Shares in Genesis Energy have debuted on the New Zealand stock exchange at a 17 percent premium above the price the Government sold them for.
Investors were sold the shares for $1.55 each but they opened at $1.81 when trading started at 1pm on Thursday. Throughout the afternoon they were between $1.80 and $1.83, before closing at $1.81.
Finance Minister Bill English. Photo: RNZ / Diego Opatowski
The Government sold 49 percent of the shares in the electricity generator and retailer to investors, including 68,000 mum-and-dad-type investors, for a total of $733 million
The shares had been expected to debut at a premium because there was significantly greater demand than available shares. The Government had to scale back purchases by larger investors, capping retail investors' holdings at about $5000 and cutting broker allocations by 20 percent.
Just after trading began, Finance Minister Bill English said the demand for the shares had been greater than many people had expected and rejected a suggestion that demand was strong because the price was so cheap.
"We went to the market and circumstances where people regarded the $1.55 as a better price than they'd expected. But look, markets shift - we've had different experience with Meridian, different again with Mighty River Power. The markets move around - sometimes it's up, sometimes it's down."
Mr English said taxpayers got a good deal from the Genesis sale and other state-owned assets assets the Government has sold in its privatisation programme, bringing the total proceeds to $4.668 billion.
A director of the sharebroking firm Hamilton, Hinden and Green, Grant Williamson, told Radio New Zealand's Checkpoint programme it was a very successful first day for Genesis, with 78 million shares changing hands, mostly due to interest from institutional investors.
Bonfire of the vanities, says Labour
The Labour Party said the opening share price highlights what a fire-sale the Government's asset sales programme has been. State-owned enterprises spokesperson Clayton Cosgrove says the difference between the issue price of $1.55 and its opening price of $1.81 adds up to a taxpayer loss of $120 million.
"It was sold as as cheaply as possible and the private sector or the market's taken the cream off the top to the tune of $120 million. This is bonfire of the vanities - and the vanity is Bill English, Tony Ryall and John Key pursuing this policy at the expense of the taxpayer."
Milford Asset Management executive director Brian Gaynor believes the sale of power companies Meridian, Mighty River Power and Genesis was flawed and badly managed by the Government, which could have got a higher price for them. However, he thinks Genesis shares are likely to be the best performer of the three companies.
Mighty River Power sales
Mighty River Power has generated and sold less electricity in the nine months to the end of March.
Figures released by the company show its market share of power generation has declined from 17 percent to 16 percent for the period. Its market share of total electricity sales has also fallen by 3 percent to 17 percent.
Despite this, Mighty River produced 36 percent more geothermal power in the nine months and it is also getting a higher price on the wholesale market.
Earlier in the week, Meridian Energy said it was also generating less hydro power due to the lack of rain in its major catchment areas.