Govt talks up Genesis demand

01:04, Mar 26 2014
Genesis Energy Huntly powerstation.

The Government is talking up demand in its final asset sale, which opens tomorrow, indicating it expects to sell all of the 49 per cent on offer.

When Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall announced the sale in February, they indicated they may only sell 30 per cent of Genesis, New Zealand's largest electricity retailer.

But today English indicated demand could be strong.

"We have received positive feedback on the offer to date from local and international institutions and New Zealand sharebrokers."

Sources involved in the deal said that with generally positive coverage of the deal in recent press coverage, and broker reports saying shares in the company were worth upwards of the top of the $1.35-$1.65 of the range, the joint lead managers working on the deal had received strong indications of demand.

The final share offer price will be announced Friday, meaning retail investors will know exactly how much they are paying per share when they apply for the shares.

While the sales of 49 per cent of Mighty River Power and Meridian Energy, and the sale of a smaller stake in Air New Zealand, have raised close to $4 billion, proceeds have been generally lower than expected.

Many investors are believed to have been put off by the first sale, Mighty River, with shares currently trading 13.6 per cent below their initial price. The fall was blamed on falling demand for electricity, and plans by Labour and the Greens to undertake a major overhaul of the wholesale electricity market if they win the election.

The Government cut its target for proceeds from the sales from  $5b-$7b to $4.6-$5b, although part of the drop was caused by Solid Energy being withdrawn from the process, as it came close to collapse because of excessive debts.

Prime Minister John Key has already said that Genesis will be the final partial sale of a state owned enterprise, with no plans to campaign for a mandate to sell others in the upcoming election.

The Genesis sale is different to the previous sales, with institutional investors and sharebrokers competing for up to 400 million shares - 40 per cent of the company, ahead of retail investors.

The bookbuild, a type of auction where institution give a series of bids based on what they would buy at a variety of prices, opens tomorrow and closes on Friday afternoon.

The retail offer, where retail investors will buy shares, opens at 12.01am on Saturday. Retail investors will be offered up to 90 million shares, although about 15 million of these have been set aside for the loyalty bonuses.

Retail investors will be offered one bonus shares for every 15 they already own for one year. This is a much more generous offer than for Mighty River Power, where investors will be given one share for every 25 they purchased two year if they hold them for two years after the initial public offering.


Fairfax Media