Mighty River Power shares have made their debut on the stock market today, rising as much as 8.8% above the issue price before settling back to be 4.8% ahead.
In early trades the share price hit NZ$2.72, giving an acceptable early premium for those buying shares in the recently completed float.
However, later the price eased back to NZ$2.62. Trading was extremely brisk, with over 56 million shares, representing more than 8% of the total sold to the public in the offer, changing hands.
While the NZ$2.50 price achieved by the Government for sale of 49% of MRP, raising about NZ$1.7 billion, was acceptable enough, it will be crucial for the Government that the shares go well on the market after listing.
The final number of Kiwi investors in MRP, at just 113,000 could be seen to be disappointing in the light of pre-registered interest by 440,000 people. But undoubtedly the launch of the Labour/Greens policy for a new single buyer of electricity did put some investors off.
The Government will be hoping that a strong post-listing share price for MRP will convince investors who held off, to sign up for shares in the next of the partial privatisations.
The Government has a stated intention of raising between NZ$5 billion and NZ$7 billion by selling down its holdings in MRP, Meridian Energy, Genesis Energy and the already NZX-listed Air New Zealand.
Achieving good results from the privatisation programme is crucial to the Government's immediate strategy because it is forecasting a Budget surplus by 2014-15.
Theoretically it will be able to achieve the surplus and maintain spending on new assets by funnelling the money from the sale of existing assets into those new investments. Without the returns from the assets sales it would be looking at having to either borrow the money for the new assets, or slash spending.
The Government's already indicated that it is getting ready for the next partial privatisation. This will most likely be the biggest of the state power companies Meridian. Based on last year's board valuation a sale of 49% of this company could raise as much as NZ$3.2 billion - though there have been suggestions the Government might look to sell it in two bites given its large size.
Market watchers are likely to regard movements in the MRP price today as largely irrelevant. With local institutions having only been able to get about 17% of the shares offered, it was always likely they would be in the market after listing to top up their holdings - thus pushing prices up.
Of more crucial interest will be how the MRP shares fare over the next month or two.
Continued strong prices should set the Government up well for the Meridian float. If there is weakness in the MRP price then this will likely put downward pressure on anticipated returns from the Meridian float.