Asset-sale delay troubles investors

The Mighty River sale will be followed by a second float - likely to be either Genesis Energy or Meridian. Photo / APN

Key market investors are surprised and disappointed at the Government's decision to delay the partial privatisation of Mighty River Power.

Prime Minister John Key yesterday confirmed the listing of the state-owned power company would be put back until the second quarter of next year to allow for more consultation with iwi over a shares-plus concept.

The concept, proposed by the Waitangi Tribunal, would potentially create special shares with additional financial and governance rights to address Maori claims over water.

The Mighty River Power float had been expected to go ahead this year in the first of five state-owned asset sales slated by the Government.

Rickey Ward, head of equities at Tyndall Investment Management, said: "The market won't be happy with that."

Ward said Key had talked up having a mandate from the public to sell down the assets and there was a belief that he would push ahead with the timeframe regardless of the challenges.

"To delay it from the outset will come as a surprise."

Ward also warned it would make it very difficult for the Government to get through all of the asset sales before the end of the electoral term in 2014.

Key said the Mighty River sale would be followed by a second float likely to be either Genesis Energy or Meridian later in the year.

Ward said clarity over the water claims by Maori could provide more certainty for investors and help the Government get a better price for the stake of up to 49 per cent it is expected to sell.

But another source, who did not wish to be named, said the price of the float could be affected by how much ordinary shareholders had their shares diluted by the special shares.

He said the delay also raised concerns about whether private assets would also be hit by water rights claims and could put off future investment in hydro generation.

"There is a lack of clarity on water rights, it would appear."

He said the delay was a temporary hiccup for investors rather than a major blow.

AMP Capital head of equities Guy Elliffe said there had a been a lot of intellectual capital invested in the float, particularly from the investment banking and broking community.

According to Mighty River Power's latest accounts, it spent $3.8 million on the float in the year to June 30, 2012.

Tower's Sam Stubbs said markets hated uncertainty and more certainty could mean a better price for the sale of Mighty River.

"At this stage this is politics, not business."