KiwiRail, Solid Energy blow asset limit to bits

The decision to privatise Hillside workshops and Solid Energy's confirmation that SOEs are free to sell 100 per cent of subsidiaries, blows to bits the Government’s hollow pledge to retain majority ownership and control of state assets, Labour's Economic Development spokesperson David Cunliffe said today.

David Cunliffe was commenting on the wider implications of the sale of KiwiRail's Hillside workshop, which comes hard on the heels of Solid Energy Chairman John Palmer’s confirmation that SOEs can sell off 100per cent of their subsidiaries, and revelations that SOE shareholdings can also be diluted by issuing quasi-equity bonds.

“Taken together these three loopholes blow the Government’s promise of retaining majority ownership and control of the existing asset base to bits,” David Cunliffe said.

“KiwiRail’s Hillside sale bombshell will gut Dunedin’s engineering sector and will rightly outrage the 14,000 people who signed my colleague Clare Curran’s petition opposing the workshops’ closure.

“Hillside is a major asset within KiwiRail, providing hundreds of jobs and pumping up to $30million a year into the Otago economy,” David Cunliffe said.

The problem was highlighted by testimony to Parliament’s Commerce Select Committee on 5 April 2012.

"Responding to my questions on diluting equity by selling off existing or new subsidiaries, Solid Energy and Air New Zealand Chairman John Palmer, confirmed that subsidiaries or projects of SOEs could ‘be floated in its entirety by a series of arrangements.’  He went on to confirm that could be ‘100 per cent private ownership’, and further confirmed that could be on a non-consolidated basis from the parent SOE.

“When questioned about whether this would be constrained by decisions of the shareholders, including the Crown, Mr Palmer added ‘These are decisions for the board. The shareholders do not make project decisions.’

“Selling non-consolidated subsidiaries off the balance sheet would, of course, get around the 51per cent ownership limit by allowing real assets of an SOE to be floated independently of the parent company,” David Cunliffe said.  “This is important new information for the asset sales debate.”

Labour Leader David Shearer also recently demonstrated the Government’s ability to sell equity bonds and other instruments which could reduce the real value of the public ownership below the 51per cent threshold.

“New Zealanders overwhelmingly oppose the National Government’s plans to flog off the assets they’ve built up over generations,” Mr Cunliffe says. “Now Kiwis can see how National has tricked even its supporters, who would never have imagined that ‘51per cent’ could mean losing control of everything but an asset-stripped shell.

“There is a cynical but carefully worked out Government agenda to flog off as many public assets as possible.  At a time when the Crown may be selling the crafar farms to foreign interests these issues are even more important.

“The National Government promised New Zealanders would retain at least 51per cent of their SOEs. It is now clear that promise is meaningless,” David Cunliffe said.