The political risk of a future Labour-Green government
centralising the New Zealand electricity industry still hangs
over the initial public offering of Meridian Energy, Milford
Asset Management senior analyst William Curtayne says.
The public offer for Meridian shares closes at 5pm today with
the Government planning to sell down 49% of New Zealand's
largest energy generator which provides 30% of the country's
power from 100% renewable resources.
Mr Curtayne said a lower number of retail investors were
expected for the Meridian float than for Mighty River Power,
but those fewer investors were expected to have higher
average balances of shares.
Below 100,000 retail investors were expected for Meridian.
Apart from the political risk, the recovery in the global
economy had seen investors buying growth and cyclical stocks
rather than the pure dividend-yielding companies, he said.
The shift started in May, around the time Mighty River Power
was floated, and contributed to the poor share performance of
the first state-owned energy company to be listed.
The instalment plan for retail investors had been a drawcard,
Mr Curtayne said.
Investors would pay $1 for each share they bought, with the
remainder to be paid in 18 months, giving them three
dividends. Retail investors would pay no more than $1.60 a
share, a price Mr Curtayne believed was too high.
The institutional book build started next week and
institutions were likely to bid at the lower end of the $1.30
to $1.60-per-share range.
''It is possible Meridian will come in at the lower end of
the Government's range. Retail investors will pay no more
than $1.60 but that is not an attractive price anyway,'' he
Labour and the Greens announced earlier this year they would
move to establish a new crown entity - New Zealand Power - to
act as a central planning agency for the electricity sector.
The policy stated NZ Power would act as a single buyer to
purchase all power in the wholesale electricity market and
have the power to set prices based on operating costs and a
fair return on capital.
The absence of implementation detail left the sector facing
an environment of substantial uncertainty, Mr Curtayne said.
Brokers contacted by the Otago Daily Times yesterday reported
a steady take-up of Meridian shares by clients. Most of the
investors seeking Meridian shares were not new to the market,
unlike the Mighty River Power offering.
Some latecomers were directed to the public pool as brokers
had sold their allocations.
State-Owed Enterprises Minister Tony Ryall said the
Government was pleased with the interest to date from retail
New Zealand investors.
The institutional book-build started on Monday and closed on
As outlined in the offer document, following the completion
of the retail offer and the book-build, the final share price
was expected to be announced on Wednesday night, he said.
New Zealanders were expected to have their share allocations
confirmed by next Friday.