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Meridian tipped as next state asset for sell down

Published: 10:58AM Monday May 13, 2013 Source: ONE News

Meridian Energy will be the second state-owned asset to be put up for partial sale later this year, a leading business commentator predicts.

Brian Gaynor of Milford Asset Management also expects a much greater uptake of Meridian shares than the 113,000 people who bought Mighty River Power shares. The company was floated on the sharemarket last week.

"Depending on what the share price does with Mighty River Power over the next few weeks, I would imagine that the uptake for Meridian, which we expect to be the next one, will be far greater than it will be for Mighty River Power," Gaynor told TV ONE's Breakfast today.

Mighty River Power shares ended the first day of trading on Friday at $2.62, up 12 cents or 4.8% from its listing price of $2.50. The Government floated 49% of the company, banking $1.7 billion.

State Owned Enterprises Minister Tony Ryall told TVNZ yesterday, the Government's next share float will be an energy company.

Details will be announced in Thursday's Budget and he expects New Zealanders will have an opportunity to buy shares in the company about October, the Minister said.

Gaynor said if it is done in October, an interim result will have come out for Mighty River Power and an interim dividend will have been paid by them.

"And if the share price is say around $2.70, $2.75, $2.80, it will get more investors into that one because at the moment people are really short of getting high yields," he said.

"They're looking for companies that would give them a high dividend yield. Meridian is probably going to do that."

Gaynor agreed that investors will be just as cautious over Meridian as they were over Mighty River Power because the same issues exist - the threat by Labour and the Greens to regulate the electricity market and the risk of the Tiwai Point aluminium smelter closing and flooding the market with excess electricity supply.

He said he would have expected about 220,000 to 230,000 people to have invested in Mighty River Power.

"So there certainly has been some that have been turned away from it. But at the same time there''s people who have been in the sharemarket a long time, understand the risks of these things," he said.

"And you will lose some people but you'll actually get some people who will want to invest more because they'll reckon that the price is going to be lower because of the risks that are associated with it."

'A success'

The Mighty River Power float definitely was a success, despite "some pitfalls along the way," Gaynor said.

Milford Asset Management estimates about one-and-a-half million New Zealanders have invested in Mighty River Power - 113,000 directly plus about 1.4 million through Kiwisaver, superannuation funds or other types of PIE funds, he said.

Gaynor said there was "huge interest" by the financial markets on Friday, with everybody looking at their screens to see what the Mighty River Power share price would be and individuals themselves wanting to know what the first price was.

The float has certainly generated a lot more interest in the sharemarket which is good, Gaynor said.

"Not that the sharemarket is be all and end all. But New Zealanders have too much in residential property and residential property prices are going up too fast."

People need to diversify their investments, putting some in the sharemarket, some in property, some in bank deposits and some in bonds, Gaynor said.

Prime Minister John Key told Breakfast he thinks the Mighty River Power float was a success.

The company has the widest share register of any company in New Zealand, he said.

The Government hopes to see the partial sales of Meridian Energy and Genesis Energy and further sell down of Air New Zealand go through before next election, Key said.

Mighty River Power was the first of the four state-owned enterprises slated for sell down under a Government policy to raise as much as $7 billion to repay debt and seed its Future Investment Fund for schools and hospitals.