Meridian the next cab off rank

Minister of Finance Bill English, Minister for State Owned Enterprises Tony Ryall and NZX CEO Tim Bennett last week at the listing of Mighty River Power. Photo / Getty Images

Finance Minister tipped to reveal plans for partial sale of power generator in next week's Budget

Shares in Mighty River Power listed on the NZX at a healthy premium yesterday, paving the way for the partial sale of the jewel among the state's power generators - Meridian Energy - before the year's end.

Finance Minister Bill English is expected to detail sale plans for Meridian - which has extensive South Island hydro and wind generation assets, along with an energy retailing wing - at next Thursday's Budget, investment sources said.

Genesis Energy - a power generator and retailer about one-third of the size of Meridian - is seen as a sale possibility under the Government's mixed-ownership model before the end of the year, but is more likely to be a contender in the first quarter of 2014, market sources said.

Further aiding sentiment for the Government's privatisation cause are the robust local and international markets; the NZX-50 index and the Dow Jones are near record highs.

Meridian is by far the state's biggest power generator and is easily its most fiscally significant asset as the Government pursues its stated objective of a budget surplus in 2014/15.

Andrew Barclay chief executive and managing director of Goldman Sachs New Zealand - one of the joint lead managers for the Mighty River float - said yesterday's listing meant the company was off to a positive start.

Brokers reported active "follow-through" buying of shares in Mighty River from retail investors and institutions once trading got under way.

The Government placed a great deal of importance on the float and investment banking sources saw it as a forerunner for the other share sales.

Mighty River's promoters were keen to see MRP shares trade at a premium to their issue price to give investors - many of them first time share owners - a positive experience from the outset.

In the end, the stock finished at $2.62 - 4.8 per cent above their $2.50 a share issue price.

Controversy surrounding plans by the Labour Party and the Greens to introduce a single-buyer power purchasing model - should they form a government - meant final pricing expectations had to be bumped down.

One investment banking source said that even at yesterday's price, a 20c Labour-Greens discount was built in to the share price.

"The 20c discount is still there - which ever way you look at it - but I think that over time the market is going to close that gap when they realise that the Labour-Greens proposal is not going to work," the source said.

Shane Solly, portfolio manager at Mint Asset Management, said the initial public offer was "a well executed transaction".

"As long as capital markets remain sound, there should be a healthy appetite for further mixed ownership model listings," he said.

The Government has said it intends to sell down its majority stake in Air New Zealand. What happens with Solid Energy is less clear.

APNZ