The Government has delayed the first of its partial asset sales to allow more time to consult with Maori.
The sale of up to 49% of shares in state-owned power company Mighty River Power will now take place between March and June 2013.
Prime Minister John Key made the announcement on Monday afternoon, saying the Government's preference would have been for a share offer this year.
An interim report from the Waitangi Tribunal issued on 24 August this year found that Maori have proprietary rights over water and recommended that the Government delay the sale until it has reached some sort of agreement. The tribunal is expected to release its full report sometime in September.
Mr Key said that, after careful consideration, ministers have decided to consult with iwi on the 'shares plus' concept raised in the Waitangi Tribunal's interim report.
Shares plus would involve iwi receiving not just shares, but other shareholder agreements and revamped company constitutions that could give Maori enhanced power in the companies.
"The Government does not believe shares plus is necessary or desirable. Further, we do not believe that to continue with our share offer without shares plus would be a Treaty (of Waitangi) breach," Mr Key said.
"The Government has, however, decided that the right thing to do at this point is to undertake a short period of consultation."
Associate finance minister Steven Joyce told Radio New Zealand's Checkpoint programme on Monday the Government wants to be sure it hasn't missed anything before it makes a final call. Mr Joyce said the shares plus option could also lower the value of the state-owned companies and result in a lower sale price.
The Prime Minister said preparations would continue for the partial sale of Mighty River, Genesis and Meridian Energy. Even with extra time for consultation, John Key said there is a risk of legal action being taken against the Government.
Government showing respect - Maori Party
The Maori Party says the Government is showing respect to Maori in delaying the partial float of Mighty River Power.
Co-leader Pita Sharples told Checkpoint the delay is costing the Government millions of dollars.
"They're doing it because they respect the need for iwi to be addressed and consulted on this issue and we're very pleased as the Maori Party that we advocated for that."
Dr Sharples is optimistic that the Government can come to an arrangement with Maori over water rights and the partial sale of state-owned assets. He said this is only the start of what is a longer process of negotiation and his party is in there for the long haul with the Government.
Prime Minister John Key has ruled out consulting with the Maori Council, saying it will talk with individual iwi who have specific rights or interests in water.
The council says the Government's decision to delay shows it is acting in good faith. However its lawyer, Donna Hall, told Checkpoint the Government must include the council in talks as it is the only statutory authority that represents a national position for all Maori.
"The case was taken by the Maori Council for all iwi and hapu with interests in specific water bodies. It was not take for just a lucky few that the Government chooses to deal with."
Ms Hall says the issue is a national one which affects all hapu and iwi.
Abandon plan, says Labour
Labour Party leader David Shearer says the delay in the share float is a backdown by the Government.
"The entire SOE sale is completely off the rails, so the Government's botched the sale and as a result of that they're going to have to back down."
Mr Shearer said the argument over water rights will not help the sale of shares in state-owned power companies.
"With all this uncertainty, whatever price that we get there is a perception of risk out there in the market - and when investors smell risk, they certainly don't want to pay top dollar. So we will not be getting top dollar for these assets either."
Mr Shearer believed the Government should abandon its plans to partially privatise the companies.
New Zealand First says now is the worst possible time to sell parts of the country's assets. Leader Winston Peters told Morning Report the sale has become a bloody-minded push for an ideological outcome and the assets will not fetch a good price in the current economic climate.