New Mighty River prospectus details impact of Greens/Labour policy

The opposition power policy may have material adverse effect on the market value of Mighty River Power shares, according to an amendment to the share offer prospectus.

However, the Greens/Labour policy announcement, described by one analyst as a hand grenade, will not alter Mighty River’s forecast financial information already disclosed to the market.

Mighty River and its state owner say the announcements last week increase regulatory uncertainty for MRP.

“This regulatory uncertainty is likely to have a material adverse effect on the value and market price of the shares. This effect cannot be reliably quantified by the Company or the Crown.”

The government has temporarily suspended the $1.7 billion Mighty River share offer, the first under the mixed-ownership model, to allow investors to consider a supplementary disclosure document.

The additional information to the prospectus is required after Labour and the Greens jointly announced a shock power policy to create a single state-controlled buyer for electricity.

They claim the policy can reduce the cost of power to residential customers by up to $700 million a year, or about $300 per household.

But if they are elected it is still likely to take up to two years to enact the power sector reform, a point acknowledged by Mighty River in its supplementary disclosure.

“Taking into account the nature of the proposals of the Green Party of Aotearoa New Zealand or the New Zealand Labour Party and the time it would take a government to implement them, the company does not consider that the proposals affect the prospective financial information, including the assumptions, for financial year 2013 and FY2014 as set out in Section 6.3 of the offer Document.”

The amended prospectus notes that neither the company or the crown can quantify, “in a manner they believe is reliable”, the potential effect of the announced proposals on the company’s future business and financial results or on the value of the shares.

Factors not known include:

• The outcome of future parliamentary elections.
• The composition and policies of future governments (which may differ from announced or future political party proposals).
• The likelihood of implementation.
• The timing and implications for the industry generally or for the company of any implementation of such proposals.

Early today, SOE Minister Tony Ryall confirmed that potential investors who have already applied for shares may withdraw their applications if they choose. Withdrawals will be accepted for five working days.

He repeated government advice that New Zealanders should consider the share offer opportunity carefully before making their own decisions.

“That advice hasn’t changed,” Mr Ryall says.

“The MRP share offer is firmly on track. As we said at the time the offer was launched, MRP is a proud New Zealand company and the government is confident in its future as a listed company.”

The share offer closes on May 3. The issue price will be set following an institutional book build.

The price range of between $2.35 to $2.80 a share remains unaffected.