By Bernard Hickey
Finance Minister Bill English has announced the Government plans to open a public offer for shares in Genesis Energy in the second half of March and list it on the NZX around mid-April.
English said it may sell as little as 30% of the shares, rather than the full 49% to create more tension in a bidding process where the price would be set at the start of the offer, rather than at the end.
Labour leader David Cunliffe was quick to respond by saying Prime Minister John Key had "given up" on the Genesis sale before it has even begun "by saying he may only be able to sell 30 per cent of the state asset". Cunliffe's statement is below.
And Green Party Co-leader Russel Norman said Key’s "inability to admit that his asset sales have been a complete failure" had now cost the New Zealanders taxpayer over half a billion dollars. Norman's full statement is also below.
English said the Government had decided to price the shares at the start of the offer period through a 'front-end book-build' to provide more certainty for retail investors, rather than at the end of the offer as it did with the sales of 49% of the shares in Mighty River Power and Meridian Energy.
The Government expected to sell between 30% and 49% of the shares, rather than state up front it would sell the full 49%. A decision on how many shares to sell would be made just before the offer opened in mid March.
It also planned to offer bonus shares to retail investors, as it did with the float of Mighty River Power.
English said the front end book-build process was used successfully last year during the stock market floats last year of Synlait, SLI Systems and Wynyard.
"This will provide more certainty for Kiwi retail investors, because they will know the price when they apply for shares," English said in a luncheon speech to the Auckland Chamber of Commerce and Massey University in Auckland.
"For the first time in the share offer programme, New Zealand sharebrokers will bid for shares at the same time as institutions. This will create stronger competition for shares during the book build," English said.
State Owned Enterprises Minister Tony Ryall said in a joint statement with English this process would allow all major sharebroking firms to take part in the book build alongside New Zealand and international institutions, "creating stronger competition among professional investors."
Ryall said he expected a range of independent advice and reports from sharebrokers and other analysts will be available to New Zealand retail investors, as was the case during the Meridian float.
The Government had decided to sell between 30% and 49% of the shares in Genesis, rather than say at the beginning of the process that the full 49% would be sold.
"When we announced the share offer programme almost three years ago, we said that we would sell up to 49 per cent of these companies, subject to market conditions," Ryall said.
"Our initial advice is that a smaller Genesis offer could increase price tension in the front-end book build by offering fewer shares to more bidders," he said.
"But we will not know that until we further test demand in the market, where investors now have a wider choice of several energy companies."
The Government would decide how much to sell within that range before the offer opened.
Loyalty shares
English said the offer would include loyalty bonus shares for retail investors.
Ryall said Genesis and Treasury had been working with the Financial Markets Authority to produce a separate and more succinct Investment Statement.
"The more succinct Investment Statement will be the primary investment document for retail investors," Ryall said.
The Government would not be offering Genesis shares to United States institutions.
"This decision removes restrictions on the way that the Crown, the company and its advisers are able to provide information to New Zealand retail investors, and will help improve the accessibility of this offer," Ryall said.
An Order in Council to remove Genesis Energy from the State Owned Enterprises Act and insert it into Schedule 5 of the Public Finance Act is expected to be considered by Cabinet on 3 March 2014.
"This is a necessary step to enable the Crown to proceed with the Share Offer," Mr Ryall says.
'This will be the last'
English and Mr Ryall reiterated the Prime Minister's announcement this week that the Genesis share offer will be the last state owned enterprise or mixed ownership company to be floated by the National-led Government.
"The Government won't be selling any more shares in SOEs or mixed ownership companies - either this term or after the election," English said.
"We're now moving to a business-as-usual approach to SOEs. That obviously doesn't preclude SOEs buying and selling assets themselves, which they do all the time - or entering into joint ventures or other arrangements," English said.
"The remaining SOEs are a combination of small entities, natural monopolies or companies in sectors that are unsuitable for future share offers."
Below is David Cunliffe's full statement on today's announcment.
Key admits defeat before even selling Genesis
John Key has given up on the Genesis sale before it has even begun by saying he may only be able to sell 30 per cent of the state asset, Labour Leader David Cunliffe says.
“Everyone knows the Genesis sale is going to be a failure, from the public to investors to Treasury. Now it turns out even John Key knows it.
“Not only is it a bad idea to sell off assets in the first place, it’s economic idiocy to sell three in the space of a year. The sharemarket just isn’t that interested. That’s why John Key has admitted he may not be able to sell the full 49 per cent of Genesis.
“John Key must have looked at the figures. The number of investors in SOE energy company sales has halved after each sale since Contact Energy was floated in 1999. Given that just 62,000 Kiwis bought shares in the last company sold, Meridian, it’s possible just 30,000 will buy shares in Genesis.
“That compares to 920,000 people who voted ‘no’ to asset sales in last year’s referendum.
“Nothing shows this Government has run out of ideas more than the return of the ‘buy-one-get-one-free’ scheme of Mighty River Power. Since then they’ve tried ‘buy-now-pay-later’ with Meridian and ‘Grab-a-Share’ with Air New Zealand but with little success.
“John Key has already effective admitted that the asset sales programme has failed. It’s been so unpopular and so unsuccessful that he’s had to say ‘no more sales’ after the election.
“He should listen to the people and stop the sales right now. The Genesis sale is the last cab off the rank. The Government should leave it there,” David Cunliffe says.
This is Green co-leader Russel Norman's full statement:
John Key’s inability to admit that his asset sales have been a complete failure has now cost the New Zealanders taxpayer over half a billion dollars, Green Party Co-leader Dr Russel Norman said today.
The cost of the asset sales programme – including Treasury and SOE costs, give-aways to share buyers, foregone dividends, losses on sale, and the Rio Tinto payout – stood at $486 million before today’s Genesis sale announcement. The direct sales for Genesis are likely to total a further $20 million plus tens of millions for the bonus share give-away, and potentially much more in loss on sale.
“With the half a billion dollars that John Key has flushed down the drain on his asset sales, we could have employed thousands of teachers and nurses,” said Dr Norman.
“New Zealanders told Mr Key loud and clear that they didn’t want the asset sales. He has no mandate to continue wasting their money on his failed privatisation obsession.
“National’s decision to sell as little as 30% of Genesis is an admission that they botched the earlier sales. It also raises the question of why they’re going ahead with this sale at all. New Zealanders have shown no interest in forking out to buy what already belongs to them in the previous sales and aren’t likely to line up for Genesis shares either.
“The bonus share give-away is an expensive taxpayer hand-out to a small number of wealthy investors and National doesn’t even know how much it will cost. The Mighty River Power give-away cost $25 million. That’s an irresponsible use of public wealth.
“Rather than wasting its time and the public’s money on selling our power companies, National should have been tackling the massive increase in power prices on its watch.
“In government, the Greens will end asset sales, put an end to the excessive prices that the power companies charge families and businesses, and offer families independence from the big electricity companies with affordable solar power,” said Dr Norman.
(Updated with more detail, quotes)
2 Comments
Clearly they are not confident about the price and number of shares that they will sell. If they were working for the best interests of the tax payers they would wait untill the market had digested the previous sales and built up some demand for a new listing. This is just an attempt to save face by sticking to their guns while minimising the loss of value to the tax payer. They are playing politics with our assets and looking after their own interests rather than acting as responsible stewards.
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