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Net Worth Attributable to the Crown

Table 12 - Net worth
Year ended 30 June
$ million
Actual
2010
Actual
2011
Actual
2012
Actual
2013
Actual
2014
Forecast
30 June 2014
Budget 13 Budget 14
Net worth attributable to the Crown 94,586 80,579 59,348 68,071 75,568 61,997 70,032
Net worth attributable to minority interests 402 308 432 1,940 5,211 3,185 5,435
Total net worth 94,988 80,887 59,780 70,011 80,779 65,182 75,467

Total net worth was $10.8 billion higher than last year. However, $3.3 billion of this increase is reflected as net worth attributable to minority interests following the Government's share offer programme. Net worth attributable to the Crown was $75.6 billion as at 30 June 2014, an increase of $7.5 billion from a year earlier, continuing the upward trend from last year. As a share of the economy net worth attributable to the Crown was 33.0% of GDP, which was 1.0% higher than a year earlier.

Figure 15 - Net worth attributable to the Crown
Figure 15 - Net worth attributable to the Crown   .
Source:  The Treasury

The main reasons for the improvement in the Crown's net worth were the revaluation uplifts of the Crown's property, plant and equipment (details on the next page) and the operating balance surplus. The operating balance surplus was driven by gains on financial assets and reductions in long-term liabilities (as discussed on page 14).

Compared to Budget 2014, the net worth attributable to the Crown was $5.5 billion stronger than expected due to revaluation uplifts of the Crown's property, plant and equipment (that were not forecast).

The composition of the balance sheet remains largely similar to previous years (Table 13), except for the increase in minority interests, following the Government share offer programme over the last two years. For further information on this programme, refer to the box on page 20, and note 35 in the financial statements (pages 156 to 158).

Table 13 -Composition of the statement of financial position

Year ended 30 June
$ million
Actual 2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Forecast 30 June 2014
Budget 13 Budget 14
Property, plant and equipment 113,330 114,854 108,584 109,833 116,306 112,627 112,264
Financial assets and sovereign receivables 95,971 115,362 116,178 118,779 123,177 121,515 121,134
Other assets 14,054 14,999 15,556 15,804 16,600 16,036 15,905
Total assets 223,355 245,215 240,318 244,416 256,083 250,178 249,303
Borrowings 69,733 90,245 100,534 100,087 103,419 112,201 103,058
Other liabilities 58,634 74,083 80,004 74,318 71,885 72,795 70,778
Total liabilities 128,367 164,328 180,538 174,405 175,304 184,996 173,836
Net worth 94,988 80,887 59,780 70,011 80,779 65,182 75,467
Minority interests (402) (308) (432) (1,940) (5,211) (3,185) (5,435)
Net worth attributable to the Crown 94,586 80,579 59,348 68,071 75,568 61,997 70,032

Assets

Total Crown assets were valued at $256.1 billion at 30 June 2014 (Figure 15), an $11.7 billion increase over the year with the growth largely in social assets ($8.1 billion), as well as financial assets ($2.3 billion).

Revaluations of property, plant and equipment had a significant impact on values of social assets, with the largest uplifts related to:

  • The state housing portfolio ($2.1 billion of which $1.8 billion relates to land), reflecting the strength of the property market (primarily in Auckland).
  • The value of state highways increased by $1.6 billion, mainly due to revaluation changes for the corridor land and increase in held properties. The corridor land was revalued in four regions and Auckland accounted for the largest portion of the increase. The held properties have increased since 2013 due to acquisition of properties in advance of future road developments in Auckland and Wellington.
Figure 16 - Total Crown assets
Figure 16 - Total Crown assets   .
Source:  The Treasury

The increase in financial assetswas driven by strong returns in equity markets, which increased fair values of investment assets. Refer to page 14 for discussion about the investment gains this year (largely from the NZS Fund).

Liabilities

Total Crown liabilities were $175.3 billion at 30 June 2014, an increase of $0.9 billion (0.5%) from the previous year (Figure 17).

Figure 17 - Total Crown liabilities
Figure 17  - Total Crown liabilities   .
Source:  The Treasury

Total Crown borrowings increased by $3.3 billion to reach $103.4 billion. Core Crown borrowings made up a significant portion of this ($89.1 billion) and is generally the key driver for growth in total Crown borrowing (refer to page 17 for a discussion of the Crown's gross debt and the borrowing programme). Outside of the core Crown, the most significant borrowings were the deposits held by Kiwibank ($12.8 billion). These increased this year by $0.6 billion, underpinning an increase in its lending.

Other liabilities were $71.9 billion at 30 June 2014, compared to $74.3 billion at the end of last year. The decrease of $2.4 billion reflected the following items:

  • ACC's insurance liability increased this year by $0.5 billion from $29.4 billion to $29.9 billion. The increase is due to an expected increase from new claims entering the ACC scheme during the year, the impact of legislative and policy changes, and partly offset by changes in inflation rates (as discussed on page 14).
  • Earthquake-related insurance liabilities of EQC and Southern Response were $2.1 billion and $0.3 billion lower respectively as claims were paid out. EQC's claims liability movement includes an actuarial reduction reflecting greater certainty about the expected cost of claims still to be paid.
  • Estimated retirement plan obligations for former state servants' Government Superannuation Fund were $1.0 billion lower than the year earlier largely owing to a decrease in the expected future inflation rate and favourable experience adjustments (as discussed on page 14). In addition, the assets (which are held by the Fund to offset the future obligations) increased this year with global equity markets providing strong returns.

Government Share Offer Programme

The Government 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.

As a result of the sale of shares to minority interests, the income from the entities assets must be shared with the minority interests. However, because the Crown retains control of the assets, no “sale” of assets is reported. As a result, 100% of the assets, liabilities, revenue and expenses will continue to be reported in the financial statements of the Government. The key change to the financial statements will be the disclosure of non-controlling minority interests in those assets, liabilities, revenue and expenses.

Core Crown

The core Crowns' direct investment in the Government Share Offer Programme, is shown in Table 14 below.

Table 14 - Government Share Offer Programme
Year ended 30 June
$ million
Last year Current year Total
Mighty River Power Meridian Energy Air New Zealand Genesis Energy
Percentage sold 48.24% 48.98% 20.05% 47.61%  
Gross proceeds 1,689 1,883 365 738 4,675
Net proceeds 1,642 1,827 364 706 4,539

As shown in Table 14, the Crown will receive $4,675 million from the sale of these shares.  Once the cost of the sales the estimated cost of the bonus share issues for Mighty River Power and Genesis Energy and the deferred settlement for Meridian Energy are deducted, the net proceeds from sale were $4,539 million.  

The profile for receipt of proceeds is as follows:

Profile for receipt of proceeds
$ million Gross
proceeds
Net
proceeds
Financial year    
2012/13 1,689 1,642
2013/14 2,358 2,269
2014/15 628 628
  4,675 4,539

Total Crown

In addition to the core Crown's direct investment in the Government Share Offer Programme, a number of Crown Financial Institutions (CFIs) have also invested in the companies as part of their normal investment activities. These investments have the effect of increasing the total Crown investment and therefore reducing the overall minority interest. The total Crown's direct investment in the Government Share Offer Programme, is outlined in note 35. 

While the Crown will continue to hold at least 51% of shares, the CFIs' shareholding will vary depending upon their investment strategies. 

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