RICHARD MEADOWS AND HAMISH RUTHERFORD
While the Opposition's power policy has rocked the float of Mighty River Power, Prime Minister John Key has confirmed he plans to forge ahead with the sale of other state-owned assets by the first quarter of 2014.
The Wall Street Journal reported overnight that Treasury had called for investment banks to tender for roles in the selldown of Meridian and Genesis Energy.
This morning a spokeswoman for Treasury confirmed the agency was "undertaking preparatory steps for the next IPO/s, including selecting JLMs [joint lead managers]".
She added: "Ministers have indicated publicly that they would like to see at least one more IPO [initial public offering] in 2013, subject to market conditions and the preparedness of the companies.
"No decisions have been made about which company will be next, or the timing of any offer."
Yesterday, Key told BusinessDay he remained committed to the mixed-ownership programme.
"We believe it's right," he said.
"Unless there's some particular reason why we shouldn't carry on, we'll be forging ahead."
He also confirmed that the sales were still on track to be completed by the original deadline - the first quarter of 2014.
"We certainly haven't seen any advice to the contrary of that, so yes, that's what we believe at the moment," he said.
Last month. the Labour and Green Parties announced a proposal to create a single buyer for electricity, which would determine a fair rate of return for power companies.
The unexpected policy created yet more headwinds for the Government's mixed ownership programme, which had already faced staunch public opposition and legal challenges from the Maori Council.
Addressing a BNZ-hosted event in Auckland yesterday, Key said he was constrained in what he could say about Mighty River Power as the shares were still on offer.
However, he said "hypothetically" the risks associated with the Labour-Green proposal could put a dent in the sale price.
"If the markets were to read in that there was another risk out there because of what could happen through nationalisation of those companies, in theory you would expect the logical market reaction to be a reduction in price," he said.
Key said experienced investors would understand that the reduction would take place before the float, potentially leading to a cheaper purchase price.
However, many of the mum-and-dad types "who might have gone in with $2500" would be likely to be put off.
"Unfortunately, the kind of people who are probably, frankly, Labour and Green supporters, and will be less sophisticated as investors will get frightened off," he said.
The Mighty River Power offer closes tomorrow, with shares expected to begin trading on the NZX late next week.
The Government has refused to say which state-owned assets would be the next to be put on the block, although attention has focused on Meridian.
INVESTORS EXPOSED
The Green Party says moves to sell stakes in state owned electricity companies this year will leave retail investors exposed "when" power prices fall.
Green Party co-leader Metiria Turei said the calling for tenders for lead managers for both Meridian and Genesis "strongly indicates that National intends to sell both of these companies, in addition to Mighty River Power, before the end of the year".
Turei added that Key wanted to get the asset sales wrapped up before the Opposition's possible referendum on asset sales, and as far ahead of the election as possible.
"He's putting his political interests ahead of democracy, good economic management, and his duty to potential investors."
Selling all three companies would depress the price the Government would get for the companies, she added.
The Government wants to raise $5 billion to $7b from the sale of stakes in a series of state owned enterprises. Since it named the financial target, debt-troubled mining company Solid Energy has been withdrawn from the sales process.
The offer period for the sale of up to 49 per cent of Mighty River Power closes tomorrow, with shares expected to begin trading on the NZX late next week.
While it was thought the sale may raise more than $1.9b for the Government, the price is expected to be lower than the upper range of $2.80 a share because of the uncertainty caused by proposals by Labour and the Green Party to regulate the electricity industry if they win the next election.
Late last year, Finance Minister Bill English said it was possible that the Government could sell stakes in three companies.
It has refused to say which company would be the next to be put up for sale, although attention has focused on Meridian.
Most of Meridian's value is tied up in huge hydro electricity resources in the lower South Island, while it is also building a wind farm just north of the huge West Wind near Wellington.
Genesis is New Zealand's largest retailer of electricity by customer numbers. It also owns the gas and coal fired Huntly Power Station, as well as hydro stations.
- ? Fairfax NZ News
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Source: http://www.stuff.co.nz/business/industries/8622877/Govt-preps-for-next-power-company-IPOs
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