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UPDATE 2-NZ seeks up to $680 mln in Genesis stake sale, prices offering low
March 13, 2014 / 5:21 AM / 4 years ago

UPDATE 2-NZ seeks up to $680 mln in Genesis stake sale, prices offering low

* Genesis offer to open March 29 after bookbuild

* Indicative selling price between NZ$1.35 and NZ$1.65 per share

* Final amount to be sold between 30-49 pct, disclosed March 26

* Sale brings end to NZ govt’s asset sale programme (Recasts, adds analyst comment and company’s earnings outlook)

By Gyles Beckford

WELLINGTON, March 13 (Reuters) - New Zealand is seeking to raise as much as NZ$800 million ($680 million) through the sale of a minority stake in power company Genesis Energy Ltd , setting a low price range and offering other sweeteners to draw investors to the last of its state asset sales.

The sale of up to 49 percent in Genesis had always been seen as the most difficult as it is the third utility in a row the government has sought to partially privatise. The mainly coal and gas power firm also has a much higher cost structure than the earlier offerings of hydro power firms Meridian Energy Ltd and Mighty River Power.

But the lower-than-expected pricing, a loyalty scheme more generous than the one offered for Mighty River and indications of high dividend yields bode well for robust investor interest.

“They have a higher dividend component, and a good incentive in terms of getting bonus shares. I think they want this to be a success, they want higher participation,” said Nachi Moghe, an analyst at Morningstar.

The indicative price range was set between NZ$1.35 and NZ$1.65 per share, valuing the entire company at between NZ$1.35 billion and NZ$1.65 billion. That compares with valuations from brokerages of between NZ$1.40 and NZ$1.90 a share.

The loyalty scheme awards a bonus share for every 15 held for 12 months from the offer and the government indicated a gross dividend payout for the 2015 financial year of up to 16.5 percent.

The size of the stake to be sold will be announced on March 26 and the sale will open on March 29 following a two-day bookbuild with investment institutions. The company will float on the New Zealand and Australian stock exchanges on April 17.

Genesis, which has about a quarter of the country’s retail electricity market, expects flat revenue and a 9.3 percent drop in underlying profit over the coming year, according to financial information released with the offer.

It also said the slow rate of growth in power demand, climate impact on generation, and uncertainty about future regulation of the energy sector were all risks to the company’s performance.

Seeking to cut borrowing and pay down debt, the government has already sold 49 percent stakes in Mighty River and Meridian, and reduced its stake in Air New Zealand Ltd to 54 percent, bringing in a total of NZ$3.93 billion.

$1 = 1.1782 New Zealand dollars Reporting by Gyles Beckford; Editing by Edwina Gibbs

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