New Zealand will sell stake in 3rd power company

AP News
Posted: Feb 25, 2014 8:55 PM

WELLINGTON, New Zealand (AP) — New Zealand's government on Wednesday announced plans to sell a slice of a third state-owned power company as the final step in a contentious program of asset sales.

Finance Minister Bill English said in a speech the government planned to list Genesis Energy on the stock market in mid-April. He said the government would sell between 30 and 49 percent of the company depending on demand.

Over the past year, the conservative government has raised about 4 billion New Zealand dollars ($3.3 billion) by selling 49 percent stakes in energy companies Mighty River Power and Meridian Energy. It also sold a 20 percent stake in national carrier Air New Zealand, which was already partially privately owned.

The government says the program has helped it reduce foreign debt and allowed it to invest in hospitals, schools and roads.

But opponents say the program is ideologically driven and unnecessary. More than two-thirds of New Zealanders who voted in a referendum last year said they opposed the sales.

Genesis Energy is the smallest of the three power companies. An independent 2011 assessment valued the company at NZ$1.8 billion, suggesting the government could expect to reap between NZ$540 million and NZ$900 million from the sale.

English said it will offer bonus shares as a loyalty incentive to eligible mom-and-pop investors. Unlike the previous energy company sales, he said, the share price will be announced at the start of the offer period rather than the end.

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The government will almost certainly fall short of its initial goal of raising between NZ$5 and NZ$7 billion from the asset sales program. That's because state-owned company Solid Energy has lost almost all its value due to missteps and a drop in the price of coal, forcing lawmakers to abandon their plans to sell a stake in that company.

English said the government "achieved what we wanted to" with the offers and it would not be selling any more assets.

Political opposition leader David Cunliffe said the asset sales were a bad idea made worse by flooding the stock market with three power companies in the space of a year.