New Zealand’s sell-down of state-owned energy companies would gross about $6.8 billion, provided investors agree with the latest valuations by investment banks and research houses.
The valuations, published on the Crown Ownership Monitoring Unit website, are about $2 billion higher than the stock exchange operator, NZX, had assumed in its review of its index methodologies, which was announced last month.
Forsyth Barr valued Solid Energy at $1.69 billion, Macquarie valued Genesis Energy at $1.76 billion and Meridian Energy at $6.53 billion, while First NZ Capital valued Mighty River Power at $3.63 billion for a total of $13.61 billion. The government plans to sell down its holdings to around 50 percent.
It also aims to reduce its stake in Air New Zealand to about 50 percent from 75 percent, which would net the government some $220 million based on current pricing. That would leave the newly listed companies accounting for almost 6.4 percent of the NZX 50 Index’s market capitalisation.
The NZX is currently seeking feedback on plans to change the weightings of companies in the benchmark index to ensure it doesn’t become ‘less investable’ because of the amount of stock retained by the government and not available for trading. Its existing methodology was introduced in 2003, with further adjustment aimed at ensuring no single company dominated the index.
While the full details of the adjustments are complex, it boils down to approximately $3.5 billion, or 9.1 percent, of the NZX 50’s market value of $38.3 billion being due to the modifications, according to an NZX report last month.
The 2011 valuations are largely unchanged from a year ago, though Solid Energy’s independent valuation is almost half what the coal miner’s board thinks it is worth in the SOE’s statement of corporate intent.
Including the Air New Zealand sale, the government would reap $7.03 billion from its asset sale programme, the top of the $5 billion-to-$7 billion range it flagged last year.
Such a figure would net investment banks about $127 million in fees if they get the same percentage as when Contact Energy was privatised in 1999, which is broadly in line with the $100 million indicated by State Owned Enterprises Minister Tony Ryall last month.
Mighty River is poised to be first off the rank with a sale expected in the third quarter of this year, and Genesis will likely be the second company partially privatised.
The sale programme will get legislative sign-off as part of the supply and confidence deal with United Future, which will remove the companies from the State Owned Enterprises Act and set a cap on the Crown’s level of ownership and how much a single entity can buy.
Corporate iwi investors are likely to join institutional investors such as the New Zealand Superannuation Fund, Accident Compensation Corp’s investment portfolio and KiwiSaver funds when the allocations are determined.
The government will be the only investor allowed to hold a shareholding bigger than 10 percent.