Genesis Energy chief executive Albert Brantley says the resilience of the power generator and retailer to volatile market conditions appears to be winning over potential investors for the public share offer.
Brantley said the flexibility of Genesis's generation portfolio, combined with its large retailing business and upstream gas interests, provided more stability of earnings, which flowed through to a higher yield.
That seemed to be counting with investors, despite the two large energy privatisations that preceded it last year, and the uncertainty over both energy regulation and future electricity demand, he said.
"The investment story that we are emphasising is really the diversity of our earnings and the way in which we flex the portfolio allows us to get pretty constant earnings," Brantley told the The Australian Financial Review.
"We've been quite encouraged by the reception in Australia and in the UK, and Singapore and Hong Kong, and certainly in the retail roadshows we've done in New Zealand."
The government is selling between 30 per cent and 49 per cent of Genesis in the last in a wave of sales that included a stake in Air New Zealand. With shares to be priced at $1.35-$1.65 a share, the IPO will raise between $405 million and $808m.
The sale follows last year's IPOs of Mighty River Power and Meridian Energy, which raised $3.6 billion.
Genesis has thermal plants at its main Huntly site, as well as lower-cost hydropower plants, and the country's biggest electricity retailing business, with 27 per cent of the market. It also owns 31 per cent of the Kupe oil and gas field, a revenue stream largely immune to power market dynamics. It contributes 25 per cent to 30 per cent of earnings.
One portfolio manager in Australia, who is considering buying shares, said the offer looked "pretty interesting".
He said Genesis was more flexible in its generation options, and had reasonable access to gas through its stake in Kupe. Added were the healthy dividend yield and the straightforward offer, avoiding the instalment receipts used for Meridian.
"And it looks as though they have priced it sensibly," he added.
The IPO offers a gross yield of up to 16.5 per cent and a cash yield of up to 11.9 per cent in 2015, depending on the initial price. Some critics have labelled the offer, including a loyalty bonus for local investors, over-generous.
Brantley wouldn't comment on the structure but said the predictability of earnings allowed more to be paid in dividends. He pointed to the changes Genesis had made in its generation fleet over recent years that allow it to adjust output between plants, depending on wholesale prices. That means Genesis can cover its retail demand through low-cost hydro and gas-fired generation, only running its higher-cost gas-coal units at Huntly when prices are higher, typically in drier periods.
The result is relatively constant earnings within a wide range of wholesale prices of $30 to $75 a megawatt-hour, even though output is much reduced at lower prices.
"We think the balance is about right where we can flex the portfolio up or down," Brantley said.
The main regulatory risk is the electricity reform proposed by Labour and the Greens should they win the September election. Brantley said Genesis would be less affected than its "pure hydrology peers".
The percentage of Genesis to be sold will be announced on March 26 and the share price two days later.