The Government has set a price range of $2.35 to $2.80 per share for the partial privatisation of Mighty River Power and has included a loyalty bonus scheme for the offer.
Based on an issue price of $2.35, investors can expect a beforetax yield of 7.1 per cent for the current year, increasing to 7.7 per cent in the next financial year, according to the offer documents. At $2.80 a share, the yield would be 6.0 per cent, increasing to 6.4 per cent in the next year.
When the stock lists on the NZX on May 10, it is expected to have a market capitalisation of $3.29-$3.92 billion, making it the fourth or fifth largest company on the exchange.
New Zealand retail investors in the offer 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.
The final price is expected to be announced on May 8 after the retail offer has closed and the institutional offer has been conducted by an auction-style "book-build" process.
The offer documents highlight a number of risks involved in the investment, among them being the possible closure of the Tiwai Point aluminium smelter.
Finance Minister Bill English said the bonus was another way to encourage widespread and substantial New Zealand ownership of shares in Mighty River.
"It also recognises the loyalty of those New Zealanders who retain their shares and contribute towards the country's savings culture," he said.
The loyalty bonus scheme is available only to New Zealand retail investors - not to institutions in New Zealand or overseas.
The Mighty River offer document was formally registered today. The share price values the 49 per cent stake in the company at between $1.6b to $1.9b.
English repeated that the Government expects to see at least 85 per cent New Zealand ownership of the company at the time it lists.
The maximum cost of the loyalty scheme will not be known until the offer has closed and allocation decisions are made, but a bonus offer of 1:25 means that the maximum cost will be 4 per cent of the value of shares allocated to New Zealand retail investors, he said.
The share offer period, during which New Zealanders can apply to buy shares, is expected to open on April 15. It will remain open for three weeks, with the expectation of it closing on Friday, May 3, one week before the company lists.
Mighty River is one of New Zealand's largest electricity companies. Its generating assets mostly comprise a series of hydro dams along the Waikato River. It also has extensive geothermal assets.
It will be the Government's first partial privatisation under the so called mixed ownership model. It also intends to partially privatise the other state-owned generators - Genesis and Meridian.
The offer documents point out the risks of investing in Mighty River. Among them were:
- The availability of the fuel - mainly water, geothermal fluid and gas - that Mighty River requires to generate electricity may reduce for a wide number of reasons.
- The wholesale price at which Mighty River sells the power it generates, or buys electricity to sell to customers, is subject to significant variability and may be unfavourable.
- The volume and price at which Mighty River Power is able to sell electricity to customers may be affected by competition, economic conditions, changes in customer demand or regulatory changes.
- Investment in geothermal development activity requires significant early stage capital and may encounter unexpected delays.
- International geothermal development faces additional risks associated with operating in jurisdictions outside of New Zealand.
- Changes in the regulatory environment.
- A catastrophic event generating losses not covered by insurance.
- Insufficient access to future capital.
- Treaty of Waitangi and other M?ori claims relating to ownership and governance of land, water and geothermal resources that directly or indirectly impose additional restrictions, conditions or additional costs.
Infographic: Claudia Ruiz