By David Hargreaves
Mighty River Power warns that regulatory uncertainty stemming from the Labour/Greens power proposal could have a material adverse effect on the value and market price of its shares.
The comment is made in a supplementary disclosure to its share offer document issued by the company and the Government. However, the potential impact is not quantified in the two-page addition to the original prospectus for its current share offer. The Government and the company say they can't quantify it.
The issuing of the supplementary disclosure statement means that would-be investors in MRP who have already applied for shares can if they wish withdraw their applications and get their money back.
The supplementary document is being issued after the release late last week of the Labour/Greens plan for a a new Pharmac-style agency called NZ Power that would act as a single buyer of wholesale electricity. Labour and the Greens have estimated household power prices would drop by 10% to 14% after the reforms, which they said would create 5,000 jobs and boost Gross Domestic Product by NZ$450 million.
But they also estimated the Crown would lose between NZ$260 million and NZ$365 million in dividends and taxes from power generation companies, while power generators -- both private and public -- would lose revenue of between NZ$500 million to NZ$700 million.
After much speculation during Monday that the Government would be forced to give potential MRP investors more information, Finance Minister Bill English and SOE Minister Tony Ryall finally confirmed that a supplementary document - giving information on the ramifications of the Labour/Green proposal had been filed.
Offer website suspended
As a consequence of the rules governing supplementary disclosure, the share offer website had been temporarily suspended until Tuesday morning when it would re-open with the new disclosure added, but with all other details of the offer remaining the same, including the closing time of 5pm on Friday 3 May.
Under the rules, also, any New Zealanders who had already applied for shares could withdraw their applications if they chose. Withdrawals would be accepted for five working days.
In the supplementary statement MRP says the announcements increase regulatory uncertainty for Mighty River Power by raising the possibility that a future government may enact legislation that materially changes the structure of the New Zealand electricity industry.
"Moreover, political or other interested parties may make further announcements or take other action that could further affect the degree of regulatory uncertainty faced by Mighty River Power. This regulatory uncertainty is likely to have a material adverse effect on the value and market price of the shares. This effect cannot be reliably quantified by the Company or the Crown."
The supplementary statement says, however, that the Labour/Green plan is not expected to have an impact on the profit forecasts - for this year and next - in the original prospectus.
"Taking into account the nature of the proposals of the Green Party of Aotearoa New Zealand or the New Zealand Labour Party and the time it would take a government to implement them, the Company does not consider that the proposals affect the prospective financial information, including the assumptions, for FY2013F and FY2014F as set out in Section 6.3 of the Offer Document," the statement said.
The statement also says the company and the Government can't quantify in a manner they believe is reliable the potential effects of the announced proposals on the company's future business and financial results as well as the value of the shares.
"Factors not known include the outcome of future parliamentary elections, the composition and policies of future governments (which may differ from announced or future political party proposals), the likelihood of implementation and the timing and implications for the industry generally or for the company of any implementation of such proposals."
English said that the existing MRP offer document already outlined the principal risks associated with an investment in MRP shares.
“That covered the risk that changes in the regulatory environment, including for the wholesale or retail electricity market, may affect the company."
However, the Government had received advice that the Labour/Greens plan, if they were elected, could be "material" to decisions to invest in MRP.
“Our advice is also that if Labour/ Greens had announced this policy before the offer began, their announcement would have been referred to in the offer document submitted to the FMA.
“The supplementary disclosure sets out the additional information so that prospective investors can factor that into their decision making,” English said.
Ryall said the Government had always said that New Zealanders should consider the share offer opportunity carefully before making their own decisions and that advice had not changed.
“The MRP share offer is firmly on track. As we said at the time the offer was launched, MRP is a proud New Zealand company and the Government is confident in its future as a listed company,” he said.