Bill English, Christopher Finlayson
17 October, 2012
Iwi participation in Government share offers
Iwi groups yet to complete their Treaty settlements will be offered the opportunity to participate in the Government share offer programme, Finance Minister Bill English and Treaty Negotiations Minister Chris Finlayson say.
“This is a result of our constructive engagement with Iwi leaders and their technical advisers,” the ministers say. “It is another example of how direct engagement with the Crown can produce pragmatic solutions that provide an opportunity for more New Zealanders to participate in the share floats and support Iwi and the Crown to settle historic Treaty claims.”
Since the consultation with Maori in February, the Government has been talking to iwi that have expressed an interest in participating in the proposed Initial Public Offerings but whose Treaty settlements may not be completed in time for them to buy shares at the time of the offer.
As a result of today’s announcement, Iwi yet to settle their claims can choose to receive a percentage of their forecast settlement package “on account” in the form of shares in the Government share offer companies. Mr Finlayson says “on-account” arrangements were not new for Iwi in negotiations with the Crown. The facility has been used by many Iwi in the past. They must pay the full issue price and any amount drawn down will be deducted from the final settlement.
“One of the stated goals of the share offer programme is to give as many New Zealanders as possible the opportunity to invest in these companies, as individuals or through institutions,” Mr English says. “This process will allow more local investors to do that.”
The Government confirmed on Monday that the sale of up to 49 per cent in Mighty River Power will take place in the first half of next year, subject to market conditions. This will be followed by sales of up to 49 per cent of Genesis Energy and Meridian Energy in the subsequent 12 months, again subject to market conditions.
“The Government has already announced that individual New Zealanders seeking up to $2000 worth of shares will be guaranteed that amount, and that they will get a loyalty bonus if they hold on to those shares for a period likely to be about three years,” Mr English says.
If yet-to-settle Iwi meet criteria for eligibility, they will be able to buy ordinary shares at the IPO price, on the understanding that the purchase forms part of their overall settlement package.
They will not be eligible for loyalty bonuses, as these will apply only to individual New Zealanders.
“It does not change the total amount of Treaty settlements. It simply allows Iwi more flexibility about how their settlement money is invested, and we believe it will enhance the share offer programme,” Mr Finlayson says.
Around 65 Iwi may be eligible to participate in on-account share purchases. They would, like all other investors, be encouraged to first seek independent financial advice, the ministers say.
Each Iwi would be limited to 5 per cent, 10 per cent or 12.5 per cent of their likely total settlement, depending on their situation.
- A 5 per cent maximum of their likely settlement would be available for Iwi not “local” to any of the power companies’ assets – for example, if there was no dam or other operating asset within the Iwi’s area.
- A 10 per cent limit would apply to Iwi who are “local” to any of the companies.
- A 12.5 per cent limit would apply to Iwi who are “local” to any of the companies, had reached an Agreement in Principle with the Crown, and had already agreed a quantum amount for settlement.
Mr English says the actual amount to be advanced as on-account payments for shares will depend on the level of take-up by Iwi. The Treasury estimates that if all Iwi take up their full entitlement, this will amount to $145 million over the entire Government share offer programme.
“Even if all Iwi take up their full entitlement and allocate all of it to the Mighty River Power share offer alone, it would still represent less than 5 per cent of the shares of Mighty River Power,” Mr English says.
“However, we anticipate the take-up being less than the possible maximum and it is also unlikely that all Iwi will choose to invest their total allocation in a single company.”
Questions and Answers
How does this arrangement relate to the “shares plus” concept proposed by the Waitangi Tribunal?
It is quite different. The “on-account” arrangement simply allows Iwi who have not yet had settlements completed to access funds (in advance of their future settlement) to purchase shares – those shares are ordinary shares and will be acquired by Iwi at the same price and terms as other investors in the IPO. Any amount drawn down will be deducted from the final settlement. The “shares plus” concept looked to create additional rights for Maori.
Who is likely to take up the offer?
We can’t speculate on who will accept the offer. There are around 65 Iwi yet to reach settlements. Individual Iwi would obviously need to take financial advice and make their own decisions about whether to participate. If Iwi have not yet begun negotiations with the Crown, they will need to obtain a Crown-recognised Deed of Mandate to participate in this opportunity.
Will Iwi need to wait until they have fully settled with the Crown before selling their shares?
Iwi will have to wait for two years or until they have reached an Agreement in Principle with the Crown (whichever occurs later) before they can sell their shares.
If Iwi don’t know the value of their quantum settlement, how do they find out?
The Office of Treaty Settlements will advise Iwi of this.
How long will this funding be available?
This on-account transfer allocation will be available to purchase shares in any initial public offering as part of the Government share offers programme that takes place within the next three years. The funding allocation is not limited to the Mighty River Power share offer.
Do Iwi have to spend the allocation on shares?
Yes. Iwi groups can only use their on-account transfer allocation under this proposal to purchase shares in the Government share offers programme and do not have the option of taking the allocation or any unused portion of the allocation in cash.
What happens next?
Iwi will work with the Office of Treaty Settlements, depending on what is required for them to reach the point of eligibility. For some, this will be in the form of seeking authority from their claimant community, for others (those in the latter stages of negotiations), it might be simply confirmation of their desire to take up the offer.
The Crown is considering offering shares to the public in one or more of Genesis Power Limited, Meridian Energy Limited, Mighty River Power Limited, Solid Energy New Zealand Limited and Air New Zealand Limited. No money is currently being sought and no applications for shares will be accepted or money received until after an investment statement containing information about the relevant offer of shares is available.