Keep Our Port Public

The Press reports that foreign investors seeking a major stake in key South Island assets such as port companies and airports are likely to be blocked under new rules to protect strategically important infrastructure.

The Government moved late on Monday to effectively block the sale of Auckland International Airport to the Canadian Pension Plan Investment Board (CPPIB) by instituting a new national interest clause in legislation governing foreign ownership of major assets on sensitive land.

The move sent Auckland airport’s share price tumbling 48c yesterday, before recovering slightly to close 30c down.

CPPIB vowed to press ahead with its bid for a stake, saying it was not interested in a controlling interest in the airport.

However, Finance Minister Michael Cullen said a controlling stake could still be possible with less than majority ownership.

The pension fund wants about 40 per cent of the airport. Foreign shareholdings above 24.9%, or $100 million, already require approval from the Government.

Monday’s rule change is the first time effective “control” of an asset has been added as a consideration.

It follows tightening of overseas investment last year after an outcry over the sale of large tracts of South Island high-country land to foreign investors.

Cullen said nothing in the change ruled out the acceptance of any overseas investment application.

However, Forsyth Barr head of research Rob Mercer said the change made major foreign shareholdings in strategic assets more difficult.

Asked whether the rule change was likely to impact on South Island infrastructure, Cullen quipped: “The whole of the South Island is a strategic asset.”

He named major ports “and other significant assets” among infrastructure that could be included in the new test.

That could include Lyttelton, which has been the target of overseas ownership speculation on several occasions.

Last year, Danish shipping giant A. P. Moller-Maersk Group said it was interested in buying port terminals in New Zealand.

And in 2006, the Christchurch City Council attempted to tie up the port with Hong Kong operator Hutchison Port Holdings. The deal failed when Port Otago took a blocking stake in the company.

The city council also owns 75% of Christchurch International Airport, the country’s second-largest airport. The balance is owned by the Crown, which has previously attempted to sell its stake.

National leader John Key said Labour was changing foreign investment rules for political purposes and the move would impact on inflows of foreign capital.

“I would have thought the international community would be a little bit nervous.”

However, Key struggled to answer if National would block the sale of Auckland airport or other significant infrastructure assets if it was the government.

“If National is the government, majority control won’t be going to foreigners for strategic assets,” he said.

Key would not say what “majority control” meant, however, or whether that meant National would allow up to 49% foreign ownership.

He said the Canadian plan was not for a majority stake in any case and he was not opposed to the fund’s plan to take a stake in the airport.

Cullen said the decision was in response to overwhelming public opposition to New Zealand assets falling under foreign control.

Cullen rejected suggestions other strategic assets such as Telecom could be subjected to foreign ownership restriction, saying the move was not nationalisation.

“It only applies to those areas which involves sensitive land.”

New Zealand First and the Greens welcomed the change, although New Zealand First leader and Foreign Minister Winston Peters said more could be done to protect the country’s other important assets.

Green MP Sue Kedgley labelled the rule change a victory for the Green Party, and said she hoped it would have the effect of blocking the sale of other key assets as well.

However, Bruce Sheppard of the Shareholders’ Association, slammed the move as asset theft by the Government.

“What this does is undermine the effectiveness of our capital markets and it also increases the risk of investing in New Zealand if you are a foreigner.”

. This entry was posted on Monday, March 10th, 2008 at 11:14 am and is filed under In the media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.