MightyRiver shares to list at $2.50, in lower half of target

MightyRiver shares to float at $2.50, in lower half of target range

by Pattrick Smellie

May 8 (BusinessDesk) - MightyRiverPower shares will list on the NZX at 12.30pm this Friday at $2.50 a share, in the middle of the $2.25 to $2.80 range announced when the MRP prospectus was released last month.

Some 113,000 New Zealanders, about a quarter of the 440,000 who registered interest in the shares, have bought a slice of the state-controlled electricity generator and retailer, which will remain majority-owned by the government with a 51 percent shareholding.

The sale will raise $1.7 billion, effectively valuing MRP at nearly $3.5 billion, in line with independent market valuations last conducted for the Treasury two years ago. The company's profits have continued to rise as new geothermal generation capacity has come on-stream.

Of the shares issued, 86.5 percent will be New Zealand owned: 26.9 percent by New Zealand retail investors, 8.6 percent by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding, Finance and State-Owned Enterprises Ministers Bill English and Tony Ryall announced at a mid-evening press conference.

The outcome was "an outstanding result," they said.

Foreign investors have been allocated 13.5 percent of the shares, with MRP due to list also on the ASX.

Because of the level of demand, "some scaling has been necessary," said Ryall. "We have decided to apply progressive scaling, which means that larger applications are scaled more than smaller ones.”

“That means that more than 80 per cent New Zealanders will get what they applied for."

The 113,000-strong share register will be the largest by far among domestic listed companies and comparable to the numbers achieved in the last such asset sale, the sale of 49 percent of Contact Energy in 1999.

Friday's float will mark the end of a tortuous journey since the November 2011 election, which National won, having promised it would partially privatise up to five state-owned enterprises.

Since then, the government has faced challenges in the courts by Maori freshwater rights claimants, the financial turmoil that has seen state coal miner Solid Energy placed on commercial life support, the future of the country'slargest electricity user, the Tiwai Point aluminium smelter placed in doubt and, most recently, the proposals from the Labour and Green parties to reregulate the electricity market.

Both the smelter closure threat and the Labour-Greens proposals are widely judged to have deterred some retail and institutional investor demand for MRP shares, with the proposal to recreate a central buyer model for New Zealand electricity production requiring an update to the risk section of the prospectus on April 22.

Today's ministerial decision on the issue price weighed the level of public appetite for shares, institutional demand in a book-build over the last two days, and eventually a judgement about where to pitch the listing so that it is more likely to rise than fall in price when it lists, without going through the roof.

Ryall and English said that by making 113,000 New Zealanders shareholders in MRP, the government was honouring its commitment to put "kiwis at the front of the queue" for shares and maintain 85 to 90 percent domestic ownership overall.

Individual New Zealand investors who hold the shares for three years or more will be eligible for one bonus share for every 25 held, in a loyalty bonus scheme used for the first time in the MRP float.

The government must now decide whether, when and in what order to do partial sales of its other two power companies, Meridian Energy and Genesis Energy, and whether recent profitability makes now a good time to offer more of the already part-privatised national carrier, Air New Zealand, to the market.

(BusinessDesk)

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