Mighty River priced at $2.50 a share

Mighty River Power share offer – at a glance
Share Price: $2.50 (target range: $2.45 to $2.80)
Proceeds of share offer: $1.7 billion
Total NZ ownership (incl 51% Crown):  86.5%

New Zealand retail investors
Individual New Zealand shareholders: 113,857 (provisional; preregistrations: 440,000)
Retail investors: $943m
Proportion of shares: 26.9%
Average shareholding for New Zealand retail: $8220
Applicants who pre-registered:  91%
Applicants without CSNs (indicating first-time share-buyers):  68%
Withdrawal after Greens/Labour policy:  1783 applicants ($25m)

New Zealand institutional investors
NZ institutions:  $300m
Proportion of shares: 8.6%

International institutions
Offshore institutions: $472m
Proportion of shares: 13.5%

Note: numbers are provisional until settlement

Investors in Mighty River Power will pay $2.50 per share, the government said this evening.

Today's ministerial decision on the issue price weighed the level of public appetite for shares, institutional demand in a book-build over the last two days, and eventually a judgement about where to pitch the listing so that it is more likely to rise than fall in price when it lists, without going through the roof.

Of the shares issued, 86.5 per cent will be New Zealand owned (spread over 130,000 shareholders):  26.9 per cent by New Zealand retail investors, 8.6 per cent by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding.  That leaves 13.5 per cent for overseas institutions.

The share price will raise $1.7 billion for government coffers. 

Mighty River will list on the NZX at 12.30pm on Friday. There will be nothing to stop investors immediately onselling to foreign buyers - but individual New Zealand investors who hold the shares for two years or more will be eligible for one bonus share for every 25 held, in a loyalty bonus scheme used for the first time in the MRP float.

Although only 113,000 people subscribed for shares out of  440,000 who pre-registered their interest, SOE Minister Tony Ryall says some scaling has been necessary.

“We have decided to apply progressive scaling, which means that larger applications are scaled more than smaller ones.

“That means that more than 80 per cent New Zealanders will get what they applied for.”

Demand for shares in the State-owned power generator was sapped by the sudden Labour/Greens electricity market policy for a single state-owned buyer designed to force lower prices. 

Mighty River will be included in the NZX-50 index. This means that some institutions at some stage will have to buy shares in Mighty River because their investment funds are linked to sharemarket indices.

“While most New Zealand investors will be able to work out from this announcement what their share allocation is, they will also be able to get confirmation of their individual allocation from Friday – by checking the website or calling 0800 90 30 90. 

"We will also be emailing or writing to all applicants to confirm their allocation,” Mr Ryall says.

“The demand from institutional investors was strong, and bids from both New Zealand and offshore institutions were scaled considerably. Institutions will be advised of their allocations shortly, after which a settlement process commences."

Mr English and Prime Minister John Key have already said the sale's proceeds are to be used for public infrastructure projects that would otherwise need to be funded through volitile debt markets.

Mighty River is expecting a sharp rise in profits after suffering heavy writedowns on its offshore geothermal investments last financial year, but is expecting its underlying earnings to be flat this year before declining again in 2014.

The company is looking forward to the full commissioning of its new 82MW Ngatamariki geothermal power station to better balance its portfolio against dry conditions such as the recent summer.

Mighty River currently generates about 17% of New Zealand’s electricity from nine hydro power stations in the central North Island and a multi-unit gas fired station in Auckland.

Mighty River chairwoman Joan Withers says determination of the final price was at the sole discretion of the Crown as outlined in the Offer Document.