Celebrating the successful listing of Z Energy are (from
left) NZX chief executive Tim Bennett, Z chief executive
Mike Bennetts and Z chairman Peter Griffiths. Photo
The successful listing yesterday of Z Energy is likely to
cause some concern for the Government as it prepares to list
Meridian Energy, the largest of its state-owned energy
companies, in October.
Shares in Z opened at $3.73, a 23c premium on their $3.50
The $3.50 share price raised $840 million for Z's co-owners
Infratil and the New Zealand Superannuation Fund, which sold
60% of the service station chain.
Infratil and the super fund bought Z Energy in 2010 for
$695.6 million. While the owners had squeezed a lot of money
out of the company, Z was still regarded as a yield company.
Brokers said the deal was well supported, and Z would become
the country's first transport fuels distribution company,
putting it among the top 20 New Zealand companies on the NZX.
The Government had high expectations of the float earlier
this year of Mighty River Power, but political issues
surrounding an energy-buying plan by the Labour and Green
parties caused some investor unease.
The shares trade below their listing price and uncertainty
continues around Mighty River's performance. Mighty River
shares were issued at $2.50, traded at $2.73 on the first
day, before finding a level around $2.62.
Yesterday, Mighty River shares last traded at $2.23.
Meridian is likely to list on October 18, and the prospectus
is out next month.
The Government recently paid $30 million to secure a
renegotiated electricity contract between Meridian, which
operates the Manapouri energy project, and global resources
giant Rio Tinto.
The deal secures the future of the Tiwai Point aluminium
smelter for only another three years.
Unless the value of the New Zealand dollar falls, or the
global price of aluminium rises substantially, many people
believe Rio Tinto will close the smelter in about four years.
The support Z received on listing takes $840 million away
from the potential of Meridian, from which the Government is
seeking to raise between $2 billion and $2.5 billion.
New Zealand institutions would have received an allocation
for Z and are likely to seek more as the company becomes part
of the top-20 listed companies.
Retail investors have been looking for a relatively good
return on their money to replace the 8% or so they have been
receiving from five-year bonds, which are currently rolling
Z Energy's issue price of $3.50 implies a yield of 8.7% and
brokers say long-term investors are likely to be attracted to
the return and hold on to their shares.
Unlike Meridian, which is heavily regulated and subject to
much political pressure and speculation, Z trades in a
relatively free environment.
Investors are more likely to be now attracted to companies
such as Z, rather than face the vagaries of a regulated
company in which the Government will still hold 51%.