Several aspects of the Mighty River Power business which goes on sale on Monday, are occupying the minds of fund managers looking at buying shares.
One key to valuing the shares is the outlook for the prices it charges its business and residential customers.
The prospectus shows a 5% change either way in Mighty River Power's retail prices could slice off or add $19 million to its bottom-line profit for the year ending June 2014.
Over the five years covered by the prospectus, Mighty River Power's retail prices are up by double the rate of inflation.
BT Funds Management head of equities Paul Harrison doubts this can continue because going forward there is an over capacity of electricity in New Zealand and demand is very slow.
"There is the potential post-2015 if Tiwai Point was shut down that we do see a significant surplus of electricity come into our market."
Closures of more expensive power stations, such as Huntley and Otahuhu B, would likely limit any fall in wholesale prices.
Harbour Asset Management research analyst Craig Stent believes competition will limit retail price increases.
Fund managers say they believe there's little political will to see lower retail electricity prices.
The Government does not want to jeopardise the part-sales of its power companies while the Greens and Labour see higher power prices as a way to reduce emissions.
Writedowns
Mighty River Power's forays into offshore investment have led to large writedowns - in the current year it has written off $89 million, leaving a book value of $92 million.
Devon Funds Management equity analyst Phillip Anderson said previous ministers directed the company to look for offshore investments.
He said New Zealand has some of the best geothermal resources in the world, but from a listed company perspective a lot of that is probably more speculative than desired.
The company is committed to spending $10 million a year just to maintain its position in Chile.
Mint Asset Management portfolio manager Shane Solly said it's difficult to know at this stage whether that was money well spent, but the board will work through those issues.
Shareholders Association chairman John Hawkins said investors should not expect too much from Mighty River Power.
He said there's some risk in relying on the increases in revenue forecast for Mighty River, particularly for 2014, because the company has aggressive payout of dividend in the prospectus based on its strong cashflow, but this cashflow reduces the company may not be able to achieve that level of payout.
"Bottom line, Mighty River Power is not a get rich quick investment, it's probably going to be a reasonably steady dividend play like most infrastructure companies, but it'll have its ups and downs as well."
The actual share price, between $2.35 and $2.80, will be announced on 8 May and trading will begin shortly after.
