The results of the Meridian share float have been announced and they pose a whole lot of problems for the Government.
Meridian is a company which was valued at $6 billion in 2011. The sale of 49% of its shares at $1.50, at the low end of estimates, gives the company a market value of $3.84 billion.
The Government thought that it would have 250,000 mum and dad investors in each of the planned floats. Mighty River Power had 116,000 and Meridian is down to 62,000.
And 13% of its shares will be owned by overseas interests, not Kiwi mum and dad investors. And they will be financed into the transaction.
As a sign of how bad things are Bill English was sent out to make the announcement. John Key was no where to be seen.
If you ever needed to be persuaded that selling what are long term strategically vital assets for peanuts is a bad idea then this should provide it.
Update:
Thanks Pascal’s bookie for this comment from local mike:
“Cosgrove’s statement here:
“I don’t know how John Key and Bill English can look the taxpayers of New Zealand in the face. They have they sold half of a valuable long term asset for $1.2 billion less than they told the public they would sell it for in 2011. And just 62,000 retail investors, including institutions, bought shares.
“John Key and Bill English threw everything they could at making this sale a success, even offering a Suzanne Paul-style buy now – pay later scheme. Despite offering everything but a free set of steak knives just 62,000 people wanted to buy in.
“The number of investors in Meridian is half that of Mighty River, which was half that of Contact Energy when the National Government sold it in 1999. At this rate of success they will be paying people to buy Genesis Energy shares.
Greens here:
Only 62,000 retail shareholders have bought shares in Meridian Energy. That compares to 113,000 who bought shares in Mighty River Power and an expected take-up of 250,000 buyers per sale when the asset sales were being planned. 62,000 equates to just 1.4% of the New Zealand population.
Buyers will reap the benefit of paying only $1 per share up front and the remaining 50 cents in 18 months’ time – the total cost to the Crown of these interest free loans will be $50 million. Overseas investors bought 28% of the shares sold (13.5% of the company), meaning the New Zealand taxpayer is paying $14 million to incentivise foreign institutions to buy our electricity company.
“The Meridian flop confirms that National’s asset sales are a failure and a huge waste money,” said Dr Norman.
“Only 1% of Kiwis bought shares in Meridian. The other 99% of us have lost the profits from a strategic asset and can now look forward to higher power prices.
“The Meridian sale cost around $90 million. We know the ‘buy now, pay later’ scheme alone will set taxpayers back $50 million while the fees for brokers, lawyers, and ad-men will add around $40 million to the bill. That’s on top of the $173 million that National’s asset sales have already cost the taxpayer.
“Mr Key has just cost the New Zealand taxpayer $14 million to subsidise overseas buyers as they swoop in to take a chunk of Meridian and its profits.”
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