Bankers in for $100m SOE sell-down bonanza

File photo / Greg Bowker

Brokerage fees and other expenses could cost up to $100 million for the state-owned enterprises tagged for partial sale if National wins the election.

The Government says those firms that want the business must keep fees down but, based on previous floats of public assets, the costs of sale were typically up to 2 per cent.

With signs the hoped-for $5 billion to $7 billion from the sale of four energy companies and more of Air New Zealand may be heading towards the lower figure, this equates to $100 million. The sales are expected over a period of three to five years.

Merchant banking sources said brokerage fees by themselves could be as high as 2 per cent but this would depend on how hard the Government would push them down.

On top of that would be legal, accounting and promotion costs but these would not scale up as brokerage did.

"With the size of the deal and a whole lot of institutional support you might be able to drop that [brokerage] down to 1.5 per cent," one source said.

Finance Minister Bill English would not comment on specific figures.

"In terms of costs and other fees, it has been made clear to everybody concerned that they must be kept to an absolute minimum. This will be a competitive process for advisers and the cost to taxpayers will be an important consideration," a spokesman for the minister said.

Figures compiled by the Treasury and released under the Official Information Act show costs of large initial public offerings over the five years between 2004 and 2009 ranged from 1.7 per cent in the case of utility company Vector to 8.4 per cent for Feltex Carpets.

Brokerage fees in Contact Energy accounted for 1.4 per cent of the $1.1 million float of Contact Energy in 1999 out of a total percentage of 1.8 per cent.

Initial listing fees are $310,000 for companies with a market capitalisation of $1 billion or more, dropping to $191,000 for companies over $500 million.

NZX chief executive Mark Weldon said he expected strong competition for the work and this would keep a lid on costs.

"People will compete for this business quite aggressively because there's quite a lot of prestige in being associated with these floats if and when they come to market," he said.

"In terms of brokerage the more you put through the more power you have in achieving quite fine pricing."

If National wins the election, up to 49 per cent of Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy could be listed and about another quarter of Air New Zealand.

Weldon said there were big benefits for the finance sector.

"We have been not doing so well in the war for talent over the past two decades in this area.

"This gives the intangible of a more secure cash flow, more work in a thicker market - you will see more jobs and more talent in this area."