WELLINGTON (Reuters) - The New Zealand government raised $1.6 billion in its Meridian Energy Ltd IPO, pricing the shares low to help ensure a strong performance after listing and keep investors on side for two more partial asset sales.
The pricing for Asia's fourth-largest IPO this year reflects an abundance of caution in the wake of a 12 percent slide for shares of Mighty River Power MRP.NZ - the first of Prime Minister John Key's asset sales aimed at underpinning an economic recovery and getting the national budget back to surplus.
It also factors in concerns about whether a key customer for Meridian will remain in business and warnings by political parties opposed to the asset sales that they would cut electricity prices if elected next year, which would weigh on revenues.
The sale of the 49 percent stake in the country's biggest power firm was priced at NZ$1.50 per share, the bottom of a projected range of NZ$1.50-NZ$1.80 and values Meridian at NZ$3.8 billion ($3.24 billion).
Mindful of a election that will be held next year, the government is looking for proceeds of some NZ$5 billion from the sale of minority stakes in four firms. The Meridian sale was its biggest asset sale to date.
"Combined with the NZ$1.7 billion in proceeds from the Mighty River Power offer, this will be $3.58 billion over two floats which the Government does not have to borrow to reinvest in new, priority public assets," Finance Minister Bill English said in a statement.
Fund managers said the result boded well for the partial sale of Genesis Energy planned for early next year.
"I think it is positive for Genesis," said Paul Harrison, managing director at Salt Funds Management. "The market is prepared to look through short-term issues, whether it's politics or a potentially weaker outlook for electricity prices."
Overseas demand for the offering was high, particularly among Australian investors, the fund managers said, adding that offshore allocations would likely be scaled back compared with bids. Overseas investors now account for 13.5 percent of total holdings in Meridian, in line with the government's intention to keep at least 85 percent of shares in New Zealand hands.
With a NZ$3.8 billion market capitalisation, Meridian is one of the country's 10 biggest stocks, although that is much less than official government valuations two years ago of about NZ$6 billion.
The sale of shares in the wind and hydro-power firm reduces the government's stake in the country's power industry to around 40 percent, compared with around 65 percent before the Mighty River Power sale.
The government plans to sell a 49 percent stake in the remaining state-owned power company Genesis Energy GEPWR.UL, which has just over a quarter of the retail power market. It has been valued at between NZ$1.8 billion and NZ$2.1 billion, with much of its generation from gas and coal fired power stations.
The government also plans to reduce its stake in Air New Zealand (AIR.NZ) from the current 73 percent, but maintain majority control. It has scrapped plans to sell a stake in debt-laden, financially troubled coal miner Solid Energy Ltd.
The asset sales come as demand for New Zealand equities soars. The benchmark NZX 50 Index .NZ50 has gained nearly 20 percent so far this year, closing at a record high on Wednesday and creating a favorable environment for listings.
Additional reporting by Lincoln Feast in Sydney and Elzio Barreto in Hong Kong; Editing by Edwina Gibbs