The Treasury, through its advisers, has been testing local and international investor sentiment to assess the level of interest in the Government's plan for partial privatisation of state-owned assets, market sources say.
Deutsche Bank and Craigs Investment Partners have been appointed to prepare the state-owned enterprises (SOEs) for partial sale but behind the scenes a handful of other investment banks have been quizzing big institutional investors, through questionnaires, about their attitudes toward the planned sell-downs.
Assuming it wins the upcoming November 26 election, the Government intends to sell as much as 49 per cent each of power generators Meridian, Genesis, Mighty River Power and coal company Solid Energy. It also intends to reduce its 75 per cent holding in Air New Zealand.
"Global and local investors have been asked a series of questions about their interest and level of understanding of potential partial sell-downs," one market source said. "It's about understanding how people are perceiving the respective businesses - understanding what people might like to see in terms of the structure of the potential sell-downs, and generally just gauging where people's interests are.
"It has been a little while since we have had a large investment opportunity in New Zealand to consider, so whether it is about New Zealand partial listings or potential capital raisings, there is generally a positive feeling about New Zealand as an investment location at the moment," he said.
The appetite for the generators was quite high, he said, adding that Meridian - the largest - appeared to be the one that is best-positioned.
One of the questions was whether investors would prefer a sale of the 49 per cent stakes in tranches or in one block.
Potential investors have been questioned about the quality of the boards that are currently in place and whether those people are right for the role.
Fund managers agreed that the addition of the three power generators would make the share market, which is already heavily influenced by Telecom and Contact Energy, top-heavy with utilities.
According to one market estimate, a 49 per cent stake in Meridian is expected to be worth around $2.9 billion.
The half stake in Mighty River Power has been put at $1.8 billion, while stakes in Genesis and Solid Energy have been valued at $800 million each.
At today's prices, a sell-down of the Air New Zealand holding to 51 per cent would net the Government around $300 million. First NZ Capital is understood to be doing a scoping study on Meridian, Macquarie for Mighty River Power, UBS for Solid Energy and Goldman Sachs for Genesis.
The firms' fact-finding missions include how big the potential investors are, how active they are, what sort of demand they are likely to have for the SOEs, and in which order should they be floated.
"There is a huge amount of jockeying going on among the investment banks because the worry is that the Government might only get two of these assets away in the next term," said one financial market source. He said it was possible the first sale would involve one generator, followed by Solid Energy.
"Because the investment banks only really get their fees once these things become listed, everyone wants their particular asset to be the first one to list in case they miss out on the whole thing," he said.