New Zealand's Asset Sales May Boost Stock Exchange by Billions, Says CEO

The valuation of New Zealand’s stock market could grow by “billions” next year if potential sales of stakes in four state-owned companies announced this week go ahead, according to the head of the local exchange.

The government may offer as much as 49 percent in three power companies and one coal-mining company for public trading, said Mark Weldon, chief executive officer of NXZ Ltd. in an interview in the company’s Wellington offices. The companies’ combined net assets total NZ$10.2 billion ($7.9 billion), according to their last annual reports.

The potential sales were announced by Prime Minister John Key on Jan. 26 as one measure to reduce government debt. The government was exploring “mixed ownership” models for Mighty River Power Ltd., Meridian Energy Ltd., Genesis Power Ltd. and Solid Energy New Zealand Ltd., according to a statement that day.

“They will all be in the multiple billions,” Weldon said today. “From an international perspective, it will put the New Zealand equity sector, over the next few years, back on the radar.”

The largest power company on the New Zealand stock exchange is Contact Energy Ltd., with a NZ$3.8 billion market value. It’s the country’s third-biggest publicly traded company. The government may also reduce its 74 percent stake in Air New Zealand Ltd., the nation’s No. 1 carrier, the Jan. 26 statement said.

New Zealand’s stock exchange has a market capitalization of about $36 billion, according to Bloomberg data. That value ranks as the second-lowest in the Asia-Pacific region, beating only Sri Lanka. Vietnam and Pakistan bourses having the next two highest values. Japan’s exchanges are the largest, valued at $4.1 trillion. ]

Controlling Stake

The four other stakes that the government is considering selling would be among the exchange’s 10 largest companies, said Weldon. “It really does provide a bit more bulk in the middle and it provides bulk that’s a direct exposure to gross domestic product.”

The government would keep a controlling stake in the companies, it said in the Jan. 26 statement. It has asked Treasury for advice and will detail its intentions before the country’s general election “later this year,” according to the statement. If the stakes are sold, they are likely to be publicly traded within the first half of 2012, said Weldon.

To contact the reporter on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net

To contact the editor responsible for this story: Iain Wilson at iwilson2@bloomberg.net

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