Christopher Luxon wants ‘a more mature conversation’ about selling public assets. Big daddy Spinoff is here to explain the birds and the bees of privatisation.
Hey, government. How’re ya going, champ? Mind if I sit down for a sec? Listen… you’re getting to that age where administrations starts thinking about selling public assets. Everyone around you is talking about it, and it can be confusing. I know it’s awkward, but your prime minister and I think it’s time we had “the talk”.
Your portfolio is changing
Your assets are growing in new and exciting ways. They’re worth $99 billion compared to $49 billion in 2014. You might get embarrassing inflations from fiscal stimulus. Some nights, you’ll wake up to find your balance sheets covered in unexpected liquidity (these are called dividends). This is nothing to be afraid of. It’s a sign that your investments are maturing.
It’s OK to be curious
I’ve noticed you’re spending a lot of time alone in your office. Young governments often go through a phase where they’re obsessed with exploring their holdings. It’s normal to feel urges to release your capital. For now, you’re keeping your assets in public hands. But eventually, you may be interested in selling your assets to an investment fund.
Asset sales can be healthy
Selling assets can relieve pressure in your budgets and help to focus you on more productive investments. And let’s be honest: it feels good to sell off.
Casual asset sales can be great for a quick hit of dopamine, but they’re nothing compared to transacting with a committed strategic partner.
With the right asset manager, you aren’t just unloading equity for a cheap thrill. You’re working together to adjust your exposure, up and down through economic cycles, until both of you reach a peak liquidity event.
Transactions are a spectrum
Most governments sell their assets to private sector investment funds. But you may be attracted to another country’s sovereign wealth fund. Or even a public-private partnership. It’s 2025, after all. Heck, you could list your assets on the NZX and let every investor with $20 and a Sharesies account have a piece. I’m not judging. I just want you to be safe.
Find what works for you
Right now, you own three kinds of assets: social assets (ministries, Crown entities, and other public service agencies), financial assets (such as ACC investments and the NZ Super Fund) and commercial assets (state-owned enterprises and Crown companies).
As you explore your portfolio, you’ll start to figure out your investment preferences. There is a whole world of financial instruments out there. Many fund managers enjoy Bonds, Debt, Stocks and Mortgages (BDSM). Others are into fee stuff. Eventually, you may want to experiment with some light leverage, yield play, short positions, naked options, backdoor listings, master-feeder funds, or other exotic derivatives.
Set clear boundaries
In most asset sales, the parties begin by giving each other Heads of Agreement – but any change to negotiated terms requires ongoing consent.
Just because you agree to sell some of your assets doesn’t mean you have to sell everything. Know what you’re comfortable with and communicate that clearly.
For example, you own ample tracts of fertile land through the state-owned farming company Pāmu Landcorp. This asset gets good returns (a $49m profit last year), but isn’t strategically significant. The farms would still be productive under a different owner. If you sold some of the farms, you could focus your interests on an alluring new asset class.
Other assets are best kept to yourself. Air New Zealand, NZ Post and TVNZ provide important core services that the country relies on. A new owner might not give New Zealanders the same level of satisfaction.
Some assets are worth saving until you meet the right investor. You own 51% of three electricity companies: Genesis, Meridian and Mercury. These are both commercial and strategic assets. If you sold them tomorrow, the companies would still produce just as much electricity. But what if the new owner neglected to maintain the plants, and the rate of generation declined or stopped entirely? That would be a crisis, and taxpayers would have to bail them out. That’s why it’s important to…
Do it with someone you trust
Many naive, innocent governments get manipulated by smooth-talking fund managers and end up making asset sales they regret. For example, the 1993 sale of New Zealand Rail, where merchant bank Fay Richwhite acted as an advisor. The government opened up to Fay Richwhile about some of its most private and sensitive commercial information, only for the bank to turn around and buy a 31.8% stake of NZ Rail through an investment company.
Before you have an asset sale, ask yourself: would I trust this fund to be a parent company to my subsidiary?
Wait until you’re ready
Don’t sell your assets out of peer pressure. Do it when it feels right to you. It may seem like all the other governments you know are selling lots of assets. Most of them are just talking a big game to impress their voters; it doesn’t mean they’re actually doing it.
Similarly, popular culture these days is full of unrealistic or exaggerated depictions of asset sales. For example, the hit podcast Juggernaut 2: The Story of the Fourth National Government. Don’t believe everything you see in the media. Ruth Richardson doesn’t exist; she’s a fictional character created by Toby Manhire.
I’m here for you
Lastly, I want you to know you can tell me anything, and I promise not to get mad. No matter what you decide to do with your assets, I’ll support you. I love you, government.
