into their design. In the 1980s, entities that had previously been Government departments were reorganised as commercial enterprises. These new "companies" would be owned by the Government, but required to operate on a commercial basis.
The problem for ministers, both then and now, is that many of the entities provide services that are too useful to be shut down, but not commercial enough to be profitable.
"Our analysis showed that actual performance is poor against the SOE Act's primary legislative objective of being a successful business, and the sub-objective of being as profitable and efficient as comparable privately owned businesses (as measured by shareholder returns)," Treasury told ministers in 2020.
In 2018, three ministers, Jones, then-SOEs Minister Winston Peters and Finance Minister Grant Robertson tasked officials with investigating merging the companies into a massive holding company similar to Temasek, a large Singaporean firm which has a portfolio worth more than NZ$400 billion.
Temasek began life as a holding company for Singapore's SOEs, but has since grown to be an international investment behemoth, building up a global asset portfolio and delivering large returns to its owner: the Singaporean government.
Jones was a longtime supporter of the Temasek model, with Parliamentary references to his support going back to 2012.
Jones told the Herald he had "always been a fan of the Singaporean approach to both national development, and using the heft of these government commercial entities to create a new raft of economically successful investments".
"I studied with Singaporeans when I was at Harvard in 1990. I've always been a strong believer that if we are going to be in the business of owning SOEs, then they need to be put to a greater purpose than their CEOs and boards," he said.
In January 2019, a "dedicated project team with senior resources within the Treasury" was established and drew on private sector advice.
A work programme was established to investigate the idea, with an interim report returning to ministers in mid-2019 and a final report landing in September that year.
Temasek was itself involved in the project, with Treasury officials soliciting the company for advice and feedback on New Zealand proposals.
In March 2019, Jones travelled to Singapore with Treasury Deputy Secretary financial and commercial operations Jon Grayson to meet Temasek officials.
Issues with the SOEs were identified early on. Treasury noted that the fully-owned SOEs had "significantly underperformed" while the mixed-ownership companies - those the Government has a part interest in, but is not the sole shareholder, like Air New Zealand and a handful of power companies, had managed to generate "good shareholder returns".
Treasury estimated the poor, almost uncommercial performance of the SOEs had cost the crown $13.6 billion in the 10 years to 2018 which might have been earned were they as successful as other, more commercial entities the Crown has an interest in.
"Entities in 100 per cent Government ownership have produced aggregate returns of 0.1 per cent per annum, against a cost of capital of 10.9 per cent," Treasury wrote.
All the ministers, including Robertson were keen on the idea that under a Temasek model those profits could be reinvested in the company, and in turn the wider New Zealand economy.
Over time, the company would likely grow and own shareholdings in a number of New Zealand firms, helping them to grow and become more productive - or at least that's what Treasury hoped would happen, if the Temasek model was followed.
However, SOEs had a handful of benefits: the key ones being that while SOEs are commercial, they are not fully independent and are required to follow certain high-level directions of ministers - this includes areas like phasing out fossil fuel use, or continuing certain essential services.
This created a problem for ministers who, according to Treasury, faced a "strong personal and political accountability" for SOEs in the area of a "relatively broad set of wellbeing objectives" - but who faced significantly less accountability to deliver returns to the Crown - in other words, ministers had an incentive to use the companies to deliver on political promises, rather than to deliver value to the Crown.
Treasury officials summed up the tension as " an important choice between the higher degree of control you have under the current model, and the potential to drive higher shareholder returns and take a more strategic approach to support your economic strategy under an operationally independent Holding Company."
There was another, bigger, catch.
What makes Temasek successful is its ability to buy and sell companies independently of the Singaporean Government.
Treasury said that all of the SOEs were rolled into one company, it would want that company to have this power too - the company needed to operate a "dynamic portfolio" that could buy and sell assets at will.
Referring back to Temasek, Treasury said the company was able to grow through "the sale of underperforming state-owned assets and purchase of better growth prospect assets".
The ability to part or fully privatise companies was central to the way the Temasek model worked. Underperforming parts of SOEs, like NZ Post's letters division, could be sold, and the proceeds could be reinvested in parts of the business that were growing.
There was no limit to the scale of privatisation contemplated by Treasury: even Transpower, which has a regulated monopoly on the national power grid, could have been sold.
The Government looked at ways around this.
Treasury believed that the "wellbeing" sacrificed by losing direct control of the SOEs could be made up for by the fact the new holding company would be incredibly profitable. Those profits could be reinvested in wellbeing-generating initiatives through the Government's normal budget process.
One of the final briefings said the Holding company would generate $44b in returns between now and 2060, $27b more than the SOEs will generate under the current model.
And there was a way around losing some of the services offered by SOEs.
Treasury gave advice on "delivery of goods or services that provide wellbeing benefits - such as the mail service".
It recommended the Government could contract those services on a commercial basis, from the SOEs - in other words, the Government would pay NZ Post to keep the mail service running.
Treasury believed that the NZ Post's "mail service obligations" had "reduced its ability to compete - and make returns - in the freight/logistics market". Under the new model, NZ Post could be free to compete, and the Government would pay a fair price to keep the mail service operating.
But ultimately, a Treasury analysis found the proposal would only really work if the company had the ability to privatise SOEs at will - something no one was all that keen on.
Robertson told the Herald, the threat of privatisation was "one of the reasons the work programme was not pursued".
Jones said there was another concern too: putting all the SOEs into one company, could make it easier for a future government to privatise them.
"There was a fear that if all of the assets were grouped together it would provide the opportunity for a future government to privatise them," Jones said.
The Government knows it needs to do something soon.
Treasury thinks that a quarter of Government commercial entities are being disrupted currently (NZ Post's letters arm, plus TVNZ, and Kordia Networks), while 61 per cent face disruption in future, mainly Transpower, and NZ Post's parcels arm.
Only 16 per cent of entities face "minimal" disruption risks - these are MetService, Animal Control, Airways, and Assure Quality.
In fact, the Treasury thought that KiwiRail was such an investment basket case that it shouldn't be included in the portfolio - it's beyond saving, in a commercial sense.
In December 2020, incoming SOEs Minister David Clark was briefed on the Temasek work programme, and the problems with the SOEs. But the current strategy is one of both lifting "performance and position" of the companies while also getting them to "contribute to the Government's overall objectives".
The Government is currently reviewing whether KiwiRail should be switched from an SOE into something different and potentially less commercial.
But the Government has a very clear bottom line: when asked to rule out any SOE reform that involved part or full privatisations, Robertson's answer was very clear, "yes".
The 19-year-old disappeared without her wallet or mobile phone.