Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and NZME. news service.

Mighty River Power shares start trading

Shares in Mighty River Power have started trading this afternoon on the NZX at $2.73 each - a 23c or 9.2 per cent premium on the listing price.

Market expectations were for the stock to list at a premium because of the extent of unsatisfied demand from institutions.

Finance Minister Bill English said the shares rose as expected on their NZX debut while confirming that the next power company to be put on the block will be named in the budget next week.

"It's trading to the range that we would have expected," English said at the NZX headquarters in Wellington, where he watched the shares trade for the first time. He will make an announcement on the next float in the budget on May 16, he said.

The shares traded recently at $2.70, giving the electricity generator and retailer a market value of about $3.8 billion. That means about $300 million has been added from the IPO. Some 24 million shares have changed hands so far today.

The debut catapults the company into fifth place among the top 10 domestic stocks on the market by value. The government raised $1.7 billion selling 686 million shares, or 49 per cent of the company, at $2.50 to local and overseas investors.

The 9.2 per cent initial gain compares with a 22 per cent jump on debut for the Fonterra Shareholders' Fund on Nov. 30. The Fonterra units ended their first day up26 per cent.

Mighty River Power is the first of four SOEs plus Air New Zealand that are slated for selldown under a government policy to raise as much as $7 billion to repay debt and seed its Future Investment Fund, which is to help fund investment in school, hospitals and transport infrastructure such as KiwiRail.

Either Genesis Power or Meridian Energy is most likely to be next out of the blocks. Air New Zealand could follow, though coal miner Solid Energy is being restructured to return it to profitability before it will be considered.

The government is aiming to complete the second sale this year. "We're keen to get on with the next one," English said.

New Zealand institutions were allocated 8.6 per cent of the shares on offer and overseas funds got 13.5 per cent, with both scaled back considerably. A total of 113.857 individual New Zealand investors bought shares, accounting for 26.9 per cent. The government retains 51 per cent.

Based on forecast dividends, the offer price implies a gross dividend yield of 4.6 per cent in the 2013 financial year, rising to 5.2 per cent the following year.

Controversy surrounding plans by the Labour Party and the Greens' plan to introduce a "single buyer" power purchasing model - should they form a government - meant final pricing expectations had to be bumped down to the lower end of the indicative range.

Under its so called mixed ownership model (MOM), the Government has sold its 49 per cent stake in Mighty River but has retained a controlling interest.

Total New Zealand ownership stood at 86.5 per cent per cent after the allocation process, with overseas institutions ending up with 13.5 per cent.

Mighty River's share loyalty scheme means domestic investors will receive one loyalty bonus share for every 25 shares they hold for two years from the offer, up to a maximum of 200 bonus shares.

with BusinessDesk

- APNZ

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on production bpcf02 at 23 Dec 2014 18:39:57 Processing Time: 628ms