Monday 4th March 2013
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The next three weeks will see the government mount a $1.1 million mass market television, newspaper and internet campaign to entice New Zealanders to invest in the 49 percent of state-owned electricity company, MightyRiverPower, being offered for sale.
Pre-registrations of interest will open tomorrow and last three weeks until March 22, placing would-be small-scale investors in MRP into the queue to meet the government's political commitment to ensure 85 percent to 90 percent of the shares on offer are bought by New Zealand investors.
That total will include locally registered financial institutions and fund managers as well as so-called "mum and Dad" investors, who will get a sweetened offer of a loyalty bonus if they hold their shares for a specified period of time before selling them.
Details of the loyalty offer will only be settled once the extent of market demand has been tested, although Finance Minister Bill English floated a three year holding period last October.
A minimum of investment of $1,000 will be required and the retail float element will only be available to New Zealanders able to furnish a local address, tax number and bank account. Retail investors seeking more than $2,000 worth of shares may be disappointed if there's heavy demand, but the government is promising no New Zealand investor will be scaled back to below $2,000 of shares.
Employees of MRP will be able to subscribe for up to $5,000 of shares. Iwi will be able to participate, including those yet to conclude Treaty of Waitangi settlements, although they won't be eligible for the loyalty bonus to be offered to individual shareholders.
The share price has yet to be set and is the most complex element of the process as Ministers, the Treasury and their merchant banking advisers will be weighing up not only the company's performance and prospects, but also how strong demand for the shares is.
Offer documents for the float will be released shortly after March 22, after which a so-called "book build" exercise will be undertaken to match demand for the shares with available supply.
The greater the excess of demand against supply, the higher the initial share price is likely to be. Once that is complete, the shares will be allocated and then listed on the New Zealand and Australian stock exchanges.
MRP was independently valued at $3.6 billion in 2011, so the sale of 49 percent could raise close to $1.8 billion, which the government says it will invest in public infrastructure instead of borrowing. It is sticking by its estimate of total realisations from the sale programme of between $5 billion and $7 billion.
That's in spite of two of the original five candidates for sell-down - Air New Zealand and coal company Solid Energy - being removed from the list. Assuming the MRP float goes well, either Meridian Energy or Genesis Energy could be part-sold by year's end, although it remains to be seen whether the government will be bold enough to push the unpopular policy into election year.
Labour politicians accused the government of "selling New Zealanders down the Mighty River" while the Greens said the MRP sale showed contempt for public opinion.
Speaking just before leaving on a nine day trade mission to Latin America, Prime Minister John Key said he expected high levels of demand for the shares.
To questions about wisdom of an ASX listing if the intention was to attract New Zealanders as shareholders, Key said eight out of 10 of New Zealand's largest companies had ASX listings to create more "tension" in the share price.
Technically speaking, Australian or any foreign investor can buy shares listed on the NZX, although some Australian institutional investors require trading on the ASX.
The listing is expected by the time of the May 16 Budget.
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