Mighty River shares rally past issue price

Photo / Sarah Ivey

Shares in electricity generator and retailer Mighty River Power have finally rallied over their issue price after trading substantially below it for most of the company's life as a listed entity following the weekend's landslide win for National at the general election.

Mighty River was the first company to be partially privatised under the Government's so called Mixed Ownership Model.

By late morning, shares in Mighty River were trading at $2.58, up 17c or 7 per cent from Friday's closing level, and 8c higher than its $2.50 issue price, after earlier going as high as $2.63.

The stock ended its first day of trading on the NZX in May last year at $2.62 - a 12c, or 4.8 per cent premium to is issue price - but down from the opening price of $2.73.

But in the following days, support for Mighty River quickly subsided thanks to concerns about the Labour-Greens' plan centralise control of the wholesale electricity market.

Bond yields - which utility stocks are often benchmarked against -- also perked up, which put added pressure on the stock, ultimately driving it to a low of $1.95 in January this year.

Mighty River - was the first "guinea pig" in the MOM process but its relative underperformance since listing led many to question whether the share had been pitched too high.

The issue set the scene for the partial privatisations of the state's other energy companies, Meridian and Genesis, both of which used different devices to bring them to the market.

The Government raised $1.7 billion from selling 686 million shares, or 49 per cent of Mighty River, at $2.50 each, to local and overseas investors.

Harbour Asset Management portfolio manager and research analyst Shane Solly said the power generators stood to benefit from the reduced risk of regulation following the election.