UPDATED: Genesis shares list at a healthy premium

Shares in newly floated electricity company Genesis Energy [NZX: GNE] have opened their first day on the New Zealand stock exchange at a healthy premium to the issue price paid by investors.

Investors in the government privatisation of 49% of Genesis paid $1.55 per share and at the listing the first recorded price was $1.81, for an immediate gain of 17%.

At $1.80 a share the implied gross dividend yield in the 2015 financial year is 12.3%, based on prospectus information.

Initial turnover saw 21 million shares traded in the first twenty minutes with 458 trades worth $38.8 million.

Heavy public interest in the last chapter of the government's partial privatisation programme briefly crashed the NZX website within half an hour of the listing.

Nigel Scott, a financial advisor at Craigs Investment Partners, said early trading was mostly between institutions.

“It’s really insto to insto stuff here with retail probably coming from the buy side.

“It’s a healthy start. This the smallest of the three [state electricty company] listings, but there’s a lot of interest due to the yield and people are probably paying to top up their holdings from the first part to try end up with a relevant holding in their portfolio.”

Genesis' climb to $1.825 in the early afternoon gave holders of the 49 percent that was sold an immediate gain of about $135 million.

"What it has done is created demand for other electricity generators listed on the market as well," said Grant Williamson, a director at Hamilton Hindin Greene. "It's a very nice premium for investors who have got shares."

Fellow state-controlled gentailers Meridian Energy and Mighty River Power also advanced after the listing, rising 1.7 percent to $1.175 and 0.9 percent to $2.205 respectively. Contact Energy, which was fully privatised in 1999, gained 1.6 percent to $5.59 while Infratil-controlled TrustPower gained 0.5 percent to $6.48.

Mr Williamson expected Genesis' share price to take two weeks to settle, as supply and demand for the stock evened out.

"Certainly looking at the future dividend yield and such like the stock still doesn't look that expensive even at these levels," he said. "There will be good interest in the shares particularly from income investors."

Good deal
Speaking at a listing ceremony at the NZX headquarters in Wellington, Finance Minister Bill English said: "Taxpayers get a good deal and we believe we've got a pretty good deal across the whole programme," referring to the four asset sales over the last 13 months, which have raised a total of $4.7 billion.

"We went to the market where $1.55 was a better price than expected but markets shift," said English. "We've had different experience with Meridian and again with Mighty River Power."

While Meridian shares are trading above their $1 a share issue price last November, MRP shares are still nearly 30 cents below their offer price last May of $2.50 a share.

Green Party co-leader Russel Norman said the Genesis price stag showed taxpayers had "missed out on an additional $130 million of revenue by the National Government mispricing Genesis Energy."

In all, 500 million shares were purchased in the IPO and due to high demand many investors had their allocations reduced significantly on a progressive scaling basis.

Retail investors who applied through the public offer had their allocations capped at $5000 worth of shares, while the broker firm offer was also reduced by 20%.

The Genesis float raises $733 million, bringing the total proceeds from the share offer programme that also included Mighty River Power and Meridian to $4.7 billion, once the second installment of Meridian shares are paid for.

The plan was initially to have raised between $5 billion and $7 billion, but the near commercial failure of state-owned coal miner Solid Energy saw that company removed from the programme.

Genesis sweetened
More than 68,000 retail investors were allocated shares in Genesis and the government says overall 111,000 common shareholder numbers were issued during the share programme for the three energy companies.

The MRP sale last May attracted 113,000 individual investors but Meridian attracted just 62,000.

Demand for Genesis shares was possibly higher than expected given the relatively lukewarm response to Meridian when demand may have been dampened by the performance of Mighty River, which continues to trade below its offer price of $2.50 and first day close of $2.62.

Mighty River's share price performance is said to have been hampered by the Labour-Greens policy to install a central buyer of power, effectively capping prices that could be charged for electricity.

The government sweetened the Genesis offer with a bonus scheme and a lower initial offer price than expected. Investors that bought shares and keep them from more than 12 months will be issued one bonus share for every 15 shares they hold, up to a cap of 2000 bonus shares.

The dividend yield forecast is also attractive.

Genesis Energy has the most energy customers. In addition to having diverse generation, including hydro, natural gas, coal and wind, Genesis has a 31% share in the Kupe oil and gas field

In terms of the financials, bottom line net profit is set to come in at $41.8 million for the year to June 30 but forecast to more than double to $95.4 million in the year to June 2015. 

- additional reporting from BusinessDesk

dbridgeman@nbr.co.nz