The government has set an indicative price range for shares in Genesis Energy of $1.35-$1.65 per share and released details of a bonus share scheme for eligible New Zealand investors.
Based on the indicative share offer price range, the prospective 2015 financial year implied gross dividend yield is forecast to range from 13.5% to 16.5%, according to a government statement.
The price range values Genesis at between $1.35 billion to $1.65 billion, well below analyst forecasts.
Independent research house Morningstar has valued Genesis at between $1.69 billion to $1.89 billion in total.
First NZ Capital has valued the company at $1.4 billion to $1.8 billion and UBS’s valuation is $1.6 billion-$1.9 billion.
Finance Minister Bill English says the bonus share scheme – where New Zealand retail shareholders can subscribe for one new additional share for every 15 they purchase in the initial public offer (up to a maximum of 2000) if they continue to hold them 12 months after issued – is designed to encourage New Zealand participation.
This is more generous than that offered to Mighty River Power investors, who get one share for every 25 they hold up to a maximum of 200 bonus shares if they keep them for two years from the listing.
Mr English confirmed the government is looking to sell between 30% and 49% of Genesis, the country’s last fully state-owned power company.
The amount of the company to be sold through the bookbuild will be announced on March 26.
An offer document, subject to FMA approval, is available online here
The general offer opens on March 29 and closes April 11.
Shares are expected to be listed on April 17.
The final price will be determined on Friday March 28 following a front-end book-build involving brokers and local institutional investors placing their bids for the shares beginning March 27.
This means the shares will be priced at the start of the offer period, rather than at the end.
The idea is that this will provide more certainty for Kiwi retail investors, because they will know the price when they apply for shares.
“The new structure means New Zealand’s largest share brokers are free to prepare and release research and analysis on the Genesis Energy share offer, at their discretion,” State-Owned Enterprises Minister Tony Ryall said.
Mr English reiterated that proceeds from the sale will go to the Future Investment Fund, which has so far raised about $4 billion.
The government policy is to spend the proceeds on investment in assets such as schools and hospitals without the need for borrowing from overseas lenders.
Genesis is the largest of the 'big four' electricity companies by customer numbers, but the smallest by asset value.
Genesis’ portfolio of generation assets comprises thermal generation, including the Huntly coal and gas station and renewable generation, including the Tekapo A and B hydro stations.
It also has a 31% stake in the Kupe Joint Venture, which owns the Kupe oil and gas field.
The company reported a 23% slide in first-half earnings to $150.5 million, reflecting stiff retail competition and a warm winter, which meant hydro-storage was above average and wholesale prices were lower.