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America’s IPO Fever Spreads to New Zealand

NZ government plans to privatize part of Meridian Energy


Rocket Fuel (FUEL) and FireEye (FEYE) are all the evidence you need that the American IPO market is on fire.

But the U.S. isn’t the only country in on the action.

The New Zealand government plans to sell up to 49% of Meridian Energy, the country’s largest electricity company, in an offering that could raise as much as $1.7 billion U.S. — the largest deal in the nation’s history, and a staggering sum considering New Zealand’s GDP is was roughly $170 billion in 2012. The Meridian IPO would trump the $1.4 billion raised by Mighty River Power back in May.

Meridian operates seven hydroelectric dams and four wind farms that generate about 30% of New Zealand’s energy.

The company does have a few risk factors. For one, New Zealand has an excess supply of energy, which helps to explain why Meridian’s operating earnings fell 6.2% to $459 million over the past year, according to Bloomberg.

Then there’s the issue of the possible shutdown of an aluminum smelter controlled by Rio Tinto (RIO) and Sumitomo, which accounts for roughly 40% of Meridian’s electricity output.

Also late next year, New Zealand will have its national elections, and the Labor and Green parties might come to power — if so, Meridian could face new regulations, which in turn could put pressure on margins.

Still, the New Zealand government — which is trying to raise about $3.9 billion to return to a budget surplus — wants to get a deal done.

To this end, New Zealand open up the offering to the general public. Meridian Energy will issue so-called installment receipts, which require an upfront per share payment of just NZ$1, then a payment for the balance 18 months later. The stock also will sport a juicy yield of 7.4% to 8.9%.

Lead underwriters include Goldman Sachs (GS), Macquarie Group (MQBKY) and Deutsche Bank (DB). The government expects to launch the deal by October.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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