Well-sourced Australian media reports suggest Mighty River Power share price will be NZ$2.60, raising NZ$1.78 bln for the state

Australian media are reporting that the final share offer price for Mighty River Power shares will be NZ$2.60.

If this is the price achieved it will raise about NZ$1.78 billion for the Government.

This figure would be something of a disappointment put against earlier market expectations that the offer might raise about NZ$1.9 billion.

However, the Government is sure to acclaim it as an outstanding success when the wave of uncertainty caused by the launch last month of the Labour/Greens policy for a new singly buyer of electricity is taken into account.

The Labour/Greens policy caused an uproar and forced MRP to issue a supplementary disclosure statement.

The offer of shares to the general public closed last Friday.

The indicative price range was NZ$2.35 to NZ$2.80, although there was nothing to stop the final price being set higher or lower than that.

Although 440,000 Kiwis pre-registered interest in acquiring shares, veteran investment banker Rob Cameron, one of the key proponents of partial privatisations, suggested last week a figure of 100,000 to 150,000 might have actually applied.

The Government's said it won't give the numbers on how many applied till after the shares are listed on the NZX at 12.30pm this Friday.

The crucial part of the offer - that to institutional investors - has been taking place over the past two days. This process, the so-called book-build, is the way in which the final price is set depending on demand from the professional investors. The Government though does have the absolute final say.

The Australian Financial Review's prestigious "Street Talk" column, which tends to get a lot of investment bank-related information leaked to it, said today there had been strong institutional demand for the MRP shares. It said a final pricing decision would be made after meetings this afternoon.

Mighty River Power’s joint lead managers are First NZ Capital/Credit Suisse, Goldman Sachs and Macquarie Securities.

Street Talk said that while investors often do not show their hands until late in bookbuilds, early indications were that the deal was likely to be covered up to at least $NZ2.60 a share, which would give investors around a 5% dividend yield. 

It said that the international share offer, would be worth around $NZ400 million to $NZ500 million, with the bulk of the MRP share to be taken by Kiwi "ma and pa" investors and New Zealand institutions.

Assuming the Government has been able to raise NZ$1.78 billion from this share offer, it will be able to claim success - even though perhaps as much as NZ$2 billion might have been raised without the uncertainty injected by the Labour/Green policy.

The Government has targeted raising NZ$5-NZ$7 billion from sale of up to 49% of MRP, Meridian Energy, Genesis Energy and Air New Zealand, which is already listed on NZX. The money is earmarked for spending on new state assets.

The next key development from the Government perspective will be how well the MRP shares do once they list on the NZX - and also in Australia - on Friday.

A strong early listing price will bode well for the next projected partial privatisation, widely expected to be the biggest state power company Meridian Energy and probably before the end of this year.

Based on the valuation of its board last year, a partial sale of Meridian could potentially raise about NZ$3.2 billion. However, Meridian faces the huge uncertainty over what will happen to its biggest customer the Tiwai Point aluminium smelter, including the possibility that will be closed. It has been suggested that because of the large size of Meridian it may be sold off in two tranches.