The retail share offer for state-owned Meridian Energy has attracted heavy interest from investors but the poor performance of Mighty River Power shares - which traded this week at their lowest ever point - could weigh on the final price achieved for the country's biggest power generator, market sources said.
Sources said the Meridian general offer could attract up to $280 million which, when taken with the broker allocation of $565m, could see up to $850m out of the $1.25 billion offer in retail ownership.
If that proved to be the case, it would be the largest ever retail share offer ever undertaken in New Zealand, they said.
While it appeared that the Meridian offer had attracted fewer than the 113,000 or so retail investors who bought into Mighty River, they were writing bigger cheques, one investment source said.
That suggested the offer was attracting more "seasoned'' investors compared with the less frequent investors, or first timers, who were attracted to the Mighty River issue.
The $1.60 final share price cap for retail investors and high yield had proven to be an incentive for potential Meridian investors, and the numbers suggested investors were less worried about the politics surrounding the issue than they were initially.
Despite a strong start, Mighty River shares - which were issued at $2.50 - have continued to perform poorly since they listed in May.
The stock continued to struggle this week, despite the commencement by the company of a $50 million share buyback.
For the moment, investors were prepared to look past the demise of National Party ally John Banks, a better showing by Labour in the opinion polls, and the Labour-Greens' plan to dismantle the complex wholesale electricity market and replace it with a centralised power buying model.
One fund manager, who requested anonymity, said it appeared that there had been "reasonable'' retail demand for Meridian.
"There seems to be ok demand out of Australia, but the problem has been with Mighty River Power trading at around $2.15, Meridian does not value up well by comparison,'' he said.
"I would be very surprised if it was priced higher than the $1.60 price cap, so our thinking is that its going to be $1.50 to $1.55,'' he said.
But one source said the price of Meridian's peers - Mighty River included - was taken into account when the indicative ranges were formulated.
Concerns about the political environment would ebb and flow over time but for the moment, investors appeared to be taking a sanguine view of the risks, sources said.
The offer, which is in the form of instalment receipts, is capped at $1.60 but institutions could theoretically end up up paying more.
Scaling back of the issue - particularly at the offshore institutional end - was seen as a possibility.
The price to be paid by institutions will be determined by a book-building process which goes from Monday through to Wednesday. The indicative price range for institutions is $1.50 to $1.80.
Mighty River, Meridian and Genesis Energy are all part of the Government's ``mixed ownership'' plan to offload just under half the shares in each company onto the open market.
Meridian - by far the largest of the three - is seen as a jewel in the crown because of its substantial hydro dams in the South Island. Unlike its peers, Meridian has no thermal assets.