Lawmakers question New Zealand asset sales
WELLINGTON, New Zealand (AP) — Five months after the New Zealand government started a new round of contentious asset sales with the IPO of a state-owned power generator, the company announced it plans to buy back some of its shares.
Mighty River Power said Thursday the move is a prudent way to return capital to shareholders. But opposition lawmakers said the company is trying to boost its lackluster stock price and that the move highlights broader problems in the government's asset sales policy.
Mighty River said it will buy back shares worth up to 50 million New Zealand dollars ($42 million), representing a little under 2 percent of the total shares on issue. The government has retained a controlling 51 percent stake in the company.
Shares in Mighty River had slumped by 12 percent from their IPO price of NZ$2.50. The shares were up 1 percent Thursday after the announcement, trading at NZ$2.23.
The center-right government hopes to raise NZ$5 billion from asset sales, money it says will help reduce the country's public debt and pay for hospitals, schools and roads.
New Zealand went through a previous round of asset sales beginning in the late 1980s at a time when the economy was struggling and the government was trying to open markets to greater competition. Many New Zealanders were opposed to the depth and breadth of those sales, which ranged from forests to the national airline. Some felt vindicated when the government was later forced to bail out or buy back some of those businesses.
Joan Withers, the Mighty River board chairwoman, said in an interview that the company had done better than expected in the last financial year and was trying to return some of the wealth to shareholders. She said the buyback was more tax effective than paying a special dividend.
"This is a good news story," she said. "The board is saying: Hey, we've actually over-performed, we have less debt, and we won't spend as much as we had forecast."
She said that everyone involved with Mighty River would like to see the stock price improve, but that wasn't the primary motivation for the buyback.
Opposition lawmaker Clayton Cosgrove said the buyback was an act of "absolute desperation" that shows the folly of the government's asset sales.
He said the low share price had been scaring investors away from the government's next offering, a 49 percent stake in Meridian Energy. That company is due to list on the stock market later this month.