By CHRIS DANIELS energy writer
Contact Energy has launched a scheme to encourage its smaller shareholders to forgo dividend payments in exchange for shares.
The energy generator and retailer, 51 per cent owned by US company Edison Mission, has a large number of small shareholders, with just under 84 per cent owning
fewer than 1000 shares.
Contact is touting its "top-up plan" as a New Zealand first, as it does not involve the issue of new shares, so avoiding the dilution of other shareholders' stakes.
Broker ABN Amro Craigs will buy already issued shares on the market on behalf of the registered shareholders.
About 100,000 shareholders - those owning 5000 shares or fewer - are eligible.
These shareholders will be asked to join the scheme before November 20, as this will allow their share of the final 2003 dividend to be spent on new shares.
Contact's next dividend is due to be paid out just before Christmas.
As each dividend payment is reinvested in shares, shareholders will be told by Computershare Investor Services how many shares have been bought on their behalf.
Contact says ABN Amro Craigs will not get a commission on the deal, nor will there be any cost to the shareholders taking part.
The large number of small Contact shareholders is a legacy of the company's transition from a state-owned enterprise to a full privatised and stock-exchange listed company.
Under the former National Government, Contact was floated to the public in May 1999 after an extensive marketing and advertising campaign.
Neil Craig, managing director of ABN Amro Craigs, said shares would be bought over a long enough period so as not to affect the share price.
It was hard to work out exactly how popular the scheme might be, but other dividend re-investment plans had acceptance rates of between 10 per cent and 30 per cent. These shares had, however, been offered at a discount to the market, which did not apply in this case. Other plans had often involved more sophisticated investors.
