20 August 2013
Meridian Energy share offer details confirmed
The Government today confirmed it would use instalment receipts in the Meridian Energy share offer – allowing investors
to pay for their shares in two instalments.
Subject to market conditions, the sale of up to 49 per cent of Meridian is expected to be completed, and the company
listed on the sharemarket, by early November, Finance Minister Bill English and State-Owned Enterprises Minister Tony
Ryall say.
“Listing up to 49 per cent of Meridian on the sharemarket will give New Zealanders an opportunity to invest in another
big Kiwi company at a time when many people recognise the value of diversifying their growing savings away from property
and bank deposits,” Mr English says.
The instalment receipts, which are fairly common for major initial public offerings in other countries, will mean New
Zealand retail investors will need to pay less cash up front when they apply to buy shares. Instalment receipts were
used by the Government in the float of Capital Properties in 1998.
“They will allow New Zealanders to pay for their shares in two instalments,” Mr English says. “The first instalment, for
around 60 per cent of the share price, will be paid when investors apply for shares.
“The remaining amount, which will be fixed at the end of the share offer, will not need to be paid for a further 18
months.”
Between the first and second instalments, investors will receive the full dividends paid out in that period, which will
make the dividend yield – or return on their investment – higher in those first 18 months.
Ministers have decided to use the instalment receipts as an incentive for New Zealand investors in Meridian, instead of
the loyalty bonus shares that were used in the previous Mighty River Power share offer.
Mr Ryall says ministers have also confirmed the following decisions for the Meridian share offer:
A minimum application of $1,000 will apply for the first instalment of shares.
Given there is sufficient public familiarity with the Government's share offer programme, there will not be a formal
pre-registration process, as happened with the Mighty River Power offer.
Retail banks ASB and ANZ and sharebroker Forsyth Barr have been appointed to the retail syndicate for the Meridian
offer. The syndicate will work closely with joint lead managers Craigs Investment Partners / Deutsche Bank, Goldman
Sachs /JB Were and Macquarie to market the offer to New Zealanders.
“Another difference with the Meridian offer is that we have decided to set a share price cap for New Zealand retail
investors who take part in the offer,” Mr Ryall says.
“We understand that people like to know the maximum price they’ll be paying at the time they apply to buy their shares.
“Therefore, the cap will be set at the same time that we set the price range, and it will be announced when we lodge the
offer document. This will give retail investors more certainty when they apply for shares.
“It also means that if demand is such that institutions are bidding at higher prices than our price cap, then retail
investors will get their shares at a lower price than that paid by the institutions.”
Information about the Meridian offer, including how instalment receipts work, is available for New Zealanders on the
Government Share Offers website (www.governmentshareoffers.govt.nz). The offer document will provide prospective
investors with all of the information they need about Meridian and the offer structure.
Media contacts: Craig Howie 027 7555 809, Joanne Black 021 675 820, Jackie Maher 021 243 7803
Important information
The Crown is considering offering shares to the public in Meridian Energy Limited (“Meridian”) and is seeking
indications of interest. No money is currently being sought and no applications for shares or instalment receipts will
be accepted or money received until after an investment statement containing information about the offer is available
(the “Offer Document”).
It is intended that an application be made to NZX Limited ("NZX") for permission to list Meridian, and to quote
initially the instalment receipts and then later Meridian's shares on the NZX Main Board. The application will be made
closer to the time that the shares in Meridian are offered to the public. No such application has yet been made.
Not for distribution or release in the United States.
This media statement is not an offer of securities. The securities referred to in this media statement have not been and
will not be registered under the U.S. Securities Act of 1933 and may not be offered in the United States except in
transactions that are exempt from or not subject to the registration requirements of the U.S. Securities Act and other
applicable securities laws.
MERIDIAN SHARE OFFER
Instalment Receipts Q
What is proposed?
Investors will pay for shares in two stages; an initial part payment when the application for shares is made and the
remaining final payment after 18 months. An instalment payment option allows investors to get a higher percentage return
(or dividend yield) on their invested money for the instalment period (18 months).
Why are you using instalment receipts?
There are a number of reasons. Meridian is a large company – significantly bigger than Mighty River Power – and because
we are committed to meeting our objective of 85-90% New Zealand ownership, allowing New Zealanders to purchase shares in
two instalments is a sensible option. We also believe it creates an incentive for investors, given the enhanced yield it
offers in the first 18 months.
What are the benefits of paying in instalments?
An investor receives a higher return on the investment during the instalment period because he or she has only partially
paid for the shares yet still receives full dividend returns. In addition to dividend payments, investors retain the
other benefits of an ordinary share, such as the ability to cast a shareholder vote and the option to sell the
instalment receipts.
What is an instalment receipt?
At the conclusion of the share offer investors are issued a receipt for every share they partially pay for. These are
called instalment receipts. These receipts work like ordinary shares. They will be traded on the NZX Main Board and they
register the owner as the full beneficiary of any dividend payments and shareholder rights. When the final instalment
payment is paid, the instalment receipts are cancelled and the investor receives ordinary Meridian shares.
Can the instalment receipts be sold during the instalment period?
The instalment receipts (which represent the shares that have been have partially paid for) can be sold during the 18
month instalment period. If this occurs, the person who buys them becomes the beneficiary owner of the entitlements and
responsible for the final instalment payment.
If an investor decides to sell their instalment receipts, what price will they get?
The instalment receipts will be traded on the NZX, so an investor will get the price that the instalment receipts are
valued at (by the market) at the time of sale. The price will reflect the value of a share that is only partially paid
for.
How do investors know how much the instalment payments will be?
The first instalment payment is fixed at a set price per share outlined in the offer document. The second payment is set
at a fixed price per share at the conclusion of the share offer. Ministers have confirmed that the price for the second
instalment will be capped for New Zealand retail investors, and this will be disclosed in the offer document.
Does the second instalment payment change if the share price changes after listing?
No. The second payment does not change if the company’s trading price goes up or down. The remaining payment is a fixed
price per share that will be set at the conclusion of the share offer.
Who administers the instalment receipts?
A trustee will be appointed to administer and protect investors’ rights to shares represented by instalment receipts and
instalment receipt holders will receive dividends, notices of meetings and invitations to attend meetings as if they
were shareholders.
Are there any risks that a future Government could cancel the second instalment?
The Trustee will have a contractual obligation under the Trust Deed to transfer the shares to investors on payment of
the final instalment.
What happens if an investor doesn’t pay the second/final instalment payment?
If the final instalment payment is not paid, an investor’s right to receive ordinary Meridian shares is forfeited and
the Trustee may sell the shares on the investor’s behalf. If the sale of the shares returns more than the outstanding
payment, the investor receive the surplus proceeds (less fees and charges). If the sale returns less than the
outstanding payment, the investor remains liable for the payment shortfall (plus any fees and charges).
What dividends can be expected between the instalment payments?
It is expected that Meridian will pay three dividend payments during the 18 month instalment period. These would be at
six months, twelve months and 18 months.
How will investors know what the underlying returns (dividend yield) are likely to be?
Instalment payments provide an elevated dividend yield (percentage return on an investment) over the instalment period.
The Offer Document will clearly outline the instalment period’s enhanced dividend yield and Meridian’s underlying
dividend yield. The underlying dividend yield represents the return on the investment if the investor had been required
to pay the full share price up-front.
Are there tax implications?
Imputation credits attaching to a dividend paid by Meridian are able to be passed through to and utilised by the
instalment receipt holder. After the final payment is made and ordinary shares are received, this is not likely to
trigger a capital gains tax event for the holder.
Important information
The Crown is considering offering shares to the public in Meridian Energy Limited (“Meridian”) and is seeking
indications of interest. No money is currently being sought and no applications for shares or instalment receipts will
be accepted or money received until after an investment statement containing information about the offer is available
(the “Offer Document”).
It is intended that an application be made to NZX Limited ("NZX") for permission to list Meridian, and to quote
initially the instalment receipts and then later Meridian's shares on the NZX Main Board. The application will be made
closer to the time that the shares in Meridian are offered to the public. No such application has yet been made.
ends