Sir Michael says Cullen Fund should own all SOEs

Michael Cullen, by whose name the New Zealand Super Fund is better known and who until yesterday was the Chair of NZ Post thinks the fund should own all SOEs.

He proposed this to a Labour Party- aligned policy forum at the weekend knowing that the Government would announce yesterday that the fund was about to buy 25% of NZ Post-owned Kiwibank.

Sir Michael made his comments  at a Fabian Society Forum in Auckland.

Though the Society is not an official Labour body, it draws most of its support from Labour party members.

The Forum also included the party’s State Owned Enterprises spokesperson, David Parker, as well as a host of past Labour luminaries.

It is an important ideas forum for policy development within the party.

But the Prime Minister was equivocal on Sir Michael’s proposal.

However though yesterday he was anxious to portray the fund as being independent of Government, that ignores his own election campaign promise of 2008 that it would hold 40% of its funds in NZ shares.

Key said he would legislate for the fund to have at least a 40 percent target in a range of assets including bonds to fund large infrastructure projects.

“National believes that a greater proportion of this increasing pool of capital, which belongs to all New Zealanders, should be invested in New Zealand to grow our economy,” Mr Key said in October 2008.

That never happened; instead Finance Minister Bill English directed the fund to invest in New Zealand as much as possible.

Its latest annual report says it has 12.6% of all its investments here and 5% of its equity investment.

But only on Sunday, Labour’s former Finance Minister and (until yesterday) Chair of NZ Post, the owners of Kiwibank, Sir Michael Cullen, floated the idea of putting all the SOEs into Super Fund ownership and also having them pay their dividends directly into the fund.

“I’ve got a personal hobby horse about transferring what little is left of actual valuable commercial enterprises the Government owns and putting the shares into the super fund,” he told a Fabian forum in Auckland.

“That would help protect the shareholding as well as actually assist in paying New Zealand super in the long term.”

Sitting alongside Sir Michael at the Forum was Labour’s State-owned enterprise’s spokesperson, David Parker, who appeared to agree with the former Finance Minister.

But the Government’s transfer of Kiwibank to the super fund will still see the current dividend go to the Government.

Finance Minister Bill English said it would pay  a dividend of about $200 million to the Government “which can be used for other high priorities.”

Under the terms of the deal, NZ Post has sold a 25% shareholding in Kiwibank to the Super Fund and a 22% shareholding to ACC.

The remaining Kiwibank shares are retained by NZ Post. 

“The deal keeps Kiwibank in public ownership and gives the bank access to additional sources of capital,” said Finance Minister Bill English.

The Prime Minister said the government had not directed ACC or the Super Fund to take up the shares, however, did not see the move as part of a trend to do as Sir Michael suggested.

“I guess it would come back to whether ACC’s board or the Super Fund thought there was value in a particular SOE and then secondly it would have to be in everybody’s interest for that to happen,”

He said he didn’t think the Super Fund would be likely to take over some of the Government’s share of the power generators.

“if they wanted to buy a stake in them – they probably already own them, I haven’t looked at their holdings, but they can do that on the market.”

But one SOE which the Super Fund clearly did not want a bar of was Sold Energy which yesterday was broken up and sold off to various coal ming interests.

Stockton, Rotowaro and Maramarua have been bought by Phoenix Coal Limited, a joint venture between Bathurst Resources and Talley’s Group, New Vale and Ohai have been bought by Greenbriar which is owned by the Palmer MH Group and Strongman and Liverpool have been purchased by Birchfield Coal Mines Limited.

“The sale of the mines as going concerns is a very positive development,” Finance Minister Bill English said.

“It means they will continue to provide jobs and contribute to regional economies. That is not something we could be sure of 18 months ago.”

State-owned Enterprises Minister Todd  McClay said Solid Energy’s remaining creditors – primarily banks – were expected to receive about half of what is owed to them.

But David Parker said the National Government Ministers had told Solid Energy they had to pay higher dividends and embark on more risky ventures with no extra capital.

“Now National’s chickens have come home to roost. The SOE’s mines, once a public asset, are now being sold to Bathurst Resources, the Talley group and Birchfield Coal Mines Limited.

“We wish the new owners and their workers well, but record our dismay at this debacle.

“This sorry saga has cost many hundreds of jobs, and damaged communities across the country. It has cost taxpayers and banks billions of dollars in losses, “ he said.