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Budget 2014 Home Page Budget Economic and Fiscal Update 2014

Government Share Offer Programme

The Government's Share Offer programme has now concluded. Minority shareholdings in Mighty River Power, Meridian Energy and Genesis Energy have been sold, and the Crown has reduced its shareholding in Air New Zealand. Since the Half Year Update, the Genesis Energy share offer has been completed and the proceeds from the Crown reducing its shareholding in Air New Zealand have been finalised. Refer to Table 2.11 for the final proceeds of the programme.

Table 2.11 - Proceeds of programme (core Crown)
Year ended 30 June
May 2011 Gross
% sold
Mighty River Power 1.350 1.870 1.686 1.642 48.24
Meridian Energy 2.290 3.180 1.884 1.826 48.98
Air New Zealand 0.160 0.290 0.365 0.364 20.052
Genesis Energy 0.580 0.810 0.733 0.696 47.60
Solid Energy (did not proceed) 0.620 0.850 - - -
5.000 7.000 4.668 4.528


  1. Net of direct costs and present value discounting of the Meridian Energy deferred settlement.
  2. This represents the additional reduction in the Crown's shareholding as part of this programme.

Source: The Treasury

Total gross proceeds for the programme are $4.7 billion, compared to a range of $5.0 billion to $7.0 billion as estimated in May 2011. The May 2011 estimates included estimates for Solid Energy; however, a decision was made not to proceed with a Solid Energy share offer. For the transactions that did proceed:

  • actual proceeds for the Mighty River Power share offer were slightly above the mid-point of the estimated range from May 2011
  • actual proceeds for Meridian Energy were below the estimated range from May 2011, with proceeds affected by the falls in the share prices of comparable New Zealand electricity companies, and the revised contract between Meridian Energy and New Zealand Aluminium Smelters
  • actual proceeds for the Air New Zealand transaction were above the May 2011 estimated range, as a result of the significant increase in Air New Zealand's share price, and
  • actual proceeds for Genesis Energy were within the upper half of the May 2011 estimated range.

Although the Share Offer programme has now been completed, owing to the use of instalment receipts for the Meridian Energy share offer some proceeds (approximately $0.6 billion) are expected to be received next year.

Future Investment Fund

Proceeds from the Government Share Offer programme have been set aside to fund future capital spending through the Future Investment Fund (FIF) - a fund established in Budget 2012. So far, $3.0 billion of this fund has been allocated. A large portion of the fund is expected to be spent on investments in health and education ($1 billion each), as well as the Canterbury rebuild and irrigation initiatives.

Table 2.12 - Analysis of Future Investment Fund
$billions Total fund
Cash proceeds 4.668
Allocated in Budget 2012 (0.533)
Allocated in Budget 2013 (1.420)
Allocated in Budget 2014 (1.039)
To be allocated 1.676

Source: The Treasury

Budget 2014 allocates $1.0 billion of new spending from the fund, including $0.2 billion for KiwiRail, $0.2 billion for school property expansion, $0.2 billion for health initiatives, as well as smaller amounts for irrigation infrastructure. Refer to the Minister's Executive Summary document for further details of the Budget 2014 package.

With the proceeds from the Government Share Offer programme totalling $4.7 billion, the amount remaining to be allocated in future Budgets is $1.7 billion.

Table 2.13 - Estimated fiscal impact of the Government Share Offer programme
Note Actual to date and forecast
Completed transactions
Gross cash proceeds   $4.7 billion
Net cash proceeds $4.5 billion
Loss on disposal recorded in taxpayers' funds $384 million
Cash impact
Forecast foregone dividends 1 $336 million p.a.
Estimated finance cost savings 1 $191 million p.a.
Reduction in net debt $3.7 billion by 2017/18
Accrual impact
Forecast foregone profits 1 $290 million p.a.
Estimated finance cost savings 1 $191 million p.a.
Net decrease in OBEGAL 1 $99 million p.a.


  1. Based on an average of the fiscal forecasts subsequent to the programme being completed.

Source: The Treasury

The average profits and dividends estimated to be foregone have been updated since the Half Year Update, largely as a result of the Government selling slightly less than the 49% originally forecast, in addition to including updated forecasts from the companies.

The figures in Table 2.13 are based on the current profit and dividend forecasts supplied by the companies, and forecast interest rates on government debt.

The forecasts of company profits and dividends inherently contain more risk and uncertainty than forecasts of the Government's cost of borrowing. As a result, you would expect the return on commercial assets to reflect that additional risk and be generally higher than the Government's cost of borrowing. Whether forecast profits are actually delivered will depend on actual company performance.

The Forecast Financial Statements (Chapter 5) disclose forecasts for minority interests' share of profits and dividends for all minority interests of the Government. While these amounts include the forecasts as a result of the government share offer, they also include the pre-existing minority shareholding in Air New Zealand, along with minority interests in the Crown Fibre Holdings Group and Solid Energy (resulting from their recent restructure). As a result, the amounts in the Forecast Financial Statements are larger than those in Table 2.13 above.

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