By Bernard Hickey
Meridian Energy instalment receipts closed 8.5% above their initial public offering price on their first day as almost 18% of the shares sold by the Government were flicked on by smaller investors and fund managers for a quick NZ$19 million profit.
The instalment receipts debuted on the NZX at NZ$1.08, up 8% from the NZ$1 price paid by investors in the initial public offering (IPO) of 49% of the country's biggest electricity generator by the Government.
About 62,000 investors in the IPO are paying a total of NZ$1.50 per share, including NZ$1 for the first instalment and 50 cents to be paid by May 2015.
More than two million instalment receipts were traded in the first 10 minutes of trade. Their 'ticker' is MELCA and more information can be found here.
By the close of trade more than 223 million instalment receipts or over 18% of the total instalments sold by the Government had been traded. The price ranged from NZ$1.05 to NZ$1.09 through the day and they closed near their highs.
This was a stronger first day 'stag' than for Mighty River Power, which closed up 4.8% on its first day.
Prime Minister John Key later told a news conference the Government would indicate any further plans for more asset sales in the New Year and well before the November 2014 election, although he noted "there's very few other assets to sell."
He said the state-owned electricity network operator, Transpower, would "never" be sold in the programme. Key said the Government would get close to the bottom of its planned range of NZ$5 billion to NZ$7 billion proceeds from the Mixed Ownership Model (MOM) programme of selling up to 49% of Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy (no longer up for sale), and a further 22% of Air New Zealand shares.
Key also said the government planned to press ahead with the sale of Genesis Energy next year, "subject to market conditions."
He also appeared to rule out any potential trade sale or break up of Genesis rather than another stock market listing, saying: "We don't think that's a credible option."
Earlier, Finance Minister Bill English told a gathering at the NZX as Meridian instalment receipts started trading that the float would add more depth and vitality to the capital markets.
"It's freeing up cash that the govenrment can invest in priority asssets such as schools and hospitals without having to borrow this money from overseas lenders, but instead sourcing it from New Zealand savers," he said, adding it would also help New Zealanders diversify away from their current focus on property.
English said the Government was very pleased with the float, which had delivered "on all fronts," being being largest retail investment in an IPO in New Zealand's history.
Kiwibank stake sale?
Meanwhile, Key also appeared to rule out the sale of a stake in Kiwibank after the election.
"I don't think that's likely. It's more likely that we'd use some of the proceeds from the sales at the moment to invest in Kiwibank," he said.
Earlier, the Green Party, which opposed the sale, pointed to advice from Treasury to the Government in May 2011 that the asset sale programme should be staged over three to five years to get the best value for shareholders. The government's current timetable is for Mighty River, Meridian and Genesis to be sold over a period of about a year.
Treasury told the Government any asset sales should be staged because the stock market could not absorb more than NZ$2 billion a year “which suggests keeping offerings in any 12-month period below NZ$3 billion.”
“Asset sales were always a bad idea, but National’s reckless rush has turned them into a complete failure,” said Green co-leader Russel Norman.
“By flooding the market with electricity companies, against the advice of Treasury, National has reduced the revenue the Crown received from the sales. The lacklustre prices and the pathetically low levels of participation by ordinary Kiwis in the floats shows that National has completely mismanaged the asset sales process," Norman said.
“Pushing ahead with the sale of Genesis and Air New Zealand in the coming months hard on the heels of the failed Mighty River and Meridian sales would be completely irresponsible," he said.
Key said the government rejected the advice from Treasury about a more drawn out sale process. "We didn't believe it was necessary and I don't think it would have made any difference," he said, adding the value of Meridian had fallen because of a revaluation of its long term supply deal with Rio Tinto, not because of the timing of the float.
"I don't think it would have made any difference," he said.
(Updated with more market action, Key comments, Green comments, Market close)