National plans selling assets returning 17.6% pa

The Green Party is questioning the National Party's decision to fund new infrastructure by selling state-owned assets (SOEs) that have returned, on average, 17.6 percent per annum over the last five years.

"National have come up with the most expensive way ever devised to pay for new infrastructure, selling assets earning 18-22% per annum instead of raising debt that would cost 4-6% per annum," Green Party Co-leader Dr Russel Norman said today.

Total shareholder returns for SOEs for the financial years 2006 - 2010 were 17.6 percent. 'Total shareholder return' measures performance from an investor perspective, combining the return from dividends with the growth in the value of the company. If you remove the impacts of the global financial crisis from the results, the average total shareholder return from SOEs is 21.5 percent

"Adding to Government borrowing at a cost of four-to-five percent per annum suddenly becomes a more attractive way to fund new infrastructure compared with National's plan," Dr Norman said.

"National is considering using the proceeds from asset sales to fund further roading infrastructure. Projects like the Puhoi to Wellsford highway and the Transmission Gully road project have benefit to cost ratios of less than one - in other words, they're money losers.

"It's not smart economics to sell cash cows, like our energy companies, and invest the one-off windfall in roads with negative returns."

Link to Crown Ownership Monitoring Unit Report (see page 24):
http://www.comu.govt.nz/publications/annual-portfolio-report/2010/