May 16 (Bloomberg) -- New Zealand will offer as much as 49 percent of state-owned power company Meridian Energy Ltd. in an initial public offering in the second half of this year, Finance Minister Bill English said in today’s budget.
The government will hire advisers to help sell down Meridian, the nation’s biggest generator in terms of output, by June, English said in budget papers released in Wellington today. It’s the second sale in a planned divestment program after the government raised NZ$1.7 billion ($1.4 billion) by selling almost half of Mighty River Power Ltd., which completed earlier this month and was the nation’s biggest IPO.
New Zealand Prime Minister John Key has pledged to raise between NZ$5 billion and NZ$7 billion selling shares in state-owned companies. He has previously announced an intention to also sell as much as 49 percent of Genesis Power Ltd. and to reduce the government’s stake in Air New Zealand Ltd. to not less than 51 percent from 74 percent.
“The share offer program remains important for the government’s books and for the economy,” English said in a speech to parliament today. “As well as raising money to invest in new public assets, it benefits the companies themselves through greater market discipline.”
The sale proceeds go into a fund for investment in new schools, roads and the rebuild of quake-hit Christchurch without requiring the government to raise more debt, English has said.
The announcement “provides certainty” for Meridian, Chief Executive Officer Mark Binns said in a statement after the budget was released. The Wellington-based company is well prepared for its move to a publicly traded company, he said.
Meridian had assets of NZ$8.57 billion at Dec. 31 and revenue of NZ$1.2 billion in the six months through December, according to its website. That compares with Mighty River, which had assets of NZ$5.7 billion at Dec. 31 and a market value of NZ$3.6 billion, based on a stock price of NZ$2.58 at 3:15 p.m. in Wellington.
The government didn’t provide an estimate of how much the Meridian sale would raise. Separately, proceeds are no longer expected from a part sale of coal miner Solid Energy New Zealand Ltd. before mid-2017, according to today’s budget.
Power company valuations have been affected by uncertainty over industry structure after opposition parties last month said they’d create a state agency to buy wholesale electricity at a regulated price if they successfully form a government after an election due next year.
Contract negotiations are also continuing between Meridian and Rio Tinto Group Ltd., the majority owner of the nation’s only aluminum smelter, which used about 13 percent of national power output last year. If Rio closed the plant, that may result in a sustained drop in power prices, Mighty River said in its offer documents last month.
Meridian operates seven South Island hydro power stations including the nation’s two largest at Benmore and Manapouri. It also has four wind farms.
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