Meridian Energy next asset sale

02:44, May 16 2013

Meridian Energy will be next off the block in the Government's asset sell-down programme.

Up to 49 per cent of shares in the energy company will be offered for sale in the second half of this year depending on market conditions, State Owned Enterprises Minister Tony Ryall confirmed today as part of the Government's Budget.

Legal and capital market advisers are due to be appointed by June.

The widely expected announcement follows hard on the heels of the Government's partial sale of Mighty River, which raised $1.7 billion in its initial public offer this month.

That money went into the Government's Future Investment Fund, earmarked for major capital investment projects.

Today's Budget announced the fund has allocated spending of $1.5b over the next few years, with $426 million of that going to redevelop Christchurch and Burwood hospitals.

Finance Minister Bill English said the Christchurch rebuild was now expected to cost $40b.

"It's a massive undertaking," he said, so it would be "a major call on the proceeds of share sales through the Future Investment Fund."

Meridian is the largest of the three power companies in the asset sale programme and estimates are that the Government could reap more than $3 billion from the partial sale.

At its last balance date in December Meridian had a book value of $5b, while Mighty River's at the same date was $3.1b. At its float price of $2.50 a share, Mighty River was valued by the market at $3.5b.

This morning the shares were trading about $2.57.

The larger size of the Meridian float had led to speculation it would be offered in smaller chunks, possibly with shares being issued partly paid, but English did not give details of how the Government planned to structure the deal.

Ryall said a key step in the process would be an independent audit of Meridian's results for the six months to June.

English said the partial asset sales programme was important for the Government's books and for the economy, but it did not affect plans to return to surplus in 2015.

"The share offer programme effectively swaps one type of asset for another - electricity company shares for cash - so its primary effect is on the mix of assets and debt that the Government owns, rather than the balance.

"The other companies due for state sell-down are Genesis Energy and Air New Zealand. In all, the total proceeds are expected to be $5-$7b.