Meridian Energy's $NZ1.26b IPO

Meridian Energy Ltd. will sell as much as NZ$1.26 billion worth of shares in an initial public offering of the state-owned the New Zealand power producer, which generates all its energy through the wind and water.

The NZ government is selling 49 per cent of Meridian, or about 1.2 billion shares, at between NZ$1.50 and NZ$1.80 a share for institutional investors and between NZ$1.50 and NZ$1.60 for N.Z. individual investors. Individual investors can pay for their shares in installments.

“The price cap gives New Zealand retail applicants greater certainty around how much they will pay for Meridian shares, which is something the New Zealand Shareholders’ Association advocated,” says NZ Minister of Finance Bill English in a statement.

Meridian is New Zealand’s largest electricity generator, producing over 30 per cent of the country’s electricity. It has more than 270,000 connections to homes, farms and businesses.

The IPO of Meridian is the second billion-dollar plus sale of a NZ company this year. In May, Might River Power Ltd. raised NZ$1.7 billion in the largest sale of a state asset in NZ history. The country’s government wants to raise as much as NZ$7 billion for its coffers through the sale of 49 per cent stakes in state-owned assets to trim the nation’s debt.

The Meridian sale is a welcome bit of business to investment bankers who have had to deal with a subdued IPO market in Australia and N.Z. last year and this year. This year there have been US$13.04 billion worth of Australian and N.Z. equity and rights offerings, according to Bloomberg data. In 2012 it was US$14.59 billion and in 2010 it was US$27.12 billion, according to Bloomberg.

Craigs Investment Partners, Deutsche Bank AG, Goldman Sachs Group Inc., JB Were and Macquarie Group Ltd. are the lead managers of the Meridian IPO. 

Individual investors have to buy a minimum of 1,000 shares but will be charged no brokerage fee, the Meridian IPO prospectus says. The N.Z. government will continue to hold a 51 per cent stake in Meridian by owning 1.3 billion shares.

The implied yield on the stock in 2014 is forecast to be between 8.4 per cent and 8.9 per cent. In 2015 Meridian forecasts it will rise to between 9.2 per cent and 9.8 per cent.

The share offer is expected to open to New Zealanders on September 30 and close at 5pm N.Z. time on October 18. The institutional offer will take place on between October 21 and 23.