Tuesday 29th October 2013
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Meridian Energy's instalment receipts debuted at $1.08 after tepid demand in the initial public offering saw the stock sold at the bottom end of its indicative range and with a smaller-than-expected pool of investors.
The shares were offered in instalment receipts to sweeten the offer, with $1 upfront and the promise of full entitlement to dividends, and the remaining 50 cents in May 2015. The float will raise $1.88 billion after the two instalment payment programme completes in 2015. They recently traded at $1.07 with about 80 million shares changing hands in the first 30 minutes of trading.
"Given the uncertainty that still surrounds the electricity sector the price is probably a fair call," said Rickey Ward, head of equities at Tyndall Investment Management, which bought shares in the IPO. "The changes that could occur under a Labour-Greens proposal, as well as Tiwai - the price has got some of those elements in it."
Meridian's market capitalisation rose to $1.34 billion on a partly-paid basis, compared to $1.26 billion at the IPO price. The government's 51 percent stake isn't counted toward the total number of shares on issue until the second instalment is paid, so until then only 1.26 billion of the 2.56 billion shares are recognised.
The government attracted some 62,000 New Zealanders to the selldown of 49 percent of Meridian at $1.50 a share, the bottom of the indicative range of $1.50 to $1.80.
Demand for the shares was eroded by the risk posed by the Labour Greens policy to install a central buyer of power, effectively capping prices that could be charged for electricity.
Uncertainty over the longevity of sales to the Tiwai Point aluminium smelter also dented enthusiasm. Revised contracts for the smelter's consumption were concluded in August for a plant that uses around 14 percent of all electricity produced in New Zealand and accounts for around half Meridian's annual revenue.
The sale of Meridian also follows the lacklustre performance of MightyRiverPower shares, which sold in May at $2.50 a share and last traded at $2.19.
The government has said it may still press ahead with the sale of Genesis Energy in the first half of next year, assuming market conditions suggest there is appetite for another large, New Zealand electricity company float.
With Contact, Meridian, MRP, TrustPower and network company Vector, half the shares in the top 10 NZX shares are in the electricity sector.
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