Mighty River Power share price will be NZ$2.50, raising NZ$1.72 bln for the state

Mighty River Power share price will be NZ$2.50, raising NZ$1.72 bln for the state

By David Hargreaves

The final offer price for Mighty River Power shares will be NZ$2.50.

This will raise about NZ$1.72 billion for the Government.

This figure could be seen as a disappointment in the light of earlier market expectations that the offer might raise about NZ$1.9 billion.

Also potentially disappointing was that just 113,857 kiwis will become shareholders - when as many as 440,000 pre-registered interest.

The sale of Contact Energy in 1999 got 225,000 shareholders, despite only about half as many shares being offered as in Mighty River.

However, the Government was, as expected, quick to acclaim it as an outstanding success taken against the backdrop of the wave of uncertainty caused by the launch last month of the Labour/Greens policy for a new single buyer of electricity is taken into account.

Finance Minister Bill English said the NZ$1.72 billion to be received was a "very good return" for taxpayers. "This is an outstanding result and fulfills our commitment to ensuring at least 85-90 per cent New Zealand ownership of the company."

The Labour/Greens policy caused an uproar and forced MRP to issue a supplementary disclosure statement. Investors who had already applied could ask for their money back and the Government has now revealed that 1783 applicants sought to do this and got collectively NZ$25 million back.

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.

The shares will be  listed on the NZX at 12.30pm this Friday.

Of the shares issued, 86.5% will be New Zealand-owned: 26.9% by New Zealand retail investors, 8.6% by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding. That leaves 13.5% for overseas institutions. 

In terms of the 686 million shares that were available - bearing in mind that the Government has 51% locked up - this actually means that around 27% of them have gone offshore and the rest to New Zealanders.

Local institutions, who have complained about missing out in the past in favour of overseas institutions - notably with the Fonterra Shareholders' Fund Units - might have something to say about getting just 8.6% of the MRP capital when 13.5% has gone to overseas counterparts.

English said the proceeds from the float would go into the Future Investment Fund, allowing the Government to control debt while continuing to invest in public assets.

More details would be announced in next week’s Budget.

"The Government has achieved all of its objectives for the Mighty River Power share offer, so the company will list on Friday.

"Given the strong response to the share offer, and the price we have set, Mighty River Power will have a market capitalisation of $3.5 billion. And with over 110,000 New Zealand shareholders, it will have the largest share register – by some margin – of any New Zealand company on the exchange."

SOE Minister Tony Ryall said that due to the strong level of demand, some scaling had been necessary.

"We have decided to apply progressive scaling, which means that larger applications are scaled more than smaller ones,"  Ryall said.

"That means that more than 80% of New Zealanders will get what they applied for.

"The demand from institutional investors was strong, and bids from both New Zealand and offshore institutions were scaled considerably. Institutions will be advised of their allocations shortly, after which a settlement process commences.

"We are delighted to get to this stage, and look forward to a healthy aftermarket and a positive experience for New Zealand investors, particularly those who are investing in shares for the first time." Mr Ryall said.

The Government has said it wants to raise between NZ$5 billion and NZ$7 billion through the sale of  49% of Mighty River Power, Meridian Energy and Genesis Energy and through a sell-down to 51% of its interest in the already partly-public Air New Zealand.

Meridian is seen as likely to be the next company floated and it is much the biggest of the assets to be sold. Based on last year's board valuation a sale of half of it could raise as much as NZ$3.2 billion.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

22 Comments

Ouch, no wonder Key has been tetchy about the sale, comparing the number of people that bought Contact to this. That said the were some early comments that it was going to be priced for a successful launch on the share market (which I took to be low enough to ensure a lift in early trading) so I'm not surprised it is on the lower end price wise.

This will raise about NZ$1.72 billion for the Government.
This figure could be seen as a disappointment in the light of earlier market expectations that the offer might raise about NZ$1.9 billion.
 
Is this the amount raised net of fees that makes a contribution to taxpayer's coffers?

It didn't raise a cent. It's merely a wealth-transfer.
 
and 113,000? There's more selfish folk than that, surely? Where did they go? Anyone know how many mums and dads got in at the top of telecom, how many with it now?
 
ouch is right.
 
 
 

Failed finance companies inflicted injuries - my father has the original float Air NZ shares certificates in the "bottom drawer" - significant losses are yet to be recovered.

Absolutely true, Kilmog Man, but here's how I see it.
 
By choosing to participate, I have (willing buyer) contributed a capital sum which, if they have any clues, the Gubmint will then spend on projects or expense streams which directly benefit all of NZ:  education initiatives, health capex and the like.  With the usual caveats (I've been around Gubmint stuff most of my life, I know the dangers...)
 
It also starves the Big Gubmint beast:  the divvy stream goes to Me, and I can waste it in projects and fripperies of My choosing.  Left to the Gubmint, that same divvy stream would be frittered away firstly by sheer administration (usually runs 15-25%), things I didn't vote for (Families Commission, anyone?) or outright wastage (<name your Gubmint Idiocy du jour here>).   But they won't have That piece of the revenue stream no' mo'.
 
Win-win, I'd say.....
 
And now there's Meridian to look forward to:  a real investment, not just a token....

In ur win-win scenario u forget to include tax on ur divs and tax to cover revenue loss, both of which r inevitable. But yes, u r now better off than those without shares. Too many sure-bet property mortgages to pay off around I guess :-)

Happy to pay tax, small indigenous bird, because Someone's gotta pay mum-in-law's Pension....

As a paid up shareholder are you encouraged in any way to consume less electricity?  What happens to your dividend income when everybody does decide to consume less?

 "This is an outstanding result and fulfils our commitment to ensuring at least 85-90 per cent New Zealand ownership of the company."
Huh..? 
is that like 100k invalid signatures for fraudulent reasons..? 
The commitment as I recall it was to Privatise and give opportunity to take part, and bugger you if you don't....it will be sold. 

3.3m Kiwis are over 18.  
114,000 MRP investors.  
3.45% of the adult population have bought MRP shares.
14% of the adult population registered an interest.
Or, to put it another way:
96.55% didn't buy the shares.
86% didn't register an interest.
 
 

Anyone worked out what they think the LG "Initiative" has cost the taxpayer with MRP ?

Given the investor-state arbitration provisions in the Trans-Pacific Partnership leaks, getting their policy out before a sale was critical in the long run. Under those conditions they have saved the country a lot of money.
Now, I get that you don't like the Labour/ Greens, but I want all parties to tell us as early as possible and clearly as possible what their policies are. I really want parties to be up front, rather than waiting in secret to spring things on later. If any party have any plans for what they want to do after the next election I want to live in a country when people know about it early rather than making decisions on the basis of bad information.

Grant A. Yes.
 
It's 'cost' them nothing. This was a tangible asset, an energy-source. No more, no less. It still is.
 
No money is underwritten without the use of the stuff, so valuing it in $ terms is a complete waste of time. (for the dummies - if you have several trillion dollars but no energy, there will be nothing to buy, thus your trillions are worth exactly zero).
 
The joke is the Finance Minister, saying that some folk are looking to invest for their old age. Some of that investment will go into paying for electricity to keep warm, which will now take more of their 'savings' (stored energy tokens) than it would have.
 
If of course, the growth-based fiscal-storage system hasn;t imploded, taking their 'savings' with it. Given the increasing lack of underwrite, that's the most likely possibility.

What distress is going to be alleviated for main street by 1.7 billion when we pay 40 odd billion a year in interest alone on the entirely interest bearing private loan based money supply system that all roads lead back to the institutions with the international banking licenses which are owned by the family trusts of the worlds oldest intergenerational wealth;
John Key current New Zealand Prime Minister and former Investment Banker and head of Merrill Lynch European derivatives division said 6 May 2013;
http://www.interest.co.nz/bonds/64319/nz-pm-key-defends-government-drive-return-surplus-and-start-reducing-debt-despite-doubts
""It hasn't been like we haven't been prepared to use the balance sheet. But we're a small country. We're an open, trading nation. We have considerable private sector debt and we're relying on foreign savings to finance our future. On that basis, if we are excessive with our spending and therefore build up debt, then eventually some generation of New Zealanders are going to have to pay that back," Key said.
"Foreign Savings" Mr John Key says, he needs to take a look at this;
http://www.neweconomics.org/blog/entry/the-big-questions-on-money-and-banking-we-should-all-be-asking
We have just sold another of our necessity of life public assets under false pretenses!

Here's what Russel Norman has to say:
The Mighty River sale has been shown to be a con on New Zealanders with less
than 3 percent of Kiwis buying in and most of the shares going to corporates,
Green Party Co-leader Dr Russel Norman said today.

“The charade is over: ‘mum and dad’ New Zealanders haven’t bought the
shares; the big finance institutions and foreign corporates have,” said Dr
Norman.

“John Key’s talk of ‘mum and dad’ investors was a con – less than 3
percent of Kiwis have bought shares in Mighty River Power.

“The fact that Kiwi retail investors are having their allotments scaled
back so National can sell shares to foreign corporates shows what a farce
this has been.

“The multi-million dollar ad campaign has failed to con Kiwis into buying
Mighty River, they want lower power prices instead.

“The supposed 440,000 pre-registered investors turned out to be a figment
of John Key’s imagination. The number of retail investors is only half the
number who bought into Contact and less than half of what Treasury forecast.

“Over two and a half times as many Kiwis have signed the petition calling
for a referendum on asset sales as bought Mighty River shares – that tells
you what Kiwis think of John Key’s asset sales.

“John Key has wasted as much as $100m on the sale of Mighty River. That’s
nearly $1,000 per retail investor. It’s been a disaster. He should cancel
the rest of the asset sales and focus on creating jobs for Kiwis, not payouts
for financiers,” said Dr Norman.

John Key has wasted as much as $100m on the sale of Mighty River. That’s
nearly $1,000 per retail investor. It’s been a disaster.

 
That's a lot of money. Are those who remain solvent and didn't share in the fee bonanza meant to pick up the "lost money" tab for society's other, but less fortunate dependents?

Of the shares issued, 86.5% will be New Zealand-owned: 26.9% by New Zealand retail investors, 8.6% by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding. That leaves 13.5% for overseas institutions. 
My maths then says that the 26.9% held by retail investors (or 54.9% of the float), will mean the retail investors will have bought $928 million worth, or $8,157 on average each.
So spending $1,000 to get each of them to buy the shares does not sound like an efficient process at all.

The opposition speaks out against the governments policy, shock!  Horror!
                       
"The supposed 440,000 pre-registered investors turned out to be a figment
of John Key’s imagination."  There were that many pre-registered investors before Norman proposed nationalizing the industry, the responsibility for the lower share price and loss to the government/NZ can be laid squarely at Normans feet.  And all because he wanted to win some votes. 
 
Whether you approve of the sale or not to sabotage the float for his personal gains is appalling
 

lol, if you actually believe 440,000 who pre-registered were actually going to follow through, you must be naive at best or possibly in denial? Obviously I am one of many who registered out of interest and at the possibility of a steal, and also to see how the following SOE's stack up when they are offered. When the majority of the country (vast majority now it would seem) are against transferring our paid for SOE to Aus, and a few select investors, who would you say is gaining the most here? I would bet the biggest gain is going to the politician willing to sacrifice votes to put this through...

To all you nay sayers out there - get over it, it done. And guess what, you won't notice a blind bit of difference.

To all you nay sayers out there - get over it, it done. And guess what, you won't notice a blind bit of difference.

To all you nay sayers out there - get over it, it done. And guess what, you won't notice a blind bit of difference.