The Government says there has been strong early demand for its Meridian share offer, which opens today, despite some industry fears that political risk around the energy company may deter small investors.

Local sharebrokers were invited to submit bids for shares last week based on interest from their clients, as part of a new process being run for the Meridian share offer.

The process closed on Friday with close to half of the offer already pre-committed to New Zealand retail investors, Finance Minister Bill English said yesterday. "New Zealand sharebrokers have already committed to buy 565 million shares at a first instalment price of $1 ... This represents 45 per cent of the offer in total and an investment of up to $900 million when the second instalment is included," he said.

The Meridian share offer has an instalment receipts structure which means investors pay for shares in two instalments. The first instalment is fixed at $1 a share and payment is made at the same time as an application for shares. The second instalment is due in 18 months and is capped at 60 cents a share for New Zealand retail applicants who continue to hold their investment for 18 months.


Andrew Barclay chief executive of Goldman Sachs New Zealand - one of the joint lead managers for the float - said the numbers were a good start and indicated strong early demand. "At $900 million in committed demand that is the largest broker firm allocation that I can recall," Barclay said.

English said feedback from brokers was supportive of the offer.

But some brokers and financial advisers have told the Business Herald that interest - particularly from smaller retail clients - is lower than for Mighty River Power, indicating the Government could face a tougher task selling the shares to the public.

Grant Williamson, a director at Christchurch broker Hamilton Hindin Greene, said he was seeing very strong demand from experienced investors but not so much demand from new mum and dad investors.

"I think maybe they have been put off by Mighty River."

Williamson said he expected overall volumes to be similar to Mighty River Power as first time mum and dad investors tended to have smaller amounts of money to invest. "We are pretty happy with what we have seen." He said the reaction from experienced investors was that the yield was pretty attractive. He hoped that his firm's allocation would not be scaled back.

Andrew Pearson, a partner at Somerset Smith Partners which has offices in Thames, Napier and Havelock North, said Mighty River had dampened some of the interest in Meridian.

Mighty River shares were issued at $2.50 in May but have fallen as low as $2.17 since its sharemarket listing. They last traded at $2.30.

Simon Hassan, an Auckland financial adviser who is part of a nine-firm consultancy, said his feeling was that there was less interest this time around. "No clients have called saying we want to buy it whereas we had quite a few calls for Mighty River."

Hassan said power companies were faced with the political risk from the Labour/Greens regulatory shakeup plans as well as the threat of the Tiwai Point aluminium smelter closing.