Mighty River announces $50m share buyback

Joan Withers, chair of Mighty River Power. Photo / Greg Bowker

The newly floated state owned power company Mighty River has announced a $50m share buyback plan - less than six months after it was partially privatised and listed on the stock exchange.

Its plan "reflected the Board's view that the purchase of its own shares is in the best interests of the Company and its shareholders."

Share buybacks are common from boards as a way of bumping up an ailing share price. It can also be used as a way of rewarding shareholders, as the share buyback usually lifts the value of everyone's shares.

Mighty River shares were yesterday trading at $2.20 each - down from the May issue price of $2.50. The highest they have reached is $2.70.

The Government floated 49 per cent of the power company in May - the first of its planned partial privatisations of state owned energy companies. The largest, Meridian Energy, is due to list on the NZX at the end of this month.

Mighty River Power chair, Joan Withers, said the board believed that the buyback, representing less than 2 per cent of Mighty River shares, was "a prudent use of capital."

The purchase of up to 25 million ordinary shares may occur from 15 October 2013 and may continue until 14 October 2014.

"One of the Board's priorities as a listed company is maintaining an ongoing review of capital management as Mighty River Power transitions out of a period that involved significant capital investment," said Withers in a statement.

"The Board's view is that a purchase of our shares, at this time and at current market prices, provides a return above the Company's cost of capital and will be value-enhancing for our shareholders. It is also preferable at this point in time to the other tools we have available to us such as a special dividend or a change in dividend policy."

nzherald.co.nz