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Treasury advises against asset sales

Friday 28 Dec 2012 5:49 p.m.

Treasury has warned the Government not to sell three state-owned companies next year as it's too much for the stock market.

The Government is considering selling three power companies in 2013, after it delayed the sale of Mighty River.

The Government had planned to partially sell Mighty River Power this year, but held off following the stoush with Maori over water rights.

So now it's considering a sell-off involving all three state owned power companies next year - despite Treasury advice saying they shouldn't.

“Treasury's saying don't do it, the sharemarket can't handle it - so let's heed Treasury's advice,” says Green Party co-leader Metiria Turei. “They're not a radical organisation, they're a conservative economic organisation and they're saying it's not possible.”

A newly-released Treasury report says:

"Market capacity dictates that it is only practical to complete one sale of the size of these companies per half year".

And even that timeframe makes the programme "more vulnerable to a market downturn or a dip in a company's performance".

Analysts say a tight timeframe for the sales could de-value shares.

“If there is too much supply of shares on the market the natural school of thought could be that there'll be less demand and that may put downward pressure on the price,” says Grant Collie of Forsyth Barr.

And Labour says it would disadvantage individuals wanting to invest.

“Mum and dad investors would struggle to scrape together enough money to invest in one electricity company in one year let alone invest in three of them,” says Labour spokesman Chris Hipkins. “So what this is going to do, if they force all these sales through in one year, we are going to see those shares going to corporate interests and overseas investors, not to mums and dads.”

The Government declined to comment on the Treasury advice - saying only it has a target of 85 percent New Zealand ownership at the time of sale.

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