English lifting lid on Genesis sale

Last updated 05:00 25/02/2014

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Finance Minister Bill English will outline details of the last of the Government's state asset sales tomorrow.

Prime Minister John Key said yesterday that a stake in Genesis Energy would be sold in the next "month or so", after which the Government would call time on the controversial mixed ownership model programme.

He refused to outline the details of the sale ahead of a speech by Mr English tomorrow, but it is understood that it will be fundamentally similar to the earlier energy company sales, with Treasury aiming to find buyers for 49 per cent of the company.

The instalment receipts structure used for the partial sale of Meridian Energy - by which investors were able to defer paying for a third of the investment for 18 months - will not be repeated for Genesis, although it is possible retail investors will be offered some kind of inducement.

Based on the recently reduced target for asset sales, it appears the Treasury expects to raise $600 million to $1 billion from the stake in Genesis.

That means Auckland-based Genesis is less valuable than Meridian or Mighty River Power, and the sale will come after investors have already poured billions into local energy companies.

However, investment bankers handling the sales are expected to promote the fact that it is less dependent on hydroelectricity, making it potentially less disrupted than its rivals to the Labour/Green proposal to replace the wholesale electricity market with a single buyer.

Genesis is also New Zealand’s largest energy retailer by customer numbers, which bankers are likely to promote as having the sufficient scale to prosper over smaller rivals under electricity market reform.

Key said whatever the outcome of the Genesis sale, it would be the last of the programme.

"This Government has been absolutely open and transparent in making commitments to New Zealanders and then sticking to them," he said.

"This will be the end of the share offer programme."

The promise was partly because there was little else appropriate that could be sold, but also to prevent opponents from claiming there would be other sales following the election, Key said.

Green Party co-leader Russel Norman said proceeding with the sale now was an attempt to shut down the issue of the sales long before the election.

"The Government was advised by Treasury not to sell our electricity generating companies in quick succession as there would be insufficient demand and the revenue to the Crown would be reduced," Norman said.

"The only conclusion that can be drawn from John Key’s latest announcement is that the asset sales were always about redistributing New Zealand’s wealth to the top two percent at the expense of the vast majority of New Zealanders."

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