MRP to spend up to $50M on buyback to underpin sagging stock
MightyRiverPower to spend up to $50M on buyback to underpin flagging shares
Oct. 10 (BusinessDesk) - MightyRiverPower plans to spend up to $50 million on a buyback over the next 12 months to underpin a stock that has languished since the government sold 49 percent of its holding in an initial public offering in May.
The power company will buy up to 25 million shares between Oct. 15 and Oct. 14, 2014, it said in a statement. That amounts to about 1.8 percent of its stock on issue. The shares last traded at $2.20 and are rated a ‘buy’ based on the consensus of seven analysts polled by Reuters, with a median price target of $2.54.
The shares have lagged behind their $2.50 IPO price, stoking some criticism the sale was priced too high and spurring the government to offer shares in Meridian Energy this month via instalment receipts, with $1 upfront and a second payment in 18 months’ time capped at no more than 60 cents for retail investors.
“The board’s view is that a purchase of our shares, at this time and at current market prices, provides a return above the company’s cost of capital and will be value-enhancing for our shareholders,” Mighty River’s chairwoman Joan Withers. “It is also preferable at this point in time to the other tools we have available to us such as a special dividend or a change in dividend policy.”
The state-controlled power company posted a 70 percent gain in full-year profit to $114.8 million in August, beating its prospectus forecast. Sales, margin and operating earnings all beat the company’s forecasts.
Withers said the board had taken the company’s out-performance against the IPO forecasts into account, along with capital expenditure that was about $100 million below forecast for 2013 and is expected to undershoot again in 2014.
“We will be continuing to monitor capital management, taking into account the cash flows from our new Ngatamariki geothermal station and the board’s commitment to maintain the company’s current credit rating,” she said.