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Carter warns 'slippage' may delay law change

Fuseworks Media
Fuseworks Media
David Carter
David Carter

Wellington, Oct 12 NZPA - Any "slippage" in the capital restructure of the nation's biggest business may mean that the Government help which Prime Minister John Key promised Fonterra may not arrive until after the next general election, according to Agriculture Minister David Carter.

The minister today used a patsy question from National's King Country MP Shane Ardern to signal that Fonterra needs to avoid any hiccups in timing to have a new regulatory regime to underpin its new structure by the dairy cooperative's target date of November 2011.

A general election for the nation's 50th parliament must be held before January 7, 2012, and is expected to be held in late 2011.

Prime Minister John Key has promised to change the law to support the capital restructure, which he said would allow the giant cooperative to grow strongly into the future and deliver on its full potential.

He told farmers when they approved two key elements of the restructure 13 months ago that the Government wanted Fonterra to have a capital structure which equipped it to take advantage of opportunities.

"Fonterra has a big impact on the New Zealand market, so its fortunes play a big part in the fortunes of our country," said Mr Key. "We want it to have a structure that puts it in as strong a position as possible to maximise its opportunities".

The company's enabling legislation, the Dairy Industry Restructuring Act 2001 (DIRA), will need to be changed to allow things such as farmers selling their shares to other individual members of the cooperative, but Mr Carter -- who is already working on elements of the Act covering the sale of "statutory milk" to Fonterra's rivals -- said timeframes for re-jigging of the legislation were "very ambitious".

The Ministry of Agriculture and Forestry (MAF) was working closely with Fonterra as it developed the detail of its capital restructuring plan, to ensure that the Government's public policy requirements were addressed and that officials were in a position to design and implement an appropriate regulatory regime.

"Fonterra aims to launch its new capital structure by November 2011," Mr Carter said. "The Government is working hard to ensure that a new regulatory regime can be developed and implemented in time.

"However, it is important to note that a November 2011 time frame is very ambitious.

"Any slippage in the joint process will mean that that timetable will be hard to meet".

Fonterra is keen to get rid of the "redemption risk" where farmers -- who have to hold enough shares to cover the volume of their milkflows -- can call on the cooperative to pay out shares they surrender for reasons such as bad weather affecting production, sale of up to 20 percent of their milk to another company, or quitting the cooperative altogether.

Instead Fonterra wants farmers to sell the shares to other members of the cooperative.

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