Govt remains committed to Genesis Energy sale
The government is still committed to the partial privatisation of Genesis Energy [NZX: GPLFA], despite a rocky performance in both the asset sales so far undertaken, Prime Minister John Key has confirmed.
However, he ruled out the possibility of a break-up or trade sale of the smallest of the three state-controlled electricity companies, despite work being done on those options in recent weeks by the Treasury and its advisers.
"I don't think that's a credible option," he told his weekly post-Cabinet press conference.
Break-up options are understood to have been modelled as an alternative to floating shares in the company, which was last valued independently for the Treasury's Crown Ownership Monitoring Unit in 2011 at $1.7 billion.
However, its value has almost certainly dropped closer to $1 billion, based on the prices paid for 49 percent stakes in MightyRiverPower and Meridian Energy.
Factors depressing power company valuations include low or falling demand for electricity, uncertainty over the future of the Tiwai Point aluminium smelter, and the Labour and Green parties' plans to dismantle existing electricity market arrangements and reduce power company profits, if elected next year.
Still, investors pushed the price of Meridian instalment receipts from their listing price on the NZX this morning from $1 to $1.08, while MRP closed at $2.20, still 30 cents per share below the $2.50 listing price in May.
The Genesis sale would depend on favourable market conditions, but world economic conditions were improving. The government would only postpone if it believed it would be selling the shares at a "substantial discount to the market price."
"That certainly hasn't been the case for Meridian or MRP. Generally speaking, the conditions have been pretty good," said Key.
The government would tell voters before the 2014 election what its asset sale plans would be if elected for a third term, but he ruled out Transpower and Kiwibank, and said there were few other major assets that lent themselves to partial privatisation by stock exchange listing.
While the Meridian float has been widely panned for attracting just 62,000 retail investors and a listing price at the bottom end of the indicative range, Key defended the process, saying it delivered cash to buy new state assets without borrowing, improved the oversight of the companies concerned, and improved investors' alternatives beyond residential real estate.
"Some people are going to bag the programme, but I think it's been quite successful," he said.