Plans to raise at least $5 billion from asset sales appeared to be dashed last night with New Zealand's largest electricity company partially sold for the very lowest price the Government was willing to accept.
Shares in Meridian, which produces around a third of New Zealand's electricity from vast South Island hydro schemes, are being sold to investors at $1.50 each.
The Government had hoped to sell the shares for up to $1.80 each.On face value the sales will raise $1.88b, although the Government has to wait 18 months to receive a third of this because of the structure of the offer.
With the money raised from the partial sale of Mighty River Power earlier this year, the Government would need to raise another $1.42b from the partial sale of Genesis Energy and Air New Zealand, which investment figures say is unlikely, to reach $5b.
About 62,000 investors signed up to buy shares in Meridian, far below the 113,000 who invested in Mighty River Power a few months ago.
Finance Minister Bill English insisted the Government was "pretty happy" with the price. He refused to say whether it could still reach the $5b-$7b from asset sales it predicted.
While it was disappointed by the number of investors, he said this reflected concerns over Opposition's "irrational" plans to reform the electricity sector, and uncertainty over Meridian's largest customer, the aluminium smelter at Bluff.
There was also a "growing realisation that electricity demand is flat and these companies are no longer regarded as the semi-monopoly cash cows as they used to be".
Labour State-owned enterprise spokesman Clayton Cosgrove said the sales programme had proved to be a "fire sale" and it would inevitably fall hundreds of millions of dollars short of target.
"If the prime minister was working for [investment bank] Merrill Lynch and the taxpayer was his client, he would have told the taxpayer yesterday 'don't do it'."
Green Party co-leader Russel Norman said the lack of interest showed ordinary New Zealanders did not have the money to invest in power companies.
Both Mr Cosgrove and Dr Norman refused to say what impact the Opposition's power policies had on the value of Meridian. Neither party has committed to buying back the shares.
State-Owned Enterprises Minister Tony Ryall said the $749m raised from retail investors – often dubbed "mum and dad investors" – was the largest of any initial public offer in New Zealand history.
The profile of investor was different to that of Mighty River, with a smaller number of investors generally looking to invest more, Mr Ryall said.
Most investors will receive fewer shares than they applied for. Those who applied for up to 2500 shares will get the full amount they applied for, while those who applied for more than 20,001 will get just 55 per cent of what they applied for in excess of that figure.
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