Opinion & Analysis
Mighty River Power was worth between $3.2 billion and $4.12b in mid-March, according to valuations then by the best five analysts covering the company. The $1b range was one measure of the company's risks.
OPINION: But since then, have MRP's risks risen and its valuations fallen?
For example, the odds on the Tiwai Point smelter closing have increased markedly. If it does, the electricity market will be swamped with excess supply. Similarly, Labour and the Greens say they will cut electricity prices and investment returns for MRP and the other generators when they next form the Government.
These are complex issues. As an investor I need professional advice. Indeed, Treasury and the Financial Markets Authority say anybody who feels they need investment help on MRP should seek it.
Over the past 10 days, I've tried to find such professional advice. But I've failed.
My first step was to call my own authorised financial adviser and ask for his guidance on MRP. "I can't give you any," he replied. "We are with AMP and AMP has told us not to advise on MRP; and they said they won't be giving us any advice on it."
Seeking an explanation, I phoned Jack Regan, AMP's managing director. But he failed to return my call. After multiple exchanges with his PR person, I received this statement:
"On behalf of Guy Elliffe, head of NZ equities: ‘The team is currently assessing Mighty River Power for inclusion in AMP Capital's NZ share portfolios. As they are currently undertaking this assessment, we are unable to confirm AMP Capital's participation or quantum on the number of shares at this point in time.' "
If AMP makes up its mind before the retail offer closes on May 3, perhaps it might be so kind as to give me some help. After all, 15 years ago I became its customer by jumping through all the hoops of personal financial profiling to qualify for its service and advice.
Since AMP was no help, I cast wider. I emailed Craigs and Forsyth Barr, the two leading retail brokerage houses, asking what help they are offering clients. No reply from either, even though they are the New Zealand retail offer managers for the MRP float.
How about ANZ and ASB, the float's New Zealand retail offer co-managers?
ASB: "Given our role on the retail syndicate panel ASB is not in a position to provide comment."
ANZ: "We do not give advice to retail customers on individual shares."
How about Westpac, then? "We do not give advice to customers on individual shares."
Fisher Funds? "We are not giving clients personalised advice on MRP shares."
Hoping KiwiSavers were better served, I asked the Government's five default providers.
AMP said it hadn't decided what it was doing on MRP; and ASB said it couldn't comment.
ANZ said: "ANZ Wealth has an award-winning investment management team, including equity analysts. That team does its own research and makes NZ stock selection decisions for all our funds including our KiwiSaver Schemes. That team will review the market information available on Mighty River Power."
Fisher Funds? "We have received all the analyst reports on MRP from those brokers on our panel (all the major houses); however, we have undertaken our own research and will rely on that to determine our target price and target portfolio weighting."
Mercer? "Mercer selects managers who we think will outperform the market/index and allow them to pick stock to achieve these objectives."
And Westpac, as a KiwiSaver provider, said: "We will look to purchase shares. BT Asset Management uses its own proprietary research and analysis and will combine this with the analysis services of sharebrokers such as UBS, Craigs, Goldman Sachs."
Too bad for BT, and thus, Westpac's KiwiSaver customers, Craigs and Goldman Sachs, won't have published any research from March 22 to June 17. They are gagged by the analysts' blackout under the float rules, as this column explained last week. UBS is not publishing again until after the shares start trading.
Because of the blackout, the dearth of analysis is a serious problem for all buyers of MRP shares - institutions, KiwiSaver providers and retail investors alike.
But there is still good analytical advice out in the market, says Andrew Barclay, managing director of Goldman Sachs NZ, one of the three joint lead managers of the MRP float.
He offers three reasons why the blackout is not as severe as it might seem:
First, the mid-March reports of the five analysts caught in subsequent blackout were proprietary products for their firms' clients. They were not intended for wider publication.
Actually, the reports were used by Treasury to give market views on MRP before it finalised the offer document and made it public. One way or another, lots of institutional investors got copies of the analysts' reports, and they didn't pay for them.
Second, Barclay says, there are a number of analysts who aren't covered by the blackout such as those at UBS, Merrill Lynch, JP Morgan and Citigroup; and likewise there are unencumbered local analysts at Morningstar, a funds rating service, and Woodward Partners, a boutique Wellington investment bank.
Actually, UBS and JP Morgan say their analysts won't publish until after MRP shares start trading; Merrill Lynch and Citigroup failed to respond to my inquiries; and the local analysts are not electricity sector specialists.
Third, Barclays says, there are "more than a thousand analysts" around NZ in the form of authorised financial advisers.
They could, for example, he says, do the same analysis as Stephen Hudson, Macquarie's blacked-out analyst, has done on the global aluminium industry and Tiwai Point's role in it.
All they need to do is pay for the same aluminium industry data Hudson got from Wood Mackenzie, the renowned global researchers on the mineral, mining and energy sectors.
Nigel Tate, president of the Institute of Financial Advisers, begs to differ. "I could count on one hand" the number of AFAs capable of such analysis.
The IFA has 1980 members around New Zealand but, in the case of MRP, "most advisers are avoiding advising on it". One problem for them is the lack of independent research on MRP, he says.
I emailed Chris Major, marketing and communications director, extension of the Mixed Ownership Model, at the Treasury: "Does Treasury consider such advice is widely available? If so, please could you direct me to it." I got no reply.
But there is one voice in the market saying lots about MRP. It is a loud, insistent voice, reaching out to the nation, even resorting to capital letters in its advertising.
The Government exhorts us: "The Mighty River Power Share Offer is open. SHARE IN IT NOW."
- Sunday Star Times