49% of Genesis for sale

Genesis Energy's Tekapo B station. Photo supplied.
Genesis Energy's Tekapo B station. Photo supplied.
The Government has opted to sell 49% of Genesis Energy, in the last of its state-owned enterprise partial sell-offs.

Finance Minister Bill English announced up to 490 million shares, or 49% of Genesis, would be put up for sale, starting today with broker and institutional book building, while holding 90 million shares, or 9% of Genesis, for small ''mom and pop'' investors.

However, Labour and the Green Party labelled the 40% offer to institutions an opportunity for them to ''make a killing'' and only New Zealand's ''wealthiest'' would be able to afford the share offer, underpinned by an offer of bonus shares later costing millions.

The Government had indicated a selling range of 30%-49% of total shares, and Craigs Investment Partners broker Peter McIntyre said the Government had probably opted for the top end, following positive feedback from brokers.

''It is hard to find opportunities in the New Zealand market. This yield will be very appealing to investors,'' he said.

Based on Genesis shares selling in a range between $1.35 to $1.65, the estimated gross dividend yield in full-year 2014 is 10.8%-13.2, then for 2015, rising to between 13.5%-16.5%.

Mr McIntyre said the ''supercharged'' dividend was boosted by Genesis having the largest share of the country's retail electricity and gas market, and a 31% stake in the income stream of the Kupe oil field, estimated to have a lifespan to 2026-27.

On the question of ''just'' 9% of Genesis being offered to ''mom and pop'' investors, he said they would also be able to purchase shares from brokers' allocations.

Labour leader David Cunliffe said the most the Government could get out of the sale was $800 million, claiming it was a $300 million discount on Genesis' value.

''Institutions will make a killing out of that. Even with the best price possible from Genesis, they will fall short of their promised $5 billion-$7 billion,'' of overall returns from the SOE sales, he said.

Greens co-leader Dr Russel Norman said the bonus aspect of the share offer would cost up to $9 million. Investors holding shares for a year get one bonus for every 15, capped at 2000 bonus shares.

''Despite National selling Genesis on the cheap and spending millions on bonus shares, only a fraction of the population will buy shares,'' Dr Norman said.

The book-build opens to institutions and brokers today, and the final share price will be announced tomorrow. On Saturday, the offer opens to the general public. It closes on April 11, with Genesis to list on the stock exchange on April 17.


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