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A government plan to extend a mixed ownership model to four state-owned energy companies was a significant and complex undertaking by international standards with a wide range of risks attached,according to a cabinet briefing paper.
In the paper, released today as part of a bundle of documents related to the budget , Treasury said a high degree of flexibility would be needed to deal with uncertainty attached to the proposal, which would see the government sell a minority shareholding in Genesis Energy, Meridian Energy, Mighty River Power and Solid Energy, and further reduce its shareholding in Air New Zealand.
However, Treasury said the project was viable over a three-to-five year period and had a lot of merit because of the potential it had to reinforce efficiency, fiscal, and capital market development policy goals, while at the same time providing moderate economic gains.
Treasury identified 10 tests and objectives which needed to be met if the process was to succeed. These included companies involved presenting good opportunities for investors, the necessity for New Zealand investors to be at the front of the queue for shares and that the programme needed to be well advanced by 2014, to allow capital to be released over the next few years to finance other priorities.
“Some of these objectives have the potential to pull in different directions, particularly between fiscal and other objectives,” the paper said.
“It will not be possible for all 10 objectives to be maximised simultaneously, and as a result trade-offs between different objectives will need to be balanced to achieve a successful outcome.”
Maximum flexibility had to be maintained for as long as possible into the process, Treasury said, to ensure that Ministers had enough policy space to balance competing objectives.
The government budgeted $5.9 million for a scoping study into the plan.
Colin Williscroft
Thu, 30 Jun 2011
Thu, 30 Jun 2011
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