A bus full of bankers from Goldman Sachs Group Inc. and other lenders bounces down a dirt track in New Zealand’s North Island to survey sites that are dividing the nation, pitting John Key’s government against Maori who have lived here for centuries.
Near the volcano that film director Peter Jackson chose as Mount Doom in his “Lord of the Rings” trilogy, the bankers view a drilling rig shipped from Iceland that has bored 1,100 meters (3,600 feet) of a geothermal-power well for state-owned Mighty River Power Ltd. The company plans to sell shares this year in the first of four initial public offerings Key says will help raise as much as NZ$7 billion ($5.7 billion), the nation’s biggest asset sale in two decades.
Some Maori say the sales violate the 172-year-old Treaty of Waitangi, New Zealand’s controversial founding document that gave the indigenous people rights to their land and resources. They’re mounting a legal challenge to the IPOs that Key says will raise money for schools and roads after the country lost its top credit rating because of mounting debt.
“Overseas investors just really want to understand what it is they’re buying into,” said Mai Chen, who founded Wellington-based law firm Chen Palmer with ex-prime minister Geoffrey Palmer. “What they don’t understand is this black box called the Treaty of Waitangi.”
Maori want to stop their “taonga,” or treasures, from being controlled by private investors who the government says won’t be liable for any unresolved Treaty claims. The companies make power from resources including rivers and underground steam in areas of scenic beauty. Most of the nation’s 4.4 million people oppose the sales, with Maori opponents saying they turn a sacred life force -- water -- into a commodity.
The government plans to sell as much as 49 percent of Mighty River in the third quarter on the New Zealand stock exchange and replicate that with Meridian Energy Ltd., Solid Energy New Zealand Ltd. and Genesis Power Ltd. over the next five years. It will also reduce its 73 percent stake in Air New Zealand Ltd. to as low as 51 percent. The timing and order of the other IPOs haven’t been decided.
Goldman, Credit Suisse Group AG and Macquarie Group Ltd. are among banks that stand to gain fees from the sales. All three declined to comment.
To damp public opposition, Key said 85 percent to 90 percent of the companies will be owned by New Zealanders on completion of the IPOs. Overseas investors can build bigger stakes by buying shares in the market after that, State Owned Enterprise Minister Tony Ryall said in a telephone interview.
‘Raped and Pillaged’
“Once those resources become commodified and put on to the financial marketplace, they are raped and pillaged to maximize profit for the shareholder,” Hone Hariwira, leader of the one-seat Mana Party, said in an interview. “There’s no holding back in that world, and that’s not something that indigenous people see as being an intelligent future.”
New Zealand’s land and resource ownership has fueled wars and racial tension since James Cook claimed the islands for Britain in 1769. The 1840 Treaty of Waitangi promised the Maori undisturbed ownership of their land, forests and fisheries in return for becoming British subjects. Alleged breaches of the treaty have split national opinion since the 1970s when Maori -- now 15 percent of the population and with almost triple the white unemployment rate -- began seeking redress.
The New Zealand Maori Council filed two claims in February with the Waitangi Tribunal, an independent panel. The council argues that Maori rights to water and geothermal resources have been denied and the IPOs should be stopped. While the tribunal can only recommend actions to the government, it has helped return about NZ$1.2 billion of cash and property to Maori complainants since the early 1990s.
Nobody owns the nation’s water, the New Zealand Herald reported Key as saying in February. A 2009 cabinet paper said Maori water rights “remain undefined and unresolved.”
“There’s no doubt that it needs to be resolved,” said Chen in an interview. The tribunal last week granted the claims urgent hearings, which are likely to be heard before the IPO of Mighty River, she said.
The dispute follows a public outcry over the government’s January approval of the sale of 16 dairy farms to China-based Shanghai Pengxin Group Co. Opponents including the three-seat Maori Party said parts of New Zealand were being sold off to the highest bidder. That deal is being reviewed after a rival bidding group of local dairy farmers led by businessman Michael Fay successfully appealed in court.
Key’s sale program is New Zealand’s biggest since the government raised about NZ$10 billion between 1988 and 1990, including the sale of Telecom Corp. of New Zealand Ltd. to U.S. phone companies, government figures show.
The country lost its top credit rating at Standard & Poor’s and Fitch Ratings in September. Fitch said that a “key vulnerability” was New Zealand’s high level of net external debt, which fell to NZ$146.2 billion, or 72 percent of gross domestic product, at the end of last year.
Mighty River, which sells electricity to more than 370,000 customers, has been showing bankers and lawyers around its power stations, workers told Bloomberg News during a site visit. The company operates hydroelectric and geothermal stations near Lake Taupo, New Zealand’s biggest lake, where tourists jet-boat through river rapids or take winter skiing holidays on Mount Ruapehu, Jackson’s setting for the fiery Mount Doom.
Almost two thirds of voters in a One News Colmar Brunton poll this week opposed the planned sales.
‘Lost and Confused’
“This isn’t an asset sale. It’s a sell-down of a minority shareholding in the company,” Doug Heffernan, Chief Executive Officer of Mighty River Power said in an interview at the company’s Auckland offices. “That point has been lost and confused in the public’s mind.”
Stephen Franks, a Wellington-based lawyer who advised on previous state asset sales, said the Maori council is unlikely to stop the sale and is pressuring the government for a stake.
“The Maori strategy is essentially to raise enough dust and enough smoke and problems that it becomes worthwhile to the government to buy them off before the offerings,” said Franks, previously a member of parliament for the ACT party, which has one seat and is in coalition with Key.
Maori groups are seeking “a substantial shareholding interest” in the IPOs as one form of compensation should the sale go ahead, the Waitangi Tribunal said last week. Some Maori oppose the indigenous council’s claims after already settling with the government and forming successful joint ventures with companies such as Mighty River for years.
Harawira last month wrote an open letter to overseas investors, warning them to “steer clear” of any share offers, or they may be “caught up in legal battles and direct action from citizens determined to protect their own interests.”
Finance Minister Bill English, Ryall and other officials spent two weeks in February talking to chiefs of Maori tribes and their families about the sales in a series of “hui” -- Maori community meetings -- across the country.
“The assets involve natural resources and to us, those are taonga and belong to the inhabitants of this place,” Pita Sharples, co-leader of the Maori Party, which is also in coalition with the government, said in a telephone interview. “It’s part of our cultural and spiritual identity -- the water and the mountains and the forest.”
Editors: Adam Majendie, Bruce Grant.