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‘Front-end book build’ for Genesis Energy as English takes cue from tech IPOs’

Genesis Energy will be listed mid-April, with the IPO process featuring a "front-end book-build" and a loyalty bonus, Finance Minister Bill English says.

The float will now involve 30% to 49% of shares. The government's original goal was to raise up to $1 billion by selling 49%.

Mr English also says the Genesis listing marks the end of the government's partial privatisation programme, "either this term or after the election ... We've achieved what we wanted to with the share offers in energy companies and Air New Zealand."

The Genesis offer is expected to open in the second half of March.

The shares will be priced at the start of the offer period, rather than at the end as occurred with the previous share offers. This process, known as a front-end book build, was used successfully last year during the Synlait, SLI Systems and Wynyard IPOs," Mr English says.

“For the first time in the share offer programme, New Zealand sharebrokers will bid for shares at the same time as institutions. This will create stronger competition for shares during the book build. “This will provide more certainty for Kiwi retail investors, because they will know the price when they apply for shares,” Mr English says.

Details of the loyalty scheme are scant at this stage. It won't be fleshed out until the prospectus is released, State Owned Enterprises Minister Tony Ryall says.

With the Mighty River Power float, investors were promised a bonus share for every 25 bought in the initial public offer, as long as they held the shares for at least two years.

As with Might River, the loyalty scheme will only be available to small, NZ shareholders.

US institutional investors will be barred from the float due to regulatory complications.

“We will set out all the details in the next few weeks. As with the other share offers, New Zealanders will be at the front of the queue for Genesis shares and we remain committed to at least 85 per cent Kiwi ownership,” Mr Ryall says. 

“We’ve so far raised around $4 billion through the share offers, which is being invested in new public assets such as schools, hospitals and ultra-fast broadband,” Mr English says. “That’s $4 billion we don’t have to borrow from overseas lenders.”

“We expect that a range of advice and independent reports from sharebrokers and other analysts will be available to New Zealand retail investors – as was the case during the Meridian IPO.”

The Government expects to sell between 30 per cent and 49 per cent of the shares in Genesis.

“When we announced the share offer programme almost three years ago, we said that we would sell up to 49 per cent of these companies, subject to market conditions,” Mr Ryall says.

“Our initial advice is that a smaller Genesis offer could increase price tension in the front-end book build by offering fewer shares to more bidders.

“But we will not know that until we further test demand in the market, where investors now have a wider choice of several energy companies.”

Comments and questions

Benglish "Thats 49% of the dividends the government has sold off, including the associated dividends that return much more than the costs of borrowing".

Benglish "Thats some 15% of dividends leaving the country, increasing the net investment deficit in income this country earns, and missing from the local economy to be respent. No wonder your tax collect is down".

Most investors understand why the sale of Genesis may only represent some 30% of the business. Its because you have flooded the local market with the same type of share, and to sell 85% locally will be a hard ask.

Benglish, "You must be crazy!!"

The best thing would be for each and every NZer and company to boycott the sale. 15% of 0% share is nothing to the overseas interests.

Sell Genesis for anything we can get before the Labour/Greens make it totally worthless with their hastily thought-up sabotage plan - er I mean power policy.

I brought MRP shares, investing a chunk of my retirement savings in it. I am 60, not a suit, just a simple Kiwi who still works 6 days a week.
Presently I have lost $7000 cold hard cash to the Key government by making that purchase - or should I say trusting John Key.
Bill English had the nerve to declare on Larry Williams Drive that us small Kiwi investors paid the price we set ourselves - what planet is he on?

We had to send the cash and then rely on Key and English to set a fair price.

I relied on the Key Government being straight, not setting the price at $2.50 when the shares are worth $2.

Why these jerks felt the need to rip of the people who supported them is a mystery. I will likely not vote this year.

Please ask Key or English to respond.

The reason you're initial investment, on paper, is currently in the red, is thanks to the Labour/ Greens ill-conceived Kiwi Power policy (which in itself is only a headline policy and has no meat to support it). Your holding will recover come Elections when NZ votes John Key for a third term.

Hi Arty,
I agree that the pricing of MRP was top end and the process was a shambles.
I've done some maths; if MRP shares are down say 20% and you say you've "lost" $7,000 then I expect you invested around $35K. You sound like a switched on guy so this $35K will have been only 5% of your total investments of $700K, so the MRP slump has narrowed your capital by 1% and you will have covered this with your other investments from a market which has performed pretty well in the meantime.
Nobody wants to have an investment that goes backwards but it can/does happen. Just collect the income and get on with your life.

PS. You didn't lose $7K to the Key Government; a) you don't lose anything unless you sell and b) the govt did have a responsibility to get the best possible price on behalf of all taxpayers, imagine the criticism if they sold it cheap........

The reason that you have lost $7000, is because of the irresponsible statements by Labour and the Greens about their intention to effectively undermine the security of power supply in this country. although that is not how our biased, non comprehending journalists reported it.
So Sir, your argument is with the opposition parties not the government.
Think carefully how you cast your vote at the next election; I suspect that you will require a mind set change.

Do you think that the supplementary prospectus should have given a price impact guidance on the likely post float share price?

Reminds me of the Facebook investors who complained bitterly when the price plunged by almost 50%. Had they have sold, they would have missed the spectacular rise seeing a 50% plus gain from issue.

You lose when you sell, not when the valuation of the day differs from your purchase price.

The number one rule of investing is to diversify, not investing $35,000 of your retirement savings into a single investment.

your looking at this as a long term investment.for your retirement.
your dividend is 2x that of bank interest and with loyalty bonuses
after 2 years you need to make up $6,600.00 you will be level playing field in 5 years based on the price not going up. but it will i brought a little more than you in mrp . it would hurt more if you brought to flick and gain
short term to add value to your retirement fund. be patient and will all work out fine.

I guess a front end book build is better than the other two which where rear-enders where the retail investors got shafted.

Lift the brokerage and brokers might get inclined to get on the ph Bill. 2% should do it for retail and. 0.5 for institutional brokerage.