Treasury has, as expected, named First NZ Capital and Credit Suisse Australia, plus Macquarie Capital and Goldman Sachs as joint lead managers for the government's planned partial sale of electricity generator and retailer Mighty River Power.
Treasury also announced today the appointment of Bell Gully as legal advisor.
"The joint lead managers will be responsible for project management, consultancy, execution and advisory services for the initial public offer (IPO) of a minority shareholding in Mighty River Power," Treasury says.
The winners of the Treasury beauty parade were outed by the Australian Financial Review on Wednesday although at that time Treasury declined to confirm the appointments.
Last month the government confirmed Mighty River Power, which operates the retail brand Mercury Energy, as the first state owned enterprise for an IPO, probably in the third quarter of this year.
The National Party, re-elected to government on November 26 last year for a further three years, contested the election on the policy of selling up to 49% stakes in Mighty River Power, Genesis Energy, Meridian Energy and Solid Energy, as well as selling down the government's 73% stake in Air New Zealand to no less than 51%.
The government is touting the so-called mixed ownership model as a way of boosting "ma and pa" retail investors' investment opportunities away from property and the collapsed finance company sector. The IPOs are also seen as a way of kicking some life into a moribund domestic sharemarket whilst the government still retains control of the companies listed.
Treasury estimates the share sales will raise between NZ$5 billion and NZ$7 billion, which has been earmarked by the government for "social infrastructure" spending, such as school upgrades and irrigation, over at least the next five budgets. The money will be noted in Treasury's accounts as the "Future Investment Fund."
To date, the government has already promised to spend NZ$1.48 billion of the SOE share sale proceeds: NZ$1 billion for school upgrades, NZ$400 million for irrigation investment, and NZ$80 million to help fund a technology institute.
State-Owned Enterprises Minister Tony Ryall estimates the sales, perhaps over a three year period, will see the government pay about NZ$100 million in fees to investment banks.
Read Treasury's statement below:
The Treasury has appointed three investment banks as Joint Lead Managers (JLMs) for the sale of a minority shareholding in Mighty River Power.
The JLMs are capital market advisors and each company has well established offices in New Zealand. The companies are:
* First New Zealand Capital / Credit Suisse Australia
* Macquarie Capital New Zealand
* Goldman Sachs New Zealand
The JLMs will be responsible for project management, consultancy, execution and advisory services for the initial public offer (IPO) of a minority shareholding in Mighty River Power.
The Treasury has also appointed Bell Gully as its legal advisor.
No appointment or commitment has been made for subsequent transactions as part of the extension of the mixed ownership model. Firms not successful in the tender for work on the Mighty River Power transaction will be able to compete for roles in subsequent transactions.
The Treasury has appointed a panel of six firms that can potentially act as JLMs for future mixed ownership model transactions, and selected the three JLMs for the first transaction from that panel. The other three firms on the panel are:
* UBS New Zealand
* Forsyth Barr / Merrill Lynch
* Deutsche Bank / Craigs Investment Partners
The Treasury received highly competitive proposals from potential JLMs and legal firms, which demonstrated a strong desire by well-qualified firms to be appointed.
With these appointments complete, Treasury will immediately look to contract high quality broking firms and other distributors with channels to retail investors, so they are engaged early in the implementation and can perform a lead role in achieving widespread New Zealand ownership of shares in Mighty River Power.
Background information is available at Mixed Ownership Model for Crown Companies (COMU website).
Questions and Answers
What do Joint Lead Managers do?
The Joint Lead Managers (JLMs) will provide project management, consultancy, execution and advisory services for the initial public offer (IPO) of a minority share in Mighty River Power to assist in achieving the Government's objectives. The services include:
* planning and project management services
* the provision of advice
* the procurement process for the engagement of certain service providers
* appointing and managing the selling syndicate
* liaising with the relevant regulators
* managing and arranging marketing for the IPO.
The JLMs acknowledge that a detailed due diligence process will need to be conducted before the offer, in co-operation with the Crown, Mighty River Power, the JLMs and other respective advisers. The JLMs will participate in the due diligence, including being a member of the due diligence committee.
What fees will the JLMs be paid?
At this time, the details are commercially sensitive because the Treasury has yet to contract other capital market advisors. Fees will be disclosed in the offer documents before the IPO of a minority share in Mighty River Power.
Why are three JLMs needed?
Each of the appointed JLMs has different skills that the Treasury judged were necessary for the IPO of a minority share in Mighty River Power. The IPO of a minority share in Mighty River Power is a substantial transaction and is likely to require greater capacity than can be provided by any single firm. The Treasury has contracted for the best expertise in each specialist area of services needed for the IPO.
How will widespread New Zealand ownership be achieved?
Widespread New Zealand ownership is to be achieved through a well designed and communicated offer to potential investors. It is too early for Ministers to make decisions on the design of the first IPO, and these details will follow in the coming months. Achieving widespread New Zealand ownership will also depend on contracting high quality, respected companies to help market the offer. Contracting these firms is the Treasury's next priority in its work extending the mixed ownership model.
What progress has the Treasury made with the other tenders for implementing the mixed ownership programme?
In December 2011, Treasury issued four public tenders for services required to implement the mixed ownership model. They were:
* Joint Lead Managers (GETS tender 35054)
* Marketing, Design and Communication Services (GETS tender 35055)
* Technology and Logistical Services (GETS tender 35056)
* Marketing and Communications Director (GETS tender 35057)
Having completed appointment of JLMs, the other three tenders are progressing in line with the scheduled dates and further announcements will follow as tenders are completed.
What process was used to select Bell Gully as the legal advisor?
The Treasury conducted an open tender for legal services and contracted with a panel of four law firms as preferred suppliers. Bell Gully was appointed from the panel of preferred suppliers. The panel is:
* Bell Gully
* Chapman Tripp
* Russell McVeagh
* Simpson Grierson