Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Meridian Energy share offer details confirmed

20 August 2013

Meridian Energy share offer details confirmed

The Government today confirmed it would use instalment receipts in the Meridian Energy share offer – allowing investors to pay for their shares in two instalments.

Subject to market conditions, the sale of up to 49 per cent of Meridian is expected to be completed, and the company listed on the sharemarket, by early November, Finance Minister Bill English and State-Owned Enterprises Minister Tony Ryall say.

“Listing up to 49 per cent of Meridian on the sharemarket will give New Zealanders an opportunity to invest in another big Kiwi company at a time when many people recognise the value of diversifying their growing savings away from property and bank deposits,” Mr English says.

The instalment receipts, which are fairly common for major initial public offerings in other countries, will mean New Zealand retail investors will need to pay less cash up front when they apply to buy shares. Instalment receipts were used by the Government in the float of Capital Properties in 1998.

“They will allow New Zealanders to pay for their shares in two instalments,” Mr English says. “The first instalment, for around 60 per cent of the share price, will be paid when investors apply for shares.

“The remaining amount, which will be fixed at the end of the share offer, will not need to be paid for a further 18 months.”

Between the first and second instalments, investors will receive the full dividends paid out in that period, which will make the dividend yield – or return on their investment – higher in those first 18 months.

Ministers have decided to use the instalment receipts as an incentive for New Zealand investors in Meridian, instead of the loyalty bonus shares that were used in the previous Mighty River Power share offer.

Mr Ryall says ministers have also confirmed the following decisions for the Meridian share offer:

A minimum application of $1,000 will apply for the first instalment of shares.
Given there is sufficient public familiarity with the Government's share offer programme, there will not be a formal pre-registration process, as happened with the Mighty River Power offer.
Retail banks ASB and ANZ and sharebroker Forsyth Barr have been appointed to the retail syndicate for the Meridian offer. The syndicate will work closely with joint lead managers Craigs Investment Partners / Deutsche Bank, Goldman Sachs /JB Were and Macquarie to market the offer to New Zealanders.

“Another difference with the Meridian offer is that we have decided to set a share price cap for New Zealand retail investors who take part in the offer,” Mr Ryall says.

“We understand that people like to know the maximum price they’ll be paying at the time they apply to buy their shares.

“Therefore, the cap will be set at the same time that we set the price range, and it will be announced when we lodge the offer document. This will give retail investors more certainty when they apply for shares.

“It also means that if demand is such that institutions are bidding at higher prices than our price cap, then retail investors will get their shares at a lower price than that paid by the institutions.”

Information about the Meridian offer, including how instalment receipts work, is available for New Zealanders on the Government Share Offers website (www.governmentshareoffers.govt.nz). The offer document will provide prospective investors with all of the information they need about Meridian and the offer structure.

Media contacts: Craig Howie 027 7555 809, Joanne Black 021 675 820, Jackie Maher 021 243 7803

Important information

The Crown is considering offering shares to the public in Meridian Energy Limited (“Meridian”) and is seeking indications of interest. No money is currently being sought and no applications for shares or instalment receipts will be accepted or money received until after an investment statement containing information about the offer is available (the “Offer Document”).

It is intended that an application be made to NZX Limited ("NZX") for permission to list Meridian, and to quote initially the instalment receipts and then later Meridian's shares on the NZX Main Board. The application will be made closer to the time that the shares in Meridian are offered to the public. No such application has yet been made.

Not for distribution or release in the United States.

This media statement is not an offer of securities. The securities referred to in this media statement have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered in the United States except in transactions that are exempt from or not subject to the registration requirements of the U.S. Securities Act and other applicable securities laws.


Instalment Receipts Q&A

What is proposed?

Investors will pay for shares in two stages; an initial part payment when the application for shares is made and the remaining final payment after 18 months. An instalment payment option allows investors to get a higher percentage return (or dividend yield) on their invested money for the instalment period (18 months).

Why are you using instalment receipts?

There are a number of reasons. Meridian is a large company – significantly bigger than Mighty River Power – and because we are committed to meeting our objective of 85-90% New Zealand ownership, allowing New Zealanders to purchase shares in two instalments is a sensible option. We also believe it creates an incentive for investors, given the enhanced yield it offers in the first 18 months.

What are the benefits of paying in instalments?

An investor receives a higher return on the investment during the instalment period because he or she has only partially paid for the shares yet still receives full dividend returns. In addition to dividend payments, investors retain the other benefits of an ordinary share, such as the ability to cast a shareholder vote and the option to sell the instalment receipts.

What is an instalment receipt?

At the conclusion of the share offer investors are issued a receipt for every share they partially pay for. These are called instalment receipts. These receipts work like ordinary shares. They will be traded on the NZX Main Board and they register the owner as the full beneficiary of any dividend payments and shareholder rights. When the final instalment payment is paid, the instalment receipts are cancelled and the investor receives ordinary Meridian shares.

Can the instalment receipts be sold during the instalment period?

The instalment receipts (which represent the shares that have been have partially paid for) can be sold during the 18 month instalment period. If this occurs, the person who buys them becomes the beneficiary owner of the entitlements and responsible for the final instalment payment.

If an investor decides to sell their instalment receipts, what price will they get?

The instalment receipts will be traded on the NZX, so an investor will get the price that the instalment receipts are valued at (by the market) at the time of sale. The price will reflect the value of a share that is only partially paid for.

How do investors know how much the instalment payments will be?

The first instalment payment is fixed at a set price per share outlined in the offer document. The second payment is set at a fixed price per share at the conclusion of the share offer. Ministers have confirmed that the price for the second instalment will be capped for New Zealand retail investors, and this will be disclosed in the offer document.

Does the second instalment payment change if the share price changes after listing?

No. The second payment does not change if the company’s trading price goes up or down. The remaining payment is a fixed price per share that will be set at the conclusion of the share offer.

Who administers the instalment receipts?

A trustee will be appointed to administer and protect investors’ rights to shares represented by instalment receipts and instalment receipt holders will receive dividends, notices of meetings and invitations to attend meetings as if they were shareholders.

Are there any risks that a future Government could cancel the second instalment?

The Trustee will have a contractual obligation under the Trust Deed to transfer the shares to investors on payment of the final instalment.

What happens if an investor doesn’t pay the second/final instalment payment?

If the final instalment payment is not paid, an investor’s right to receive ordinary Meridian shares is forfeited and the Trustee may sell the shares on the investor’s behalf. If the sale of the shares returns more than the outstanding payment, the investor receive the surplus proceeds (less fees and charges). If the sale returns less than the outstanding payment, the investor remains liable for the payment shortfall (plus any fees and charges).

What dividends can be expected between the instalment payments?

It is expected that Meridian will pay three dividend payments during the 18 month instalment period. These would be at six months, twelve months and 18 months.

How will investors know what the underlying returns (dividend yield) are likely to be?

Instalment payments provide an elevated dividend yield (percentage return on an investment) over the instalment period. The Offer Document will clearly outline the instalment period’s enhanced dividend yield and Meridian’s underlying dividend yield. The underlying dividend yield represents the return on the investment if the investor had been required to pay the full share price up-front.

Are there tax implications?
Imputation credits attaching to a dividend paid by Meridian are able to be passed through to and utilised by the instalment receipt holder. After the final payment is made and ordinary shares are received, this is not likely to trigger a capital gains tax event for the holder.

Important information

The Crown is considering offering shares to the public in Meridian Energy Limited (“Meridian”) and is seeking indications of interest. No money is currently being sought and no applications for shares or instalment receipts will be accepted or money received until after an investment statement containing information about the offer is available (the “Offer Document”).

It is intended that an application be made to NZX Limited ("NZX") for permission to list Meridian, and to quote initially the instalment receipts and then later Meridian's shares on the NZX Main Board. The application will be made closer to the time that the shares in Meridian are offered to the public. No such application has yet been made.

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Life And ACC Work Of Sir Owen Woodhouse

With the death of Sir Owen Woodhouse, the founding father of the Accident Compensation Scheme, New Zealand has lost one of the titans of its post-war social policy.

In its original incarnation in the early 1970s, ACC had been a globally innovative “no fault” scheme whereby accident victims surrendered their right to sue those responsible – on the understanding that they would receive compensation at a level that, as Woodhouse famously stated, would be sufficient to enable accident victims to fully participate in social life... More>>


Parliament Today:

Bad Transnationals: Rio Tinto Wins 2013 Roger Award

It won the 2011 Roger Award and was runner up in 2012, 2009 and 08. One 2013 nomination said simply and in its entirety: “Blackmailing country”... More>>


Select Committees: Tobacco Plain Packaging Hearings

The Stroke Foundation is today backing the Cancer Society and Smokefree Coalition who are making oral submissions to the Health Select Committee in support of proposed legislation to remove of all branding from tobacco products. More>>


Milk: Oravida Asked For Cabinet Help

New evidence released by New Zealand First today reveals Justice Minister Judith Collins used her position to manipulate the Government to help her husband’s company, Oravida, after the Fonterra botulism scare, says New Zealand First Leader Rt Hon Winston Peters. More>>


With Conditions: Ruataniwha Consents Approved In Draft Decision

The Tukituki Catchment Proposal Board of Inquiry has granted 17 resource consents relating to the $265 million Ruataniwha Water Storage Scheme in a draft decision that would open more of the Hawke’s Bay to irrigation. More>>


Fast Lanes, Campervans: Labour 'Making The Holidays Easier For Kiwi Drivers'

The next Labour Government will make the holidays easier and journeys quicker for Kiwi families driving on the roads, says Labour Leader David Cunliffe. More>>


Gordon Campbell: On Royalty And Its Tourism Spin-Offs

Ultimately the Queen’s longevity has been one of her most significant accomplishments. A transition to Prince Charles while the monarchy was in the pits of public esteem in the mid to late 1990s would have been disastrous for the Royal Firm. Far more congenial representatives have now emerged... More>>


Privacy (Again): ACC Demands Excessive Privacy Waivers

Labour: “This is just another example of ACC under National deliberately acting to deny treatment and compensation... Those who did fill in the form have effectively been victims of yet another ACC privacy breach. This time Judith Collins knew it was happening..." More>>


IPCC: Many Pathways To Substantial Emissions Reductions Available

A new report by the Intergovernmental Panel on Climate Change (IPCC) shows that global emissions of greenhouse gases have risen to unprecedented levels despite a growing number of policies to reduce climate change. Emissions grew more quickly between 2000 and 2010 than in each of the three previous decades. More>>


Bowels: Green Light From Labour For Cancer Screening Programme

Labour Leader David Cunliffe has today committed to a national bowel screening programme, starting with extending the current service to the Southern and Waikato districts. More>>


Dotcom Speaks To Mana AGM: Negotiations With The Internet Party To COntinue

The MANA AGM decided unanimously to continue negotiaitions with the Internet Party. Within a month further negotiations, further consultation with MANA branches and a final decision on whether to proceed with a relationship is expected. More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news