Meridian to list in late October

The government will sell up to 49% of Meridian Energy in two instalments with the electricity company expected to list on the stock exchange on October 29.

Full details of the initial public offer (IPO) will be set out in documents this Friday, Finance Minister Bill English and State-owned Enterprises Minister Tony Ryall say.

As an incentive, the government will allow investors to buy Meridian shares in two instalments over 18 months.

This means New Zealanders will initially pay about 60% of the offer price up front, with the rest due 18 months later, and still receive a full dividend payout.

In addition, there will be a price cap for New Zealand retail applicants to provide more certainty about how much the shares will cost.

As with the Mighty River Power share offer earlier this year, the government is promising that New Zealanders will “be at the front of the queue” for shares in Meridian, Mr English says.

“The government was very clear about the opportunity for New Zealanders when we put our share offers programme to New Zealanders during the 2011 election campaign. The compelling reasons for proceeding with the share offers are as valid today.

“The government share offer will enable New Zealanders to invest in big Kiwi companies at a time when they are telling us they want to diversify their growing savings away from property, bank deposits and finance companies.

“And we can invest the proceeds in other public assets like modern schools and hospitals, without having to borrow that money in volatile overseas markets, and increase debt.”

Meridian is the largest of the three state-owned power companies being partially privatized as part of the government’s “Mixed Ownership Model”.

Reports last week indicated the company may be worth far less than an independent valuation determined last year.

Macquarie, a joint lead manager on the sale, estimates the value of this largest of the government-owned power companies at $4.6 billion to $5.6 billion.

That contrasts with an $6.6 billion estimate by PwC in the middle of last year.

A key factor weighing on the value is a promise by Labour and the Greens to reform the electricity sector and create a single buyer should the two parties gain power at next year’s election.

dbridgman@nbr.co.nz