UPDATE 1-New Zealand's Meridian set for Nov listing in $2.6 bln IPO
(Adds comment, details)
WELLINGTON Aug 20 (Reuters) - New Zealand state-owned power company Meridian Energy Ltd IPO-MEL.NZ is set to be listed in November, the government said on Tuesday, as it seeks to raise about NZ$3.2 billion ($2.6 billion) in what would be the country's largest initial public offering.
Investors will be able to pay for their shares in two instalments, paying 60 percent of the offer price in early November and the rest 18 months later, Wellington said. The government hopes domestic investors will account for 85 percent to 90 percent of the company's ownership.
The IPO of 49 percent in Meridian, New Zealand's largest power generator, will mark the second partial sale of a state-owned company this year as the government sells down its asset holdings to pay down debt and achieve a budget surplus. In May, the government floated 49 percent of Mighty River Power Ltd , raising NZ$1.7 billion.
The government also said on Tuesday that it expected to float a partial stake in Genesis Energy in early 2014.
Prime Minister John Key described Meridian as a "slightly bigger beast" than Mighty River Power, adding that this was why the government was opting for the instalment-based offer.
"It's quite a good way at encouraging New Zealand investors to take part," he told reporters.
The government had previously said it would float Meridian some time in the second half of this year.
Minimum investments will be set at NZ$1,000 for the first instalment, and the price for retail and small investors will be capped to give them pricing certainty.
The normal book build process for institutional investors will still take place, although institutional investors may end up paying a higher price for shares than retail investors.
Brian Gaynor, director at Milford Asset Management, said the government had little choice but to sweeten the Meridian offer to attract potential retail investors, given the poor performance of Mighty River shares since its May IPO.
Shares in Mighty River traded at NZ$2.23 on Tuesday, well below the IPO price of NZ$2.50.
"Mighty River Power has been a massive disappointment, and I can't see many people who went into Mighty River Power want to go into Meridian. Why would you if you lost 30 cents on your investment? It's going to be very difficult to get Meridian away at a decent price," Gaynor said.
Deutsche Bank, Craigs Investment Partners, Goldman Sachs, and Macquarie Capital have been appointed to lead manage the float.
Last week, Meridian reported a profit of NZ$295.1 million for the year to June 30, nearly four times the previous year's result.
Meridian has agreed to cut its prices and reduce volumes for its biggest customer, New Zealand Aluminium Smelters, to help keep its loss-making Tiwai Point plant open.
Meridian is New Zealand's biggest power generator with 11 hydro and wind power plants supplying about 30 percent of the country's output, and about 285,000 retail customers. It also has power investments in Australia and the United States. ($1 = 1.2372 New Zealand dollars) (Reporting by Gyles Beckford; Editing by Paul Tait and Chris Gallagher)
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