The Government, fresh from the sale of shares in Mighty River Power and Meridian Energy, faces a harder sell when it comes to divesting a 49 per cent stake in the third and final power generator on its partial privatisation list - Genesis Energy, say analysts.
So far, the Government's mixed ownership model has proven to be something of a mixed bag. Mighty River Power - despite a strong financial performance - still trades at a big discount to its $2.50 issue price.
Meridian Energy, the jewel in the crown among the state's generating assets, had a much lower shareholder uptake than Mighty River but listed strongly on NZX, the $1 receipts peaking at $1.11. They have since drifted off, closing yesterday at $1.04.
Analysts said the Labour-Green's policy of state control of the intricate wholesale electricity market was a negative hanging over all the power generators.
"I'm not sure why, but it [Genesis] is seen as being the runt of the litter," said one analyst. "People don't look upon it favourably, but maybe that creates opportunities to get the business ship-shape and move it forward," the analyst, who requested anonymity, said.
Genesis, under chairwoman Dame Jenny Shipley, is New Zealand's biggest energy retailer. Among its generating assets, it owns the coal and gas-fired Huntly Power Station - New Zealand's largest thermal power station, which can provide up to 20 per cent of the country's electricity. In hydro, Genesis has the Tongariro Power Scheme on the central plateau and Tekapo A and B, in the South Island.
The company's partial privatisation is expected to follow a similar time-line to Mighty River's, which occurred shortly after its first-half result.
If that proved the case, Genesis would come to the market some time in April or May.
Investors, through the part-payment instalment receipt structure, were offered a hefty incentive to buy into Meridian with the offer of a full dividend payment before having to pay the final instalment, which is due in May 2015.
A similar approach is not seen as likely for Genesis, because of its size. "Obviously, Genesis is not as big a swallow for the market as Meridian was, so that might count against that kind of [instalment receipt] action," said Craig Stent, research analyst at Harbour Asset Management.
Exactly how Genesis is divested is yet to be determined, as it will largely depend on the market conditions prevailing at the time. But the Treasury will be aware that across the Tasman, the IPO market - which has been largely dormant since the global financial crisis - is emerging from a prolonged post-GFC slumber, which means that there will soon be increased competition in Australasia for the investment dollar.
Then there is the issue of what Genesis does with its 31 per cent stake in the Kupe oil and gas field. All up, Genesis is estimated to be worth about $1.8 billion to $2 billion, with Kupe accounting for $400 million to $500 million of that. Removing Kupe from the equation would bring the company's worth down to about $1.5 billion.
Assuming about 30 per cent of the offer went offshore, analysts said it would not leave much for local institutions to take up.
But the Government is motivated more by philosophy than price, said David Stanley, director of equities research at Woodward Partners.
"The Government's philosophical appraisal is that the mixed ownership model is a better model," Stanley said. "Assets under the mixed ownership model, in the Government's view, are likely to perform better," he said.
"They are likely to be better allocators of capital, have higher levels of efficiency. In that sense, it is not a question of what the price is or isn't, it's because the market is the market."
Outside the power companies, the Government wants to reduce its 73 per cent stake in Air New Zealand, which arose from its $855 million renationalisation and rescue of the national flag carrier in 2001.
The selldown of Air NZ is expected to take the form of a block sale - along similar lines to the successful recent sales of big chunks of stock in Steel & Tube, Sky Network TV and Summerset.
The Air NZ sale, when it happens, is expected to be swift.APNZ