Mighty River shares are trading more than 10% down on their $2.50 list price and the Labour Party yesterday labelled the buy-back a ''an act of absolute desperation'' to prop up the price, while the Green Party said National's asset sales had now gone ''from failure to farce''.
Since Mighty River's listing on May 10, its $2.50 shares briefly hit $2.73, but then traded to a low of $2.17. Following yesterday's announcement, its shares gained 5c to trade around $2.25.
Mighty River's chairwoman, Joan Withers, announced the buy-back yesterday, saying it was part of its capital management plans and a prudent use of capital.
The board's view was that the purchase of its own shares was in the best interests of Mighty River and its shareholders, she said.
However, Labour's spokesman on state-owned enterprises, Clayton Cosgrove, claimed the buy-back was ''market interference, pure and simple''.
''The Government will be very happy with this [buy-back] act, as the falling Mighty River Power share price is scaring prospective Meridian Energy investors away.
''Clearly the [Mighty River] board could see the writing on the wall and knew the share price would fall even further,'' Mr Cosgrove said.
The buyback, represented less than 2% of the company's shares.
Mrs Withers noted Mighty River was spending about $100 million less than forecast in its prospectus, during 2013, meaning a better-than-expected year-end balance sheet, and subsequently a lower-than-expected capital expenditure during 2014.
The buy-back was preferable to other options, such as a special dividend or change to dividend policy, she said.
Green Party co-leader Metiria Turei said Prime Minister John Key's asset sales ''have descended from failure to farce''.
''Just five months after National sold these shares, promising a golden opportunity for so-called `mum and dad' investors, Mighty River is buying them back at a loss for investors,'' Mrs Turei said.
Craigs Investment Partners broker Peter McIntyre said the buy-back would be expected to be ''supportive'' to the share price, and while he acknowledged there was criticism of the buy-back, it was commonplace for companies to undertake buy-backs.
Forsyth Barr broker Andrew Rooney said that typically buy-backs helped underpin a share price and were common for companies which believed their share price was trading well below value.
Both brokers noted Air New Zealand, TrustPower and Infratil are also offering buy-backs.
''They're good for shareholders, as the value of their shares - assuming they don't sell - increases,'' Mr Rooney said.
Mighty River's capital expenditure savings come mainly from not taking up options it has held, to invest in overseas geothermal generation.
On the question of too many sellers potentially pushing the price down further, Mr Rooney said ''I don't believe there would be a risk of a rush to sell''.
Mr McIntyre also doubted any rush, noting many shareholders would be waiting for the bonus share issue, and if sellers stepped in, the company would be buying to underpin the price.
Ms Turei today launches the Greens' ''Vote No to Asset Sales'' campaign in Auckland.
