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Mighty River Power float might be launched next week after favourable court ruling

Posted in News Updated

The Supreme Court has given the green light for a Mighty River Power share float, after ruling against a Maori Council claim over water rights.

The decision now allows the Government to proceed with its partial asset sales programme, starting with MRP.

Finance Minister Bill English said earlier today the sale of up to 49% of MRP to the public could be launched as early as next week if  the much-anticipated Supreme Court ruling was favourable.

English told an audience of business people in Auckland today at the launch of the Government's Building Capital Markets Progress Report that the decision was being keenly awaited. See a summary of the judgment here.

"If it is favourable to the Government then we will be kicking off that process [MRP float] probably as early as next week. Conditions for floats look reasonably favourable. These are probably the most prepared companies ever for a public float and it would be a great relief to everybody if would could just get on with it."

After hearing later in the day of the favourable ruling, English said that the Cabinet would consider a timetable and other details of the MRP offer next Monday "including how New Zealanders will be at the front of the queue for shares".

Details would be confirmed soon afterwards.

Getting on with it

“We are pleased to be getting on with what we were elected to do,” he said.

An MRP float will be a big one. The company has been independently valued at around NZ$3.7 billion, so selling just under half of the company could raise around NZ$1.8 billion - or possibly a bit more if it goes well.

No party is likely to be more relieved than Mighty River Power itself, which has been planning for a float since 2011 and has already seen the float delayed by six months.

Chief executive Doug Heffernan said last week: “Getting more certainty, whatever that certainty is is probably important for the company".

"There’s been uncertainty for the company for a year and a half now.

"The owner will do what the owner wants. My job in running the company is to try and keep the organisation on track delivering and being focused on creating value and trying to not have distractions impact on the company and trying to get some certainty into what that environment is. So from my point of view getting some certainty is probably the big thing."

In good heart

And chair Joan Withers, also last week when announcing MRP's half-year results said the business was in "good heart".

"We’ve got very strong leadership with Doug. Success breeds success within an organisation and the team are very heartened by the consistent growth in certainly, underlying, earnings. I think our generation portfolio is exactly what we need.

“...I think we have worked assiduously to get to a point where we are all comfortable where we are in terms of preparedness.”

MRP last week reported net profit after tax of NZ$75.5 million for the six months to December, up from NZ$17.6 million at the same time a year ago. The more reliable measure of “underlying earnings” – not involving one-offs – was NZ$133.2 million, up from NZ$101.7 million. A dividend of NZ$67.2 million was paid.

MRP has moved to a new policy of paying out 40% of total forecast dividend for the full year at the interim stage. While the company has not yet released profit forecasts for the year, the NZ67.2 million interim dividend implies a payout of NZ$168 million for the year. Applying MRP's new policy of paying out between 90% and 110% of annual earnings would therefore imply an expected after-tax profit of between NZ$153 million and NZ$187 million.

After-tax earnings last year were NZ$67.7 million, however, the underlying earnings - taking out one-offs - were NZ$162.7 million, virtually unchanged from the underlying profits in 2011.

The very imminent MRP share float will be followed by a partial sale of Genesis Energy and Meridian Energy. It is also planned at some point to sell down the government's existing 74% stake in Air New Zealand - although indications are that will be some time later.

Solid Energy was originally in the list of candidates for sale, but has been withdrawn following revelations it is financially stressed and in discussions with its bankers.

Still on track

SOE Minister Tony Ryall said the government’s whole share offer programme remained on track following the Supreme Court decision.

“The Government has always been firmly of the view that the partial sale of shares does not in any way affect the Crown’s ability to recognise rights and interests in water, or to provide redress for genuine Treaty claims.

“The Government’s partial sale of shares in state-owned enterprises is good for taxpayers because we expect to generate between $5 billion and $7 billion in proceeds which we will use to control debt.

“It is also good for New Zealand’s capital markets and it will improve the performance of the companies in the share offer programme. “The Government will invest these proceeds in new public assets like modern schools and hospitals – and that’s money we don’t have to borrow from overseas lenders.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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26 Comments

It is really hard to argue

It is really hard to argue whether selling off 49% of SOEs is a good thing or bad thing.
 
To whom is good, to whom is bad??

Ultimately . xmowowang...it

Ultimately . xmowowang...it will be bad for consumers of  such products , as the first charter of any corporation is to maximise profits back to the shareholders.
 I doubt the 49% will accept interference on profit  guidelines from any State Enterprise.
Any attempt to introduce regulation to avert prioce fixing will be styfled with litigation .
In terms of selling down assetts it leaves us further exposed in the long borrow game for short term balancing concerns.
 as to who will benifit...? Well of course it will be those who can participate in the share list, providing they do not exercise the option to sell high for short term profit, selling out to large conglomerate share groups( likely offshore retirement funds and the like), without ever stopping to think they will surrender those profits over time by way of increased energy bills.
just a couple of examples there hope it helps.
Always remember , people are not necessarily greedy until the opportunity to be so, presents itself.
So are they greedy or opportunistic....? 

Chuckle - ain't that the

Chuckle - ain't that the case?
 
But this is a manifestation of the problem of ultimate scarcity; a limit to the supposedly unlimited opportunities Bill English - totally unchallenged by the media - lauds.
 
Actually, maybe the sentence needs undyslexing. Maybe the media are challenged, and that is why English gets away with speaking untruths?
 
 
 
 

I suppose it would not be

I suppose it would not be insane for Rio Tinto to obtain some serious interest PDK, help to socialise the debt so to speak........titter gafaw titter. 

Christov, have you read this

Not yet AJ...but sure to give

Not yet AJ...but sure to give it a look on your recommendation.

@ Christov - Re Rio Tino

@ Christov - Re Rio Tino stake in MRP -  you are probably not wrong and some tax rort as practiced @ Wellington Intl. Airport by Infratil will probably be established. Read Chalkie's article in Stuff
 
It comes down to tax - Wellington International Airport doesn't pay any. Chalkie has gone through several years of cashflow statements and found not a cent paid out since at least 2007.
 
The reason it doesn't pay tax relates to the subvention payment to Infratil. A subvention payment is a legitimate method of balancing the tax liabilities in a group of commonly owned companies - the threshold for common ownership is 66 per cent.
 
If company A owns companies B and C, where B makes a profit of $100 and C makes a loss of $100, A has made a balance of zero. To avoid the unfairness of B having to pay tax even though the group has made no money, B can make a subvention payment of $100 to C, so both make zero and no tax is payable.
 
Infratil does this with Wellington Airport, using a subvention payment to reduce the airport's profitability to negligible levels and offset losses elsewhere in its New Zealand portfolio. Since 2007 the payments have averaged $23.7m.

Fatal Shark attack at Murawai

Fatal Shark attack at Murawai today,  the body was recovered ,further it appears the local constable put twenty rounds into the culprit and dragged it ashore.
 Still waiting to hear if it was a White, as a swimmer at Piha last week came screaming out of the water saying a Great white had brushed up against him and remained swimming beside him for minutes.
Apparently Whitey's pay us a visit round this time of year.
You gotta ask though, with the number of attacks increasing in frequency over the last few years( globaly) is this not more evidence of a food source problem. 

Sharks have never been seen

Sharks have never been seen swimming around the Gummy family kitchen .......
 
..... and we accord them the same respect !
 
I think a little apple-puree would solve the food sauce problem ...... apparently surf-boarders , swimmers and snorklers taste a little alike pork .....

Food source problem or

Food source problem or population problem - more swimmers/surfers etc in the water.
Like to know how the constable knew he had the right perp.
Muriwai is my local surfing spot and intended heading out there today myself but didn't make it.  Family ringing this arvo making sure I wasn't shark food and fortunately for me I wasn't.

Exactly. We've double the

Exactly. We've double the population in my lifetime, globally, and I suspect we've much more than doubled the number of recreational swimmers.
 
All species of sharks have been culled off, though,
 
http://www.futurepundit.com/archives/005014.html.
 
One event a trend does not make.....

Shark fins soup!

Shark fins soup!

Chaiman that, is as vulgar as

Chaiman that, is as vulgar as Tiger Penis powder for your erectile dysfunction, along with your rhino horn...etc etc...
an enlightened culture..? I don't think so.

Think you need some of that

Think you need some of that powder stuff.. been a while?

You don't need that Herbal

You don't need that Herbal Ignite stuff to give you " penis power " .......
 
....... yer just gotta be number 1 in the world at playing around .......
 
And be willing to gofer any barmaid with big hooters , Tiger !

 Well Chairman, as I'm not

 Well Chairman, as I'm not the one tooling around here at what I guess is 10.25pm your time, I'd say prolly not ,given I have other things to tool around with come bedtime.Try eating a little less, does wonders for the bloodflow away from the gut to a coupla other organs not the least of which is the brain.

I have a mental picture of

I have a mental picture of J.Key (or Bill) lying on a gravel road with a ciggie hanging on this mouth, saying  "yippee ki yay mf.."

Almost right Chairman M.

Almost right Chairman M. except, they are the ones piloting the Steamroller as you lay on the road awaking from your slumber wondering, which direction the stampede is coming from and what kind of brokeback cowboy still yells "yippee ki yay mf.."

me, I am cashed up and

me, I am cashed up and gone..  It will you on the road..  Not me!
 

I think the main problem is

I think the main problem is no one is going to believe the numbers. 
Oh. except "mum and dad" investors, who will be queueing up for the "bargain" of the century :-)

Whilst the go ahead has been

Whilst the go ahead has been granted by the Courts Maori will still benefit from the float. Ultimately the Courts have identified it is happy that the Government has, and still is complying with its contractural arrangements (The Treaty) with Maori, and this mechanism still exists for Maori to seek redress. Regardless though as others have eluded to, we the general public will get hit in the pocket, firstly from ongoing higher electricity bills, and secondly compensating Maori for breches of the Treaty. 

In a free commercial

In a free commercial environment electricity prices would be plunging.  Price increases for electricity were rationalised as neccessary for a decade because of the need to provide increased demand.  Now it is clear the demand actually is flat we don't see the price reduction.  Funny that.
Electricity prices need to reduce to their proper level.  And not maintained artifically high by the current commercial manipulation and system of political patronage.    Given that the companies would not be paying dividends there would not be much 'asset' to sell.
So much more cash in the pockets of individual citizens and businesses would stimulate the economy quite well.  Bernard would like it.

Why should maori benefit from

Why should maori benefit from any sale.  Nothing in the Treaty about it.

Ignorance 

Ignorance 

Yeah, reportedly incompentent

Yeah, reportedly incompentent management* set to make even more money with Float!
*http://www.stuff.co.nz/business/opinion-analysis/8325286/Geothermal-clearout-deals-to-dead-rats
If anyone thinks their off shore escapades make them look competent maybe they will want to buy the shares.
Lets all buy some for Doug and the boys

  Yeah that article is

 
Yeah that article is interesting to say the least.... it is also interesting to know that Nevada, GGE executive Greg Raasch (the company that just shafted MRP- that they have just given the flick at great cost) used to work on staff at Mighty River between circa (2006-2010) and is a rolex wearing, arrogant loudmouth American that frankly had Doug and his latte sipping Auckland office cronies wrapped around his little finger and I understand directly left MRP to set up this dodgy business in the USA after already having secured unofficial promises of funding from our Doug H (aka well groomed silver tounge CEO)...  Greg Raasch was involved with the drilling programme at MRP etc that kicked off the Kawerau development and others and he was the one that bought in all the USA (yellowstone) geothermal technical experience for these MRP projects.  In my opinion, most of the technical know how related to geothermal in MRP comes from from American Consultants – it is certainly not New Zealand IP that we are going to export.   Greg was also the guy who set up or was heavily involved with the Parker and the Washington Drilling Rigs (and the Halliburton well cementer sub contractors).. that have done most of the drilling for the MRP geothermal work, these are American Rigs (with probable historic connections to our beloved Mr Raasch) and MRP was paying in the vicinity of 100k per day for these rigs, which is (according to rumours) about a 30k per day premium on top of a typical rate (and was by far the biggest expence of the entire geothermal programme).   So I would hate to go digging deeper into this mire and muddy procurement situation with the American RIgs to find out where Greg got his Rolexes from.   Also, good to keep in mind is that the geothermal developments that MRP has successfully completed were all constructed on the back of the exploratory drilling that was completed back in the 80's by the good old Ministry of Works - yeah THE SAME STATE RUN organisation that built the Dams on the Waikato River in the first place - these wells were certinaly not Doug H's idea.  I used to have some respect for Doug, but I guess in the end greed gets to everyone.