‘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.”