Govt talks up Genesis demand

HAMISH RUTHERFORD
Last updated 13:12 26/03/2014
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Genesis Energy Huntly powerstation.

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The Government is talking up demand for Genesis shares saying it expects to sell all of the 49 per cent of the energy company on offer.

When Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall announced the final asset sale last month, they indicated only 30 per cent of New Zealand's largest electricity retailer might sell.

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," he said.

Sources involved in the deal said that with generally positive media coverage of the deal and broker reports saying shares would be at the top of the $1.35-$1.65 of the range, the 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 will be paying 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, raised close to $4 billion, proceeds were generally lower than expected.

Many investors are believed to have been put off by the first sale, Mighty River Power, whose shares are trading 13.6 per cent below their initial price. The drop 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from the asset sales from the $5b-$7b range to $4.6-$5b, although part of the drop was caused by Solid Energy being withdrawn from the process, as it came close to collapse because of excessive debts.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 would be the final partial sale of a state-owned enterprise, with no plans to campaign in the coming election for a mandate to sell others.

The Genesis sale is different to the previous asset 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 institutions indicate what they would be prepared to pay for the shares, 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 bought if they hold them for two years after the initial public offering.

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- Fairfax Media

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