New Zealand May Sell Smaller Stake in Genesis to Boost Price

New Zealand’s government said it may offer a smaller stake in state-owned Genesis Energy Ltd. to boost the price after raising less than expected from its asset-sales program.

The government will offer between 30 percent and 49 percent of Genesis, the nation’s biggest energy retailer, in a share sale next month, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall said in a statement today. New Zealand last year sold close to 49 percent stakes in Mighty River Power Ltd. and Meridian Energy Ltd. in initial public offerings aimed at raising cash to fund infrastructure and reduce debt.

“Our initial advice is that a smaller Genesis offer could increase price tension,” Ryall said. “But we will not know that until we further test demand in the market, where investors now have a wider choice of several energy companies.”

Prime Minister John Key is trying to stoke demand for Genesis, which is the last of the state-owned companies to be partially sold before a general election later this year. Mighty River shares have languished below their listing price while shares in Meridian, whose IPO raised less than the government forecast, are flat.

“Not only is it a bad idea to sell off assets in the first place, it’s economic idiocy to sell three in the space of a year,” said David Cunliffe, leader of the opposition Labour Party. “The sharemarket just isn’t that interested. That’s why John Key has admitted he may not be able to sell the full 49 percent of Genesis.”

Book Build

Genesis shares will be offered in the second half of March and are expected to list mid-April, the government said today.

The shares will be priced at the start of the offer period rather than at the end to give small investors greater certainty, and New Zealand brokers will bid for them at the same time as institutions to bolster competition in the book build.

Local retail investors will also be offered a loyalty bonus scheme, while U.S. institutions will not be offered shares to remove restrictions on the way information about the float can be offered to the public, the ministers said.

“As with the other share offers, New Zealanders will be at the front of the queue for Genesis shares and we remain committed to at least 85 percent Kiwi ownership,” English said.

Genesis had total assets of NZ$3.67 billion ($3 billion) as at Dec. 31. First-half revenue dropped 6 percent to NZ$973 million, the company said Feb. 12.

The asset-sales program, which included selling down the Crown’s stake in Air New Zealand Ltd., has so far raised NZ$3.93 billion. The government in December reduced its forecast proceeds to between NZ$4.6 billion and NZ$5 billion from a NZ$5 billion to NZ$7 billion range, citing the revised valuation of Meridian and the withdrawal of troubled Solid Energy New Zealand Ltd. from the program.

Before it's here, it's on the Bloomberg Terminal.