MRP shares may sell for up to $2.80

Mighty River Power shares are likely to be priced between $2.35 and $2.80 when they are offered to the public, it was revealed today.

Friday, April 5th 2013, 3:46PM

But uncertainty over the Rio Tinto deal at Tiwai Point is likely to push prices to the lower end of that scale.

The Government will net between $1.6 billion and $1.9 billion for the offer. Already, 440,000 Kiwi investors have registered their interest in purchasing shares.

There will be 686 million shares offered, and a minimum of $1000 worth must be bought.

A loyalty offer meansinvestors who buy shares in the float will be eligible for one additional share for every 25 shares, as long as they hold the original shares for at least two years, up to a maximum of 200 shares.

Profitability is forecast to lift for the current financial year to June 30, at $94.8 million, up from $67.7 million last year, and another jump forecast in the year to June 30, 2014, to $160.4 million.

That is being driven by a rise in sales, falling costs and $91.4 million of impairments in the year, including writedowns on the value of international geothermal investments.

The offer document reflects the uncertainty about what might happen to Mighty River Power’s profits if the Tiwai Point aluminium smelter, which uses about 15% of the country’s electricity, cuts production.

"If New Zealand Aluminium Smelters were to significantly reduce consumption below 2012 levels or cease consumption altogether, the resultant drop in demand could lead to a sustained reduction in wholesale electricity prices … and electricity prices generally," the document says.

The Green Party says the risks are being downplayed. Co-leader Russel Norman said: "There is a very real danger that the closure of Tiwai Point, Treaty claims and the reforms by a future Government will reduce the value of these shares significantly."

A listing is expected on both the NZX and ASX on May 10.

The Government will retain 51% of the shares.

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