New Zealand to house record IPO

NZ$2 bn Meridian privatization to be country’s largest ever

New Zealand’s government has announced that the upcoming partial privatization of its largest electricity provider could be the nation’s largest IPO to date.

The impending float of Meridian Energy is expected to raise close to NZ$2 bn ($1.6 bn), after the government said it hoped to sell a 49 percent stake in the company. It is hoped shares will fetch between NZ$1.50 and NZ$1.80 each.

At face value, the listing could raise gross proceeds of anywhere between NZ$1.9 bn and NZ$2.3 bn, though shares bought by New Zealand citizens are subject to a price cap of NZ$1.60 apiece, as long as they are not sold within 18 months of Meridian’s IPO. Local investors, therefore, will define the amount of capital raised by Meridian’s launch, as institutional and oversees backers will not benefit from the cap.

‘The price cap gives New Zealand retail applicants greater certainty about how much they will pay for Meridian shares,’ says Bill English, the country’s finance minister. ‘The government remains committed to putting New Zealanders at the front of the queue for shares.’

The energy generator and distributor will take share instructions from New Zealand retail investors from September 30 until October 18, 2013, and from institutional investors from October 21-23.

Meridian relies entirely on hydropower and wind farms to provide its electricity, currently accounting for 30 percent of New Zealand’s total electricity production and distributing power to around 270,000 customers. Meridian also owns two wind farms in Australia and has carried out renewable energy projects as far afield as Antarctica, Tonga and the US.

Even if the lowest expected amount is raised, and even though the government will retain a 51 percent stake in the firm, Meridian will be New Zealand’s largest public company by market value. The company’s IPO is the second notable deal to be conducted as part of New Zealand’s plan to raise money by unloading minority stakes in state-held businesses. In May fellow energy specialists Mighty River Power raised NZ$1.7 bn when the government floated a 49 percent stake through an IPO.

Approximately 440,000 New Zealanders – roughly 10 percent of the country’s population – registered an interest in buying shares in Mighty River. Since the IPO, local investors account for 26.9 percent of the company’s equity, while domestic institutions account for 8.6 percent. 

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