Labour will meddle in power market

January 17, 2014

Labour is planning to follow through on its policy to meddle in the power market if it is in government:

. . . Labour and the Greens unveiled plans to overhaul New Zealand’s electricity market on the eve of the government’s MightyRiverPower selldown last year. The operator of nine hydro stations on the Waikato River has traded below its $2.50 IPO price since just after the sale last May.  Meridian Energy, sold in October, is hovering around its listing price.

The opposition parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate excessive power company profits and pass savings onto consumers through cheaper electricity prices.

“A wise investor will be aware if the pricing model changes, in this case to stop the profiteering of public rivers, that will change the companies’ profits,” Parker, who would be finance minister in a Labour government, told BusinessDesk.

“Investors are already discounting those stocks because of what might happen if we win,” he said. “It’s actually a good example of how the market works.” . . .

If they can reduce the value of companies and the wealth of investors this much when they’re in opposition, they will do much worse in government.

Investors have already assessed the threat. The New Zealand stock exchange energy group index, which includes all listed power companies along with Z Energy and NZ Refining, has dropped 9.6 percent in the past 12 months, while the NZX 50 Index has rallied about 17 percent.

“Some people just won’t touch them because they are scared of a Labour-Greens government,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “Others say because they’re dirt cheap people are pessimistic. If National got re-elected they’d go up again.”

A potential change of government may pose risks to other sectors as well, he said.

“Regulatory risk is weighing on those sectors which could be in for attention from a Labour government,” Lister said. “The market is aware of the sectors susceptible to regulation – SkyCity, the electricity sector and Chorus have a cloud hanging over them, which will continue to the election.” . . .

If there’s a Labour/Green/New Zealand Firs/Mana and whichever else party after the election that cloud will darken.


If question is wrong how can any answer be valid?

November 27, 2013

The question on the politicians’ initiated referendum asks: do you support the Government selling up to 49% of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand.

Several people have pointed out that those who want more than 49% sold could vote no.

That would be taken as opposition to any sale when that’s the opposite of their view which favours total sales.

Then there’s the name of one of the companies – if Google is to be believed Genesis Energy is an SOE but I couldn’t find a Genesis Power.

There is another even more fundamental flaw in the question – the Government hasn’t sold and isn’t planning to sell up to 49% of Air New Zealand.

It didn’t own 100% of the shares in the first place and sold only 20% of the total, retaining 53%.

If the question is wrong, how can any answer be valid?


Referendum even more redundant

September 17, 2013

Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall have announced the timetable for the partial float of Meridian Energy and Genesis Energy and further selling down of Air New Zealand shares.

The Government has confirmed New Zealanders will have the opportunity to invest in a minority shareholding in Meridian Energy from later this month, before an expected sharemarket listing on 29 October.

Full details will be set out when the offer document is lodged this Friday 20 September, Finance Minister Bill English and State-owned Enterprises Minister Tony Ryall say.

Pre-offer marketing will start this evening, ensuring New Zealanders are aware of the Meridian offer through television, newspaper and online advertising. This will explain how people can get more information, including ordering an offer document.

As with the Mighty River Power share offer earlier this year, New Zealanders will again be at the front of the queue for shares in Meridian, Mr English says.

“The Government was very clear about the opportunity for New Zealanders when we put our share offers programme to New Zealanders during the 2011 election campaign. The compelling reasons for proceeding with the share offers are as valid today.

“The Government share offer will enable New Zealanders to invest in big Kiwi companies at a time when they are telling us they want to diversify their growing savings away from property, bank deposits and finance companies.

“And we can invest the proceeds in other public assets like modern schools and hospitals, without having to borrow that money in volatile overseas markets, and increase debt.”

As Ministers have previously indicated, investors will buy Meridian shares in two instalments over 18 months. This means investors will need to pay only around 60 per cent of the price up front – but they will receive in full any dividends.

In addition, there will be a price cap for New Zealand retail applicants to provide more certainty about how much the shares will cost.

Mr English says further decisions have now been confirmed, including:

  • The Meridian offer document will be lodged this Friday 20 September, setting out all the information investors need to make an informed decision about whether to invest. This will include the price range, the price of the first instalment, the capped price of the second instalment and the expected yield.
  • After the offer document is lodged, the Financial Markets Authority has around five business days to review the document. This ‘consideration period’ is expected to conclude on 27 September.
  • New Zealanders will then have three weeks from 30 September to consider the offer document and apply for shares before the general offer closes on 18 October. This will be followed by a book-build process where institutions bid for shares.
  • It is expected that Meridian will list on the New Zealand and Australian sharemarkets on 29 October.

Mr Ryall says the offer process puts New Zealanders at the front of the queue for shares and will ensure they have easy access to information.

“To help achieve this, a retail syndicate will be marketing the offer to New Zealanders, and they will offer information and advice to their clients.

“In addition, we have included what is called a ‘broker firm’ aspect to the Meridian offer. Under this arrangement, brokers assess demand from their clients and submit bids, and the Government then chooses how much to allocate them.

“Just like the retail offer, this process is open only to New Zealanders and is consistent with our commitment to ensuring 85-90 per cent New Zealand ownership of the shares,” Mr Ryall says.

Ministers have also confirmed they are considering options for Genesis Energy and Air New Zealand – two of the other companies in the Government’s share offer programme.

“As the Prime Minister said last month, we anticipate that the Genesis Energy share offer will occur in the first half of 2014, subject to market conditions,” Mr Ryall says. “Preliminary work is underway and will continue over the next few months.”

The Air New Zealand share offer will be different to the others, as it is already a sharemarket-listed company.

“What that means is that New Zealanders can buy shares in the company now, if they wish,” Mr Ryall says.

“We are currently working through the best way the sell down can occur and we remain keen to ensure that New Zealanders have the opportunity to participate in it.  At this stage, no final decisions have been made, including on timing. However, when it occurs we expect it will be a shorter process than that used for Meridian and Mighty River Power.”

This makes the politicians’ referendum on the partial sale of a few state owned assets now even more redundant.

It was always only political posturing.

It was never going to have any impact on government policy which was clearly signalled before the 2011 election, made the issue by the opposition and had already begun with the partial float of Mighty River Power before enough signatures had been gathered.

That Grey Power which fronted the referendum petition has now negotiated a deal for its members with a private power company makes it not just redundant but hypocritical.

Referendums are very blunt instruments and none of the four Citizens Initiated Referendums we’ve had since they were introduced in 1993 have achieved anything.

There are better, and cheaper, ways to make a point and influence policy.

All the latest one does is reinforce the growing body of opinion that Citizens Initiated Referendums have had their day.


Green hypocrisy

May 25, 2013

State Owned Minister Tony Ryall has correctly applied the H word to the Green Party:

The Government says it’s hypocritical of the Green Party to criticise the number of ‘mum and dad’ Mighty River Power investors, when they were responsible for “frightening them off”.

State-Owned Enterprises Minister Tony Ryall is defending using ‘mum and dad investors’ in the Government’s sales pitch of the shares, despite Greens co-leader Russel Norman calling it a “con”. . .

. . . Mr Ryall responded to those claims this afternoon, saying there was a huge turnout of first time investors, or ‘mum and dads’, despite a plan by the Greens and Labour to “sabotage” it.

He says there were 77,000 first-time investors and more than 101,000 people invested less than $15,000 in the company.

“The Green Party are being hypocritical, saying not enough everyday New Zealanders bought shares, while at the same time they are doing their level best to frighten them off.” . . .

“Over 76,000 people invested less than $5,000 on Mighty River shares and they got everything they asked for,” says Mr Ryall.

“That is a huge achievement despite the economic sabotage of the Green Party and Labour during the float.”

Mr Ryall says investors who were not ‘mum and dads’ had their shares reduced due to demand.

I know several people who were planning to dip their toes into the share market by buying Mighty river Power shares who got cold feet after the LabourGreen power play.
It is indeed hypocritical for Norman to complain that not enough everyday New Zealanders bought shares when their quest for publicity and economic ignorance caused some of those who would have bought to change their minds.

MRP shares open at $2.73

May 10, 2013

Mighty River Power shares started trading at 12:30 and opened at $2.73.

That’s a healthy premium on the listing price of $2.50 which poses a problem for LabourGreen.

They can’t complain about the money going into the pockets of people selling them because had it not been for their sabotage, more people would have opted to buy them before they listed and the listing price would have been higher.

If they can cost us this much money in opposition the thought of how much they could cost in government is terrifying.

 


Crocodile tears

May 10, 2013

Green co-leader Russel Norman is still complaining about the float of 49% of Mighty River Power.

Mighty River Power’s shares have been transferred from all New Zealanders to corporates and a small minority of already well off New Zealanders, Green Party Co-leader Dr Russel Norman said today. . . 

Finance Minister Bill English last night revealed that only 113,000 individual New Zealanders bought shares in the Mighty River Power offer with an average purchase of $8220 worth of shares. The Government claimed over 440,000 New Zealanders had pre-registered to buy shares.

“There aren’t too many mum and dad investors with the ability to put down $8,220 on a share portfolio,” said Dr Norman. . .

An average is just that – some people would have bought more than $8220 worth of shares and others would have bought less.

What’s more 68% of applicants didn’t have a CNS indicating they were first-time investors and more likely to have purchased smaller amounts of shares.

But Norman is crying crocodile tears anyway.

As Hey Clint showed, the Green Party is delighted at their act of sabotage and it is the LabourGreen power play which put a lot of the smaller investors off buying shares.

When they list today the price is very likely to go up because institutional investors like ACC, Community Trusts and KiwiSaver funds will want more.

LabourGreen will no doubt complain about people making a fast profit but had it not been for their power play the float price would almost certainly have been higher.


MRP shares to list at $2.50

May 9, 2013

The government has announced the listing price for Mighty River Power shares:

113,000 New Zealanders will become shareholders in Mighty River Power following a successful share offer, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall say.

The final price will be $2.50 per share.

Of the shares issued, 86.5 per cent will be New Zealand owned: 26.9 per cent by New Zealand retail investors, 8.6 per cent by New Zealand institutions and with the Crown retaining a majority 51 per cent shareholding. That leaves 13.5 per cent for overseas institutions.

“This is an outstanding result and fulfils our commitment to ensuring at least 85-90 per cent New Zealand ownership of the company,” Mr English says.

“The share offer will raise $1.7 billion, which is a very good return for New Zealand taxpayers. Those proceeds will go into the Future Investment Fund, allowing the Government to control debt while continuing to invest in public assets. More details will be announced in next week’s Budget.

“The Government has achieved all of its objectives for the Mighty River Power share offer, so the company will list on Friday.

“Given the strong response to the share offer, and the price we have set, Mighty River Power will have a market capitalisation of $3.5 billion.

“And with over 110,000 New Zealand shareholders, it will have the largest share register – by some margin – of any New Zealand company on the exchange.”

Mr Ryall says that due to the strong level of demand, some scaling has been necessary.

“We have decided to apply progressive scaling, which means that larger applications are scaled more than smaller ones,” Mr Ryall says.

“That means that more than 80 per cent New Zealanders will get what they applied for.”

More details of the allocation and scaling decisions are attached.

“While most New Zealand investors will be able to work out from this announcement what their share allocation is, they will also be able to get confirmation of their individual allocation from Friday – by checking the website or calling 0800 90 30 90. We will also be emailing or writing to all applicants to confirm their allocation,” Mr Ryall says.

“The demand from institutional investors was strong, and bids from both New Zealand and offshore institutions were scaled considerably. Institutions will be advised of their allocations shortly, after which a settlement process commences.

“Mighty River Power will list on the NZX at 12.30pm this Friday.

“We are delighted to get to this stage, and look forward to a healthy aftermarket and a positive experience for New Zealand investors, particularly those who are investing in shares for the first time,” Mr Ryall says.

The price might well have been higher had it not been for the LabourGreen sabotage.

If they can cost the country millions in opposition they’ll do even more damage in government.

The NBR has the numbers:

Mighty River Power share offer – at a glance

Share Price:  $2.50
Proceeds of share offer: $1.7 billion
Total NZ ownership (incl 51% Crown):  86.5%

New Zealand retail investors
Individual New Zealand shareholders: 113,857 (provisional)
Retail investors: $943m
Proportion of shares: 26.9%
Average shareholding for New Zealand retail: $8,220
Applicants who pre-registered:  91%
Applicants without CSNs:  68%
Withdrawal after Labour/Green policy:  1,783 applicants ($25m)

New Zealand institutional investors

NZ institutions:  $300m
Proportion of shares: 8.6%

International institutions                                                                                                               
Offshore institutions: $472m
Proportion of shares: 13.5%

The 68% of applicants without a CSN are almost certainly first-time buyers. That indicates the partial float has succeeded in encouraging new investors.


%d bloggers like this: