The Government has kick started the Mighty River Power listing after deciding to go ahead with an “Order in Council” at this afternoons session.  The Order in Council process will result in Mighty River ceasing to be a State Owned Enterprise so that it can be partially sold and listed.

In a press release the Government reiterated that New Zealanders will be at the front of the queue and that applications for shares up to $2,000 will not be scaled.  The release also confirmed a secondary listing on the ASX and a loyalty bonus for New Zealand retail investors. 

A loyalty bonus will result in additional shares for retail investors who hold onto their shares for a minimum period, likely one to three years.  This mechanism was used in the 2010 Queensland Rail listing whereby Queensland investors received one additional share for every 15 held if they did not sell in the first year.

A pre-registration period will be launched tomorrow that will allow New Zealanders to register their interest and receive a copy of the offer document upon its release.  This will only be available to New Zealanders with an IRD number, New Zealand bank account and a New Zealand address.  Investors interested in applying for Mighty River Power shares should register their interest on the website to be launched tomorrow.

The offer document is expected to be lodged in the next few weeks and one week following this the offer period may begin and will last for three weeks.  The book build process will follow this where final pricing and allocation of shares will be determined.

Mighty River recently reported a strong half year result with a 31% increase in underlying earnings.  Heading into the listing analysts will be looking at the impact of the North Island drought on full year earnings, as well as what impact the possible closure of the Tiwai smelter may have on growth prospects.  Despite these short term issues Mighty River Power is a well managed and operated Company and will give many New Zealanders a chance to gain equity market exposure.

William Curtayne

Senior Analyst

Disclosure of interest: Milford may subscribe for Mighty River Power shares following a review of the offer document which is yet to be released.