NZ asset sales

NZ govt looking for $1.5 billion from first asset sale

• NZ govt to sell up to 49 pct stake

• Indicative price within broad expectations

• Local investors holding for 2 years to get bonus

Reuters,

4 April, 2013

WELLINGTON, April 5 (Reuters) - The New Zealand government said it is looking to get as much as NZ$1.8 billion ($1.5 billion) from its first partial asset sale in more than a decade, as it aims to return to surplus in the next two years, and pay down debt.

Official documents released on Friday showed the government would offer up to 686 million shares, a 49 percent stake, in Mighty River Power Ltd, and gave an indicative price of between NZ$2.35 and NZ$2.80 a share, valuing the company at up to NZ$3.9 billion ($3.28 billion).

"The desired bias towards New Zealand ownership will probably see the price go towards the middle of that range, in the sense that they want to limit the level of offshore participation in this," said Paul Harrison, head of equities at BT Funds, adding that the range was wide but not unexpected.

Mighty River is the first of three power companies, a coal miner, and airline, in which the New Zealand government wants to sell minority stakes to raise up to NZ$7 billion over the next three to five years to repay debt and get back into surplus.

The government has forecast a deficit of NZ$7.3 billion in the year to June, but expects that to halve next year, and has pencilled in a surplus of NZ$66 million by 2015. Its net debt is currently sitting at NZ$57.7 billion or 27.6 percent of gross domestic product, and is forecast to peak at 29.5 percent in 2015.

The government said New Zealand investors who held their shares for at least two years would get bonus "loyalty" shares. It has stated it wants 85-90 percent local ownership.

"We think the size of the loyalty bonus strikes a good balance between promoting widespread participation in the share offer, rewarding New Zealanders who decide to hold on to their Mighty River Power shares, and being prudent with the costs of the share offer," said Finance Minister Bill English.

The offer would open on April 15 with the final price to be decided on May 8 after a book build process with institutional investors, with listing scheduled for May 10.

More than 440,000 New Zealanders have registered their interest in buying shares in the company, and locals have been guaranteed a minimum of NZ$1,000 to NZ$2,000 worth of shares.

The documents said it was vulnerable to lack of water in dry years, potential land or resource claims from indigenous Maori people, and a slump in prices if a Rio Tinto owned aluminium smelter, the country's biggest power user, were to cut production or close down.

The company, which has nine hydro, five geothermal, and one gas fired station, produces just under a fifth of the country's power and has 390,000 retail customers.

In February, it reported a first half net profit of NZ$75.5 million from the previous year's NZ$17.6 million, although revenues were down 3 percent.

The last major state asset sale was the privatisation of Contact Energy in 1999, which saw 40 per cent of the electricity generator sold to the United States company Edison Mission Energy for NZ$5 a share.

The remaining 60 percent was sold to 220,000 New Zealand retail investors, and New Zealand and Australian institutional investors at NZ$3.10 a share after a book build, with an initial indicative range of NZ$2.40 and NZ$3.00 a share. ($1 = 1.1918 New Zealand dollars)