Asset sales will struggle to net $5 billion, says Key
Sept. 16 (BusinessDesk) – The government’s asset sales programme risks raising less than the $5 billion lower end of its target range for proceeds, Prime Minister John Key said today.
The policy has been sold for its ability to raise between $5 billion and $7 billion to help fund investments in public infrastructure, but weakness in the electricity market, threats of major policy change with a change of government and lukewarm investor appetite mean the bottom of that range may not be met.
“We are trying hard to get there,” said Key of the $5 billion target at a press conference announcing the start of advertising for the sale of 49 percent of Meridian Energy tonight and the release of investment offer documents on Friday, ahead of NZX and ASX listing on Oct. 29.
Key made it clear the government still intends to privatise Genesis Energy in the first half of next year, ahead of the general election expected in November, despite its unpopularity, and that a “shorter, sharper process” would be used to sell down further shares in Air New Zealand.
The company is already listed on the NZX, although it remains 73.3 percent government-owned.
Key said an Air New Zealand selldown before Christmas could not be ruled out.
Asked why it was still a good deal for the taxpayer to sell electricity assets in a soft electricity market and whether there was potential to flood the New Zealand sharemarket with electricity shares, Key said: “There’s lots of cash out there.
“Meridian is a high yield stock. I’m confident there’s more than enough cash floating around in KiwiSaver and bank deposits to soak up what’s a pretty big offer.”
Meridian could reap around $2.5 billion for the sale of a minority 49 percent stake, although the rules of the float mean at least 85 to 90 percent of the initially issued shares must go to New Zealand owners.
Key confirmed there would be a two-stage payment process for the shares, and an upper limit on the price that New Zealand retail investors could expect to pay.
The price range for the Meridian float will be announced Friday, when the prospectus will also become available. Would-be investors will have three weeks from Sept. 30 to Oct. 18 to apply for shares.
With respect to Air New Zealand, State-Owned Enterprises Minister Tony Ryall said the government was “working through the best way the sell down can occur and we remain keen to ensure that New Zealanders have the opportunity to participate in it.”
“At this stage, no final decisions have been made, including on timing,” Ryall said.
Air New Zealand shares were unchanged at $1.35.