Govt confident in its position on asset sales

The Government's picking it'll win its battle on asset sales.

Legal action's now expected over the partial sale of Mighty River Power after the Government decided it would proceed with the partial float and not offer shares plus compensation to affected Iwi.

But Finance Minister Bill English doesn't think the Crown will lose.

"We wouldn't want to pre-judge the nature of a court action but if it's, for instance, that the crown hasn't met it's obligations under the Treaty, we certainly believe that we have and someone going to court would have trouble succeeded on that basis."

Nor does the Minister think legal action will it hurt the SOE's potential value to investors.

The Maori Council says it was never interested in the share plus compensation scheme proposed as part of the sale of Mighty River Power shares .

Co-chair of the Council, Maanu Paul, says it was the Waitangi Tribunal's suggestion, and the council was not interested.

"We have always said that we want the law to be exercised and implemented. In order to do that we'll have to take court action. Our legal team will provide the advice to go up to the High Court or the Court of Appeal."

Mr Paul says they want a ruling on the proprietary rights of water.

A market analyst says with companies like Fonterra preparing to float shares, by the time Mighty River Power shares hit the market, investors will have a lot more choice about where to put their money.

BT Asset Management's Mathew Goodson says investors are looking at dividend yields that are on offer, but expects Mighty River Power shares to be taken up.

"We'll see the shape on Fonterra. But I would expect, if structured well, it would see demand, and looking in the crystal ball out six to nine months there is no reason to expect that Mighty River wouldn't see demand as well."

But Mr Goodson says it does come down to price and what shape the company is in at the time.

A political commentator believes the Government's done just enough to defend itself in court over the proposed partial sale of Mighty River Power.

Auckland University's Maori Studies Associate Professor Ann Sullivan says if the Maori Council takes court action, the Government can defend its obligation.

"They can then say to the court they have negotiated, they've done the good faith bargaining with Maori. They've been out, called several hui, talked to Maori and that's what's required with the whole concept of partnership."

John Key says the Government won't be engaging in any further negotiations over the 'shares plus' concept before the sale goes ahead.

The economics of the the electricity sector could affect the attractiveness of the Mighty River Power shares.

BT Asset Management's Mathew Goodson says there has been a significant reduction in demand at Norske Skog and the outcome of the Tiwai Point aluminium smelter is yet to be determined.

"Potentially around 10-12 percent of the country's electricity demand could fall out at that time. That's a very, very significant amount. so if you take out a chunk of the demand, it means the market's going to clear at much lower prices more often."

Mr Goodson says investors are looking at dividend yields that are on offer and reduced electricity demand and price could affect that.