WELLINGTON, New Zealand--The New Zealand government said the
biggest sale of a state-owned asset in the country's history could
raise at least 1.9 billion New Zealand dollars (US$1.6 billion),
further strengthening the national budget at a time when the
economy is gathering momentum.
New Zealand plans to sell up to 49% of power generator Meridian
Energy Ltd. in an initial public offering late next month that will
be the latest test of investor appetite for assets that have been
in state hands for decades.
Already the South Pacific nation has raised NZ$1.7 billion from
the sale of another electricity generator--Mighty River Power Ltd.
(MRP.NZ)--and the government also plans to reduce its interest in
Genesis Energy Ltd. and national flag carrier Air New Zealand Ltd.
(AIR.NZ).
The privatization program, worth an estimated NZ$5 billion
overall, aims to help New Zealand return to a budget surplus in the
fiscal year through June 2015.
Once a relative laggard among developed economies,
agriculture-rich New Zealand is now outperforming many of its peers
owing to high dairy prices and billions of dollars of investment in
rebuilding the southern city of Christchurch following a
devastating earthquake in 2011. New Zealand's economy expanded by
2.5% on-year in the second quarter, outpacing the expectations of
economists who thought a severe drought would have been more of a
drag on growth.
Robust economic growth is giving a lift to consumer spending,
business confidence and the appetite of investors for riskier
assets like shares. The NZX-50, the country's benchmark, hit an
all-time high Thursday and some newly listed stocks like NZ$1.5
billion-valued fuel distributor Z Energy Ltd. (ZEL.NZ) have also
gained strongly.
On Friday, the government said the indicative price range for
the sale of a minority stake in Meridian Energy would be between
NZ$1.50 and NZ$1.80 a share for institutional investors and NZ$1.50
to NZ$1.60 for retail investors. The final price is expected to be
announced Oct. 23.
The retail offer is capped in order to persuade individual
investors that their applications to buy shares will have a greater
chance of success, Finance Minister Bill English said. The
government aims to ensure that 85% to 90% of the company remains in
New Zealand hands.
For Rickey Ward, head of equities at fund manager Tyndall New
Zealand, the indicative price range was in line with his
expectations. "While we have a price for everything, our valuation
fits with the range they provided so we'll definitely participate,"
he said.
According to the government, Meridian Energy could have a market
value of around NZ$5.0 billion when it lists on Oct. 29. The sale
of shares in the generator and other state assets is expected to
boost the value of New Zealand's NZ$69 billion stock market by
about 10%.
Earlier this year, the government struck an eleventh-hour deal
to keep open New Zealand's only aluminum smelter, which accounts
for around 14% of national power demand and takes around 40% of
Meridian's energy output. Rio Tinto PLC (RIO), the majority owner
of New Zealand Aluminium Smelter, had threatened to close the
operation unless Meridian lowered power prices, claiming it would
otherwise be unprofitable.
As part of the deal with the government, Rio Tinto and Sumitomo
Chemical Company Ltd. (4005.TO) committed to keeping the smelter
running until at least January 2017, and potentially through 2030.
Rio owns 80% of the smelter, with Sumitomo holding the remaining
interest.
-Write to Rebecca Howard at rebecca.howard@wsj.com
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