New Zealand will offer shares in Meridian Energy Ltd., its largest power company, as installment receipts, allowing investors until 2015 to pay in full.
The government is selling as much as 49 percent of the state-owned company in an initial public offering and expects the shares to list on the stock exchange in early November, Finance Minister Bill English said in a statement. Investors will pay 60 percent on application, with the remainder due 18 months later.
Meridian’s IPO will be New Zealand’s largest, and the second asset sale in Prime Minister John Key’s plan to raise NZ$5 billion ($4 billion) to NZ$7 billion to pay for new infrastructure and reduce the nation’s reliance on borrowing. The government is betting the deferred payment plan will lure investors disappointed after shares of Mighty River Power Ltd., offered in May, dropped from their IPO value.
“Between the first and second installments, investors will receive the full dividends paid out in that period, which will make the dividend yield higher,” English said.
The government raised NZ$1.7 billion from the sale of a 48 percent stake in Mighty River Power Ltd. in May. It also plans to sell part of Genesis Power Ltd. next year and reduce its holding in Air New Zealand Ltd.
Mighty River shares have dropped to NZ$2.22 after being sold in the IPO at NZ$2.50 apiece.
Meridian owns seven hydro-electric plants on New Zealand’s South Island and five windfarms, one of which is in Australia. It had net income of NZ$295 million in the year ended June 30 on total assets of NZ$7.74 billion, including a NZ$101 million one-time gain on the sale of an asset.
Earlier this month, the company agreed a new electricity supply deal with the nation’s only aluminum smelter, allowing for lower prices in exchange for owners Rio Tinto Group and Sumitomo Corp. committing to the plant until January 2017. It wrote down the value of its generating assets by NZ$476 million because of the lower price.
The lead managers for the Meridian sale are Goldman Sachs Group Inc., Macquarie Group Ltd. and a partnership of Deutsche Bank AG and Craigs Investment Partners.
The government today named ASB Bank Ltd., ANZ Bank New Zealand Ltd. and Forsyth Barr to a retail syndicate to help market Meridian shares.
The government will also set a share price cap for New Zealand individual investors, which will be announced when the offer document is lodged. The cap may be less than the IPO price set by institutions, it said.