Meridian seeks up to $150 million in retail bond offer

Monday 6th March 2017

Meridian Energy wants to raise $150 million through a new listed bond to refinance an upcoming debt maturity and cover general business costs.

The country's biggest electricity generator is offering up to $100 million of unsecured, unsubordinated fixed rate bonds with oversubscriptions of up to $50 million, Wellington-based Meridian said in a statement. The bonds will mature on March 20, 2024 and have an indicative margin of 1.5 percent to 1.6 percent, implying an annual interest rate of 4.75 percent to 4.85 percent using the seven-year swap rate.

The funds will go towards repaying a $75 million seven-year bond with a coupon of 7.55 percent that matures this month and other "general corporate purposes".

Meridian flagged plans to tap the debt market for funds when it reported a 6 percent increase in first-half operating earnings last month. Like other electricity generator-retailers, the company's capital investment programme is relatively light due to flat energy demand, and Meridian plans to spend $41 million over the next seven years refurbishing three Ohau hydro stations.

Companies have flocked back to the NZX debt market as low interest rates make for an attractive funding option, and the stock market operator today said the number of listed debt securities rose 24 percent to 109 in February from the same month a year earlier.

Meridian had net debt of $1.19 billion as at Dec. 31, up $54 million from a year earlier. Of that, $80 million is scheduled to mature this year, and the next capital market maturity is in April 2019 when $271 million of bonds in the US private placement market come due.

The current offer closes on March 10 after a bookbuild process sets the final interest rate, and the debt will list 10 days after that. There is no public pool for the offer, which has been reserved for customers of joint lead managers Bank of New Zealand and Westpac Banking Corp, co-manager Deutsche Craigs, and NZX participants.

Meridian shares slipped 0.2 percent to $2.73, and have gained 14 percent over the past 12 months.

BusinessDesk.co.nz

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