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UPDATE 1-Meridian IPO raises $1.6 bln for New Zealand, at low end of range
October 23, 2013 / 7:03 AM / 4 years ago

UPDATE 1-Meridian IPO raises $1.6 bln for New Zealand, at low end of range

* Shares priced at NZ$1.50 vs NZ$1.50-NZ$1.80 range

* Govt aims to gain NZ$5 bln from asset sale programme

* Meridian to list on Oct 29

* Fourth-biggest IPO in Asia Pacific this year

By Naomi Tajitsu and Gyles Beckford

WELLINGTON, Oct 23 (Reuters) - New Zealand raised a record NZ$1.88 billion ($1.60 billion) in its Meridian Energy Ltd initial public offering, the second of four asset sales the government has earmarked to underpin an economic recovery and get the national budget back to surplus.

While it was Asia’s fourth-largest IPO this year, shares priced at the bottom of their pre-market range - a range that had already been set at up to a third below some estimates.

Meridian’s pricing reflects the weak post-listing performance from Mighty River Power, the government’s first asset sale, and concerns about whether a key customer will remain in business.

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 three power companies and the national airline.

“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.

The sale of the 49 percent stake in Meridian, the country’s biggest power firm, priced at NZ$1.50 per share. The projected price range was NZ$1.50 to NZ$1.80.

The offering valued Meridian at NZ$3.84 billion, making it one of the country’s 10 biggest stocks but much less than official government valuations two years ago of about NZ$6 billion.

The company has been dogged by concerns that an unprofitable Rio Tinto aluminium smelter which buys much of its Meridian’s output could close after 2017 when its contract to buy power expires.

Meridian will list on the New Zealand and Australian stock exchanges on Oct. 29.

The government has said it plans to sell a 49 percent stake in the remaining state-owned power company Genesis Energy in the first half of next year.

Genesis, which has just over a quarter of the retail power market, 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 from the current 73 percent level, but maintain majority control. It has scrapped plans to sell a stake in debt-laden, financially troubled coal miner Solid Energy Ltd.

The benchmark NZX 50 Index has gained nearly 20 percent so far this year, closing at a record high on Wednesday and creating a favourable environment for listings.

In addition to Meridian and Mighty Power, petrol retailer Z Energy Ltd and dairy firm Synlait Milk Ltd have made their debuts this year.

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