NZ plans to list Genesis Energy in April after partial sale aimed at increasing pricing tension, English says

Wednesday 26th February 2014

New Zealand's government will sell down 30 to 49 percent of its holding in Genesis Energy and list the power company on the nation's share market in April, marking the end of its spate of partial asset sales over the past year as a general election looms.

Genesis shares will be priced at the start of the initial public offer period in March, in what is known as a front-end bookbuild, Finance Minister Bill English said in speech notes for delivery in Auckland today. That will provide more certainty for investors and allow sharebrokers to bid for the stock at the same time as institutional investors, creating stronger competition, English said.

New Zealand's government has previously said it expected to reap between $700 million and $1.1 billion from the sale of 49 percent of Genesis, following on from last year's partial privatisation of MightyRiverPower and Meridian Energy, and a reduction in its holding in national carrier Air New Zealand. So far, the government has raised about $4 billion, reducing its overseas debt requirements and helping fund schools, hospitals and faster broadband, English said today.

"The government won't be selling any more shares in state-owned enterprises or mixed ownership companies - either this term of after the election," English said, reiterating earlier comments by Prime Minister John Key. "We've achieved what we wanted to with the share offers in energy companies and Air New Zealand."

The remaining state-owned enterprises are a combination of small entities, natural monopolies or companies in sectors that are unsuitable for future share offers, English said.

The government anticipates that selling a smaller stake in Genesis in a front-end bookbuild could increase the price by offering fewer shares to more bidders, English said. A decision on how much of the company is to be sold will be made ahead of the offer.

Genesis is the country's largest power company by customer numbers but the smallest of the partial privatisations by asset value. New Zealand retail investors in Genesis will be offered loyalty bonus shares and a simpler investment statement detailing the offer, English said.

MightyRiverPower listed in May at $2.50 and recently traded at $2.06. Meridian's instalment receipts listed in October at $1 and recently traded at $1.055.

Last week, Genesis reported a 23 percent slide in first-half earnings to $150.5 million, reflecting stiff retail competition and a warm winter, which meant hydro-storage was above average and wholesale prices were lower.

The partial privatisation programme has had mixed success after an opposition proposal to overhaul the electricity market saw traders discount the value of the power companies, accompanied by growing recognition that New Zealand has excess generation capacity that may last some years, keeping a lid on prices.

A general election has to be held this year.

BusinessDesk.co.nz

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