Meridian Energy is the next state-owned enterprise to be sold off, it was announced in today’s Budget, so long as market conditions make it a good time to sell.
Investment bankers Macquarie valued Meridian at $6.5 billion in 2011, meaning New Zealand investors may be required to stump up with a collective $3 billion to maintain a majority in the company.
The partial sale of the country’s most valuable electricity company, which is set to float in October, are set to significantly increase the capital available in the Future Investment Fund. $1.5 billion from this fund, which now includes proceeds from the Mighty River Power float, has been allocated in the budget to pay for new public assets.
More than $700 million has been set aside for key projects including new, modern schools and assisting the justice, health and education sectors of the Christchurch rebuild. A further $426 million of investment has been allocated to redevelop Christchurch and Burwood Hospitals. The remainder of the fund will be spent school network upgrades ($50 million), irrigation infrastructure ($80 million) and the fourth year of KiwiRail’s turnaround plan ($94 million.
Money from the asset sales were "only a small percentage of the government's overall spending," Finance Minister Bill English said. "But without them, we would either have to borrow more money overseas or go without some of the new or upgraded hospitals, schools and other infrastructure and investment."
In spite of uncertainty in the electricity sector, the Government is determined to go ahead with the partial privatisation of Meridian, believing enough is known about the current threats: Labour and Greens' proposal to establish a central buying agency, NZ Power, and the potential closure of the Tiwai Point aluminium smelter.