The political risk of a future Labour-Green government centralising the New Zealand electricity industry still hangs over the initial public offering of Meridian Energy, Milford Asset Management senior analyst William Curtayne says.
The public offer for Meridian shares closes at 5pm today with the Government planning to sell down 49% of New Zealand's largest energy generator which provides 30% of the country's power from 100% renewable resources.
Mr Curtayne said a lower number of retail investors were expected for the Meridian float than for Mighty River Power, but those fewer investors were expected to have higher average balances of shares.
Below 100,000 retail investors were expected for Meridian.
Apart from the political risk, the recovery in the global economy had seen investors buying growth and cyclical stocks rather than the pure dividend-yielding companies, he said.
The shift started in May, around the time Mighty River Power was floated, and contributed to the poor share performance of the first state-owned energy company to be listed.
The instalment plan for retail investors had been a drawcard, Mr Curtayne said.
Investors would pay $1 for each share they bought, with the remainder to be paid in 18 months, giving them three dividends. Retail investors would pay no more than $1.60 a share, a price Mr Curtayne believed was too high.
The institutional book build started next week and institutions were likely to bid at the lower end of the $1.30 to $1.60-per-share range.
''It is possible Meridian will come in at the lower end of the Government's range. Retail investors will pay no more than $1.60 but that is not an attractive price anyway,'' he said.
Labour and the Greens announced earlier this year they would move to establish a new crown entity - New Zealand Power - to act as a central planning agency for the electricity sector.
The policy stated NZ Power would act as a single buyer to purchase all power in the wholesale electricity market and have the power to set prices based on operating costs and a fair return on capital.
The absence of implementation detail left the sector facing an environment of substantial uncertainty, Mr Curtayne said.
Brokers contacted by the Otago Daily Times yesterday reported a steady take-up of Meridian shares by clients. Most of the investors seeking Meridian shares were not new to the market, unlike the Mighty River Power offering.
Some latecomers were directed to the public pool as brokers had sold their allocations.
State-Owed Enterprises Minister Tony Ryall said the Government was pleased with the interest to date from retail New Zealand investors.
The institutional book-build started on Monday and closed on Wednesday.
As outlined in the offer document, following the completion of the retail offer and the book-build, the final share price was expected to be announced on Wednesday night, he said.
New Zealanders were expected to have their share allocations confirmed by next Friday.
