Nats’ asset sale failure carves hole in Crown coffers

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Source: Green Party – Press Release/Statement:

Headline: Nats’ asset sale failure carves hole in Crown coffers



National’s failed asset sales have carved a half a billion dollar hole in the Crown’s coffers

National’s failed asset sales policy has attracted less revenue and cost more than forecast, resulting in a half a billion dollar hit to the government deficit, Green Party Co-leader Dr Russel Norman said today.

New analysis conducted by the Parliamentary Library and the Greens shows that the asset sales programme has been dramatically worse for the Crown’s books than was projected in Budget 2013. This is due to lower than forecast sales proceeds, which results in a smaller reduction in borrowing costs than was projected; higher than forecast dividend losses due to the sales taking place earlier than projected; and asset sales costs, which are not accounted for in the Budget tables.

Budget 2013 projected that asset sales would increase the deficit (the Operating Balance Excluding Gains and Losses) by $180 million by 2017 and improve the Crown’s net worth by $520 million. The new analysis, based on the actual performance of the asset sales programme to date, shows a $650 million hit to the deficit and a $960 million reduction in the Crown’s net wealth. If Genesis is sold too, the increase in the deficit will rise to $770 million and the Crown’s net worth will worsen by $1.08 billion.

“National’s failed asset sales have carved a half a billion dollar hole in the Crown’s coffers,” said Dr Norman.

“John Key’s asset sales failed to raise as much revenue as projected and they’ve cost more than promised.

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“When you compare the actual results of the asset sales to the Government’s official projections, they’ve so far raised two billion dollars less than National said they would. Foregone dividends are set to be $70 million more than projected. Sales costs, which are ignored in the Budget, stand at $140 million. That means higher borrowing costs for the Crown, totalling $260 million by 2017.

“John Key is using out of date figures to justify his failed asset sales to the public. If he disputes this new analysis, he needs to do his own reflecting the lower than forecast sales revenue and higher costs.

“National went into this sales process with rose-tinted glasses on and reality has proven very different, to the cost of all New Zealand taxpayers. They’ve made a bad policy worse by flooding the sharemarket with electricity company listings in a desperate attempt to get the sales done before they lose they next election.

“These numbers also highlight the importance of the referendum in helping to stop the sale of Genesis. If that sale goes ahead, even on an optimistic scenario, it will increase the deficit by $120 million.

“The referendum is our chance to tell John Key to stop wasting our money and stop his asset sales madness,” said Dr Norman.

Budget 2013 fiscal analysis tables compared to new analysis below:

Budget 2013 (BEFU page 40)

2013

2014

2015

2016

2017

5-year

Proceeds

1,500

1,500

1,500

1,500

0

6,000

Foregone Dividends

0

-120

-170

-230

-290

-810

Finance cost savings

7

79

158

245

291

780

Net debt

1,507

1,459

1,488

1,515

1

5,970

Foregone profits

-10

-140

-200

-270

-340

-960

Finance cost savings

7

79

158

245

291

780

OBEGAL

-3

-61

-42

-25

-49

-180

Gain on sale

175

175

175

175

0

700

Net worth

172

114

133

150

-49

520

Actual (excl Genesis)

2013

2014

2015

2016

2017

5-year

Proceeds*

1,686

1,621

628

0

0

3,935

Foregone Dividends

0

-156

-239

-244

-244

-882

Finance cost savings

6

85

123

156

153

522

Sales costs**

-60

-80

0

0

0

-140

Net debt

1,631

1,471

512

-88

-91

3,435

Foregone profits

-15

-185

-274

-279

-279

-1,031

Finance cost savings

6

85

123

156

153

522

Sales costs

-60

-80

0

0

0

-140

OBEGAL

-70

-180

-151

-123

-126

-649

Gain/loss on sale

163

-313

-160

0

0

-310

Net worth

93

-492

-311

-123

-126

-959

*assumes Genesis is not sold

**the Budget documents fail to account for sales costs. Other sales costs incl the incentives schemes and foregone dividends accounted for elsewhere

Actual (incl Genesis)

2013

2014

2015

2016

2017

5-year

Proceeds*

1,686

2,503

628

0

0

4,817

Foregone Dividends

0

-156

-295

-300

-300

-1,050

Finance cost savings

6

85

157

192

189

629

Sales costs**

-60

-105

0

0

0

-165

Net debt

1,631

2,327

490

-107

-111

4,230

Foregone profits

-18

-193

-338

-343

-343

-1,235

Finance cost savings

6

85

157

192

189

629

Sales costs

-60

-105

0

0

0

-165

OBEGAL

-73

-213

-181

-150

-154

-771

Gain/loss on sale

163

-313

-160

0

0

-310

Net worth

90

-526

-341

-150

-154

-1,081

*assumes Genesis sold at 2012 equity value

**the Budget documents fail to account for sales costs. Other sales costs incl the incentives schemes and foregone dividends accounted for elsewhere

Modelling details: Proceeds from official releases following sales. Foregone dividends taken from offer documents or projected forward at current levels. Interest rates for finance costs from Budget Fiscal Strategy Model and applied to proceeds, foregone dividends, and sales costs. Sales costs from COMU and written questions with not yet announced based on MRP sales costs assumed at Meridian: $30m, Genesis: $25m. Foregone profits from foregone dividends plus additional foregone profits in Budget table. Sale gains/losses calculated from 2012 equity

For more information:

Dr Russel Norman MP, 027 458 5181
Clint Smith, Political & Media Advisor, 04 817 6974, 027 465 9305

Authorised by Russel Norman, Parliament Buildings, Wellington
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