Meridian Energy offers biggest gain in $7 bln govt sell-down
By Paul McBeth
May 19 (BusinessDesk) – State-owned electricity generator Meridian Energy Ltd. offers the biggest return to the government in the proposed partial sale of energy assets.
The government wants to raise between $5 billion and $7 billion by selling down as much as 49% of power companies Meridian, Genesis Energy Ltd., Mighty River Power Ltd., coal miner Solid Energy Ltd., and more of its stake in carrier Air New Zealand Ltd.
The bulk of that would come from Meridian, which Treasury estimates could attract as much as $3.1 billion in a partial sale to private investors. MRP could raise as much as $1.8 billion in a partial float, while Genesis could attract $780 million and Solid Energy $830 million. Selling more of its stake in Air NZ could attract $280 million.
Finance Minister Bill English told media before his speech in Parliament, that no partial privatisations would occur before the election, where a mandate for the policy would be sought. The so-called mixed-ownership model would be implemented over a three to five year period.
“The proceeds will be used to fund about one-third of what the government expects to invest over the next five years in schools, hospitals, better broadband, and rebuilding KiwiRail,” English said.
The government favours an initial public offering on the stock exchange for the SOEs, subject to several tests, including a preference for New Zealand investment, government retaining at least 51% ownership, companies presenting good investment opportunities, freeing up capital to fund new public asset investment, and regulatory protections for consumers.
The Treasury said it expects the government will miss out on $200 million in annual dividends, and will forgo an annual $100 million return on retained profits. Still, it estimates the government will save an annual $400 million in lower interest costs.
English said it was his expectation that crown financial entities, such as the New Zealand Superannuation Fund, would support the SOEs once they listed, as would KiwiSaver funds.
The government’s preference was for initial public offerings and would seek to ensure that New Zealanders were “at the front of the queue” for shares.
Prime Minister John Key flagged his intention to introduce the partial privatisation when he opened Parliament this year, as a means to repay debt and offer retail investors new opportunities.