N.Z. Government’s Meridian IPO Will Be ‘Challenging,’ AMP Says

The New Zealand government may struggle to attract investors to its next offering of shares in a state-owned power company, according to the country’s biggest non-government fund manager.

The initial public offering of Meridian Energy Ltd. is “going to be really challenging,” Guy Elliffe, head of New Zealand equities at AMP Capital Investors, said at a press briefing in Wellington today. “Investors have absorbed a lot of supply, so there’s a few digestion issues, and Mighty River could have been a more edifying experience.”

In May, the government reaped NZ$1.7 billion ($1.3 billion) for a 48 percent stake in Mighty River Power Ltd., whose shares are now trading below the issue price. It aims to raise between NZ$5 billion and NZ$7 billion by selling shares in state-owned companies and has slated the sale of as much as 49 percent of Meridian, New Zealand’s biggest power company, for later this year. The government has also said it will divest a stake in Genesis Power Ltd.

Mighty River shares fell as low as NZ$2.20 on June 21 after being sold in the IPO at NZ$2.50 apiece. They rose 1 cent to NZ$2.41 at 3:10 p.m. in Wellington.

Elliffe said while the state-owned utilities are “pretty interesting companies and pretty well managed,” they carry political risk that could hamper demand for their shares.

Opposition parties have said they would alter the industry’s structure if voted into government next year by creating a state agency to buy wholesale electricity at a regulated price, creating uncertainty over the future value of the power companies.

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