The MRP share offer

April 5th, 2013 at 12:50 pm by David Farrar

Finally, it is out. The announcement:

New Zealand retail investors in the share offer will receive one loyalty bonus share for every 25 shares they hold for two years from the offer, up to a maximum of 200 bonus shares, Finance Minister Bill English says.

Mr English also announced that the indicative price range for the shares is $2.35 – $2.80 per share, with the final price expected to be announced on 8 May after the retail offer has closed and the institutional offer has been conducted by a book-build process.

“The loyalty bonus scheme that I am announcing today is another way to encourage widespread and substantial New Zealand ownership of shares in MRP,” Mr English says.

“It also recognises the loyalty of those New Zealanders who retain their shares and contribute towards the country’s savings culture.”

The loyalty bonus scheme is available only to New Zealand retail investors – not to institutions in New Zealand or overseas.

A 1 in 25 bonus is basically a 4% premium for holding on. Experienced investors will buy and sell regardless as potential gains are greater than 4% but for first time investors, the bonus will probably encourage them to hold onto their shares for at least the initial period.

People who pre-registered will be posted or emailed copies of the share offer document once the offer opens, expected to be Monday 15 April.

686 million shares are up on offer.

A useful summary of risks is here:

  • The availability of the fuel (mainly water, geothermal fluid and gas) that Mighty River Power requires to generate electricity may reduce for a wide number of reasons;
  • Mighty River Power’s power stations may not be able to generate electricity as expected if they cannot operate in the normal manner or at all;
  • If the Tiwai Point aluminium smelter were to significantly reduce its electricity consumption or cease consumption altogether, the resultant drop in demand could lead to a sustained reduction in electricity prices in general;
  • The wholesale price at which Mighty River Power sells the electricity it generates, or buys electricity to sell to customers, is subject to significant variability and may be unfavourable;
  • The volume and price at which Mighty River Power is able to sell electricity to customers may be adversely affected by competitor behaviour, economic conditions, changes in customer demand or regulatory changes;
  • Investment in geothermal development activity requires significant early stage capital and may encounter unexpected delays, increased costs, a requirement to impair assets or not be commercially viable;
  • International geothermal development faces additional risks associated with operating in jurisdictions outside of New Zealand;
  • Changes in the regulatory environment that adversely impact Mighty River Power;
  • A single (or multiple) catastrophic event generating losses not covered by insurance;
  • Insufficient access to future capital; and
  • Treaty of Waitangi and other Māori claims relating to ownership and governance of land, water and geothermal resources that directly or indirectly impose additional restrictions, conditions or additional costs

I plan to buy shares, despite those risks. There are no rewards without risk. I’m pleased that I will be able to make an individual choice as a citizen about whether to invest my money into Mighty River Power, rather than have the decision solely up to the Government,

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39 Responses to “The MRP share offer”

  1. pollywog (1,153 comments) says:

    Tis a sad day indeed for those proud New Zealanders who built these assets and the future generations whose inheritance just got sold down the river:(

    Fuck this government sucks balls!!!

    [DPF: New Zealanders did not build these assets. The customers of the power stations built them effectively through their power charges.]

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  2. kowtow (8,464 comments) says:

    Why wouldn’t one buy shares in this adventure?

    When the government (taxpayer) is a major partner you can’t lose.

    More crony capitalism.

    [DPF: Don't talk nonsense. Of course you can lose. Share prices will go up and down.]

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  3. dime (9,972 comments) says:

    id have a crack if i wasnt too busy raping the property market.

    it will be interesting to see how many go to the super fund and kiwisaver funds.

    stoked to see this happen.

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  4. MikeG (425 comments) says:

    “[DPF: New Zealanders did not build these assets. The customers of the power stations built them effectively through their power charges.]”

    What?!! Who provided the capital for ECNZ to build the hydro stations?

    [DPF: Generally, the banks]

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  5. RightNow (6,994 comments) says:

    “Tis a sad day indeed for … the future generations whose inheritance just got sold down the river:(”

    I’d think they might be happy that some of the debt they’re inheriting is being paid down.

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  6. pollywog (1,153 comments) says:

    Its the current governments debt, not theirs RightNow.

    And yes you’re right dpf. It was benevolent aliens and magic elves who built them, not nzers. We just paid for the work.

    [DPF: No. Don't lie about what I said. Taxpayers have not built these stations. Customers have, with capital generally provided by banks.

    The notion of generations of taxpayers investing in these assets is a myth like your elves.]

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  7. All_on_Red (1,582 comments) says:

    “Who provided the capital for ECNZ to build the hydro stations?”

    Bankers lending the money to the Govt/entity to do it based on the returns it will get from the people who buy their product.

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  8. kowtow (8,464 comments) says:

    Share prices go up and down,yes they do.But when the govt (taxpayer) owns it it will never go under like a genuine publicly listed co does or one upon a time should when the shit hits the fan.

    Air NZ in trouble? No problem,the tax payer has deep pockets.

    I’m not talking nonsense.

    This is all part of the too big to fail etc tax payer underwriting the whole economy bollocks that has dragged the whole west into an economic abyss.

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  9. dime (9,972 comments) says:

    hey polly – would you have that much sympathy for a guy who had to sell his house due to a tax increase? ya know, the proud kiwi who built that asset…

    also, i never realised construction workers were so emotional about what they were building. but drove past a guy working on a motorway extension, he was so proud of his work he had tears running down his face.

    as an added bonus, he was compensated with wages.

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  10. wreck1080 (3,911 comments) says:

    I find it rather funny how people pile into a new share just because it comes onto the market.

    There is nothing special about these shares as such — it is a company that will try to maximise shareholder returns, just like many others out there.

    There will be a lot of people who have 100% of their shareholdings in just this one company — whatever happened to diversification and planned portfolio construct to mitigate risk and maximise returns?

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  11. pollywog (1,153 comments) says:

    Yeah I probably would dime.

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  12. Manolo (13,767 comments) says:

    Listed as risk:

    Treaty of Waitangi and other Māori claims relating to ownership and governance of land, water and geothermal resources that directly or indirectly impose additional restrictions, conditions or additional costs.

    Yes, some Stone Agers are determined to oppose it as an avenue to obtain the highest pecuniary advantage.
    Lets give them hell.

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  13. RightNow (6,994 comments) says:

    “Its the current governments debt, not theirs RightNow.”

    Hahaha that’s very funny. But seriously let’s make a rule that governments have to finish each 3 year term with zero debt on the books.

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  14. Manolo (13,767 comments) says:

    id have a crack if i wasnt too busy raping the property market.

    dime, you’re responsible for the rape culture prevalent in NZ society and discovered by the congenial and uniquely wise P.G.

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  15. Mike Readman (363 comments) says:

    Is there anything to stop all shareholders except the govt selling all their share to overseas billionaires for example?

    [DPF: Yes. A 10% cap per share-holder. But if people get to make a profit selling the shares they paid for, that is a win-win]

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  16. graham (2,335 comments) says:

    Why yes, there is, Mike.

    Hone Harawira.

    Remember that last year, Harawira wrote an open letter to overseas investors wanting to buy shares in New Zealand state-owned enterprises (SOEs), warning them to steer clear or be caught up in legal battles.

    He claimed that “Steps are being taken to take the case to the United Nations (under the Declaration on the Rights of Indigenous Peoples) and Maori groups have pledged to take action against sales to overseas interests which impact on our sovereignty.”

    He went on to say “So today I think it only proper to send a warning to overseas investors – steer clear of any share offer in the above SOEs. “The purchase of these shares is likely to see you caught up in legal battles and direct action from citizens determined to protect their own interests, both of which will be lengthy and costly and have an adverse impact on the value of your investment … You have been warned.”

    http://www.stuff.co.nz/national/politics/6542948/Hone-Harawira-to-foreign-investors-steer-clear

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  17. graham (2,335 comments) says:

    wreck1080 at 1:22 pm

    I find it rather funny how people pile into a new share just because it comes onto the market.

    There is nothing special about these shares as such — it is a company that will try to maximise shareholder returns, just like many others out there.

    There will be a lot of people who have 100% of their shareholdings in just this one company — whatever happened to diversification and planned portfolio construct to mitigate risk and maximise returns?

    True. But then as the shares will be limited to, what, $2000 worth? – it hardly counts as “piling in”. But you are correct, of course, diversification should be carefully considered. My wife and I have relatively small holdings of shares in six or seven different companies, including a couple of overseas companies. And, of course, we have investments in other areas, not just shares.

    Hopefully people will look on this as an opportunity to increase diversification of existing investments. I’d like to see that message pushed, but I guess it’s inappropriate to do so during this particular share float.

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  18. Alan Johnstone (1,087 comments) says:

    I looked at this in some detail last week and priced what I considered a fair price to be; I considered MRP value at $2.10 – $2.20

    At $2.35 to $2.80 they are far too expensive when you consider the rapidly deteriorating debt position and for what they yield.

    There are better investments out there, I’m going to pass.

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  19. muggins (3,716 comments) says:

    So many imponderables.
    We have a rough idea of the share price, possibly will end up around $2.60.
    Bonus shares,nothing startling. 200 shares at whatever they are worth at the time,maybe somewhere between $600-700.
    No idea how many shares will be available per person ,might only be a thousand.
    Gross dividend might be somewhere between 6 and 7%.
    My guess would be the shares will go up after issue due to demand .
    But at the first hint of any trouble,ie Rio Tinto decides to close the smelter down, the nervous nellies will sell and the price could go down below issue price.
    I think I will wait until after the float.

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  20. graham (2,335 comments) says:

    Contact Energy shares were sold at $3.10 per share in 1999, now worth $5.44.

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  21. Alan Johnstone (1,087 comments) says:

    “Contact Energy shares were sold at $3.10 per share in 1999, now worth $5.44.”

    How is that in any way apposite to the current discussion ?

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  22. Cunningham (844 comments) says:

    pollywog (958) “Tis a sad day indeed for those proud New Zealanders who built these assets and the future generations whose inheritance just got sold down the river:(” Boo fucking hoo. I haven’t seen any dividends from these companies have you? What has happened is kiwis have been forced to pay stupid increases in power prices for the last decade. Yeah government control really helped to keep prices down didn’t it??? At least the money from the sale is going towards things that can be used by all (hospitals, schools etc) and not into some black hole which can be abused by the govt of the day.

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  23. graham (2,335 comments) says:

    Alan Johnstone:

    muggins mentioned that shares will probably go up after the float, but could go down when problems arise. I was merely providing the example of Contact Energy. Share price has gone up, in spite of the issues that Contact has had.

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  24. Alan Johnstone (1,087 comments) says:

    True but they are very different companies and I’d very wary about drawing any parallels between them.

    Look at the fundamentals; levels of working capital and debt. One is tracking down and one up. The last three years have seen big changes as they have increased dividend payouts to the state. (hint, solid energy)

    The time for debate over the wisdom of sales is long gone; all we’re at now is numbers. It looks expensive to me, if Bill English can sell this as $2.60 as a taxpayer I’d be delighted; as a buyer i’d want cheaper.

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  25. Ross12 (1,425 comments) says:

    One of the ironies of this that the Greens are vey much opposed to the partial sale but I’ve read European investment funds setup to specifically invest in “green” investment ( such as renewable energy schemes ) are lining up to invest in the NZ energy companies when they can.

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  26. muggins (3,716 comments) says:

    http://www.contactenergy.co.nz/web/mediaandpublications/pressreleases/2000/20000327_01
    graham , Contact Energy shares were being sold at less than issue price in 2000.

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  27. rouppe (971 comments) says:

    I know this is not unique to this IPO but…

    I hate how they won’t set a price. Basically they are saying that we should stump up $x,000, and not know how many shares we will get for that $x,000!

    The price drives the dividend yield, their upper range is 20% more than their lower range, and they already said it might be higher than that upper figure.

    Would you buy a house this way? A car? “Everybody tell us how much money you have, and we’ll tell you afterwards how much of the house we’ll give you for it.” It doesn’t work that way after the IPO, so shouldn’t work that way beforehand?

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  28. muggins (3,716 comments) says:

    http://www.contactenergy.co.nz/web/view?vert=in&page=/content/shareinformation/shareHistory

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  29. tvb (4,421 comments) says:

    The Labour Party are doing their best to make this sale tank. They have lost the argument but they box on. I would like them to get a stiff warning they are getting close to treason.

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  30. Keeping Stock (10,339 comments) says:

    Quite so tvb; it’s almost treasonable the way that Labour and the Greens are trying to stop a democratically elected government from delivering on its policy by trying to talk down the value of the MRP shares.

    Make no mistake; the electorate will be reminded of this small-mindedness and refusal to accept the will of the public when it goes to the polls next year.

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  31. cha (4,013 comments) says:

    Heh, anyone….shoe shine boys……

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  32. Johnboy (16,529 comments) says:

    Johnboy sold twenty sheep and applied for $10,000 worth. His he a fool?

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  33. Johnboy (16,529 comments) says:

    I think not! :)

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  34. redqueen (562 comments) says:

    What I thought was interesting was the indicative P/E ratio of 34.7 – 41.4 in FY 2013 forecast. That is a very steep price (albeit not the only relevant measure). However, VCT is trading around 13.5 and Contact Energy is 18.6. Still have to read more of the document, but that was a notable eye-catcher (which is good, as it’s made me think more about the share offer, including the risks, rather than just blindly purchasing them – or if I was a socialist, complaining about how this is the end of civilisation and we’re all going to end up being owned by some apparently inferior race of evil foreign people…no, but seriously, was quite noticeable).

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  35. smttc (752 comments) says:

    Well I am buying as many of those shares as I can lay me hands on. I agree with the analyst who said the govt is selling them too cheap. Actually I am going to buy them just to piss the socialists off.

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  36. UrbanNeocolonialist (288 comments) says:

    I am really looking forward to the government divesting themselves of their power producing assets and then hopefully establishing proper controls on the electricity cartel to get rid of the ridiculously overpriced electricity that we currently have. NZ has some of the cheapest generation in the world, averaging just $0.02-3c/kWh, yet somehow we are lumbered with retail prices that are 10x higher and expensive in international terms. (Tripling in price from ~$0.10 in 1990 to ~$0.30 now). It is patently bullshit to claim that this reflects increases in production or distribution costs.

    The high prices are a consequence of a ridiculously lax control of a monopoly where they put the prices up every year based on ‘low returns’ and then revalue the assets based on the resulting increased returns in an endless loop. The govt has turned a blind eye as it is pocketing billions a year in dividends from it, but it is now costing NZ households more than $500 a year each.

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  37. pollywog (1,153 comments) says:

    Let the gouging truly begin.

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  38. wat dabney (3,756 comments) says:

    Let the gouging finally end.

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  39. pollywog (1,153 comments) says:

    Warm bath and a sharp blade wat?

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