The Treasury's advice that the best price from the part-sale of Genesis Energy would not be achieved if it was sold too quickly because of the oversupply of power company shares on the market was never going to hold much sway with the Government. Politically, it needs to end the asset sales process as quickly as possible, hopefully making it a fading memory by the time of the general election.
Thus, the Genesis offer will open in the second half of next month and the shares will list in mid-April. The terms of the offer announced so far effectively acknowledge, however, that on grounds other than the political, the timing is far from ideal.
Genesis was always going to be a more difficult sale prospect than either Mighty River Power or Meridian. Particularly unattractive is the fact that one of its major assets is the ageing gas and coal Huntly Power Station. It has also just unveiled a 72 per cent slump in first-half net profit. These factors, allied to the market oversupply, mean Genesis requires especially attractive sales terms. The Government has gone to considerable lengths to find a structure that appears in large measure to achieve that.
It will use a front-end book build process that will see the share price revealed to mum and dad investors at the start of the offer, not at the end as with Mighty River and Meridian. Institutional investors and brokers will bid for shares, setting the price. That process is designed to create competitive tension, with the outcome more favourable to buyers than the seller. Mums and dads will understand exactly what they are getting.
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The Government can, justifiably, be criticised for using three different structures in the three part-floats. That smacks of learning on the run.
Take the prospectuses for the Mighty River and Meridian exercises, which were criticised as being too lengthy and too dense for unsophisticated investors. This time, that has been rectified. The cost, however, is that no shares can be offered to United States institutions.
That will hardly help the Government fulfil its aim of retaining just 51 per cent of Genesis. It has covered the American situation and a possible shortfall of demand from other quarters by suggesting it is open to selling anywhere between 30 and 49 per cent. But anything less than 49 per cent would be an embarrassment. Increased would be the gap between the $6.1 billion that the Government aimed originally to get for its assets and what is finally achieved.
It, quite rightly, ignored the outcome of the citizens-initiated referendum on assets sales, in which an emphatic two-thirds of those who voted did not support the part-floats. It has an election mandate, and it makes no sense to leave Genesis with a different ownership structure. But it could not totally disregard the underlying message of that vote; that New Zealanders are as opposed to the sale of state assets now as they were towards the end of last century when the policy was in its heyday.
This attitude will be reinforced by the British Government seriously undervaluing the shares involved in its recent sale of Royal Mail. But neither that nor the disappointments associated with the part-floats here - a result due, in considerable part, to Labour and the Greens' plan for a single buyer of electricity generation - invalidate the Government's policy.
The power companies will make better investment decisions with private shareholders. But, above all, the Government does not want voters dwelling on the sales. The timing and structure of the Genesis sale and the readiness to accept that its shareholding objective may not be achieved are pragmatic acknowledgments of that.