Mighty River likely to prove mighty tempting

You can run all the arguments you like against selling state assets, and from the taxpayers' perspective there are many.

But shroud-waving about the "dangers" of an Australian listing or dire warnings of a shortfall on the targeted 85-90 per cent Kiwi shareholding (at least in the short term) will almost certainly be proved unfounded.

The structure of the planned float of 49 per cent of Mighty River Power will ensure a strong demand, and it would be a real surprise if the kind of enthusiasm that saw more than 220,000 shareholders pile into Contact Energy was not matched or surpassed in this case.

There is, across the sharemarket, a clear trend away from direct stakes held by those mythical "mum and dad" retail shareholders. KiwiSaver is probably speeding up that process.

Even a giant like Telecom only has about 38,000 shareholders now and Contact Energy's register sports less than 80,000.

But by offering retail buyers shares with no brokers fees, a yet-to-be detailed bonus loyalty scheme, and a float during a strong run for the sharemarket, the right conditions have been created for a successful and widespread take-up.

True, the electricity market's growth potential is hardly red-hot, all the emphasis is on saving power, and there is an overcapacity in the sector at the moment.

But, like its stablemates, Mighty River is a solid utility with an implicit Government guarantee.

The Government should make its target of 85 per cent Kiwi shareholding at a canter, made up of the 51 per cent that remains in Government ownership and a 34/15 split on the 49 per cent float. Odds are it will go much higher.

The Australian Stock Exchange listing may undermine the politics of that, but it is really a red herring and will help underpin the price on the secondary market for those who buy into the stock.

All of that adds up to a near certainty that John Key and his ministers are well on their expected journey to bagging around $1.8 billion before the May 16 Budget, with bragging rights about the New Zealand retail and institutional investors on the share register.

They have hedged on that timetable, but they will be keen to get the money in the bucket so they can distribute it in the Budget, with no spare dosh for capital expenditure without it.

Top of the list are unspecified projects in Christchurch, schools, hospitals, prisons and - at an outside bet - some extra capital for the rapidly expanding Kiwibank, which is already eating all its profits.

None of that ensures Kiwi retail investors will remain in huge numbers in a few years' time; the Contact precedent and the trend away from direct shareholding ensure that.

But that is the long-term war; the short-term battle for Mr Key and his Government is getting big numbers of Kiwis to snap up the shares and, in that, they are well on the way to victory.

Fairfax Media