The Government has released the details of the loyalty scheme for the Mighty River Power share float for eligible New Zealand investors.
On Friday it issued the prospectus for the 49% sale of the state-owned energy company - the first of three up for partial privatisation by the Government.
The offer document for Mighty River Power states that the share price is likely to be between $2.35 and $2.80 per share.
Bill English says the float process will determine the true value of buying into Mighty River. Photo: NATIONAL PARTY
The prospectus highlights risks that Mighty River faces, including a lack of water to power its stations, the possible closure of the Tiwai Point aluminium smelter in Southland owned by Australian company Rio Tinto, and Maori land and water claims.
To help fulfil the Government's political promise of a high level of New Zealand share ownership, eligible investors would be able to buy at least $2000 worth of shares.
Finance Minister Bill English announced details of another policy aimed at encouraging local investment - a loyalty bonus scheme.
Mr English said they would get one bonus share for every 25 shares they hold after two years, with a limit of 200 bonus shares.
But the Labour Party's Clayton Cosgrove said that is just a bribe to stop shares being flogged off overseas at the cost of tens of millions of dollars.
"If the Government's going to have to spend around about $50 million to keep this in Kiwi hands for two years - just after the next election - then it shows it's the wrong time to sell and it's the wrong thing to do.
"They have not quantified the risks in terms of the Tiwai Point-Rio issue - we know there's a flat electricity demand there."
Bill English said the price of the scheme won't be known until the final price and allocation have been set, but the maximum cost would be 4% of the shares sold to retail New Zealand investors.
Shares are likely to go on sale from 15 April and the final share price would be set after the retail offer has closed, expected to be on 8 May.
The offer document says each share should produce a dividend of between 4.6% and 5.5% in 2014.
About 440,000 people pre-registered their interest in buying shares in Mighty River Power.
Smelter a potential risk
The Mighty River Power share offer document notes that the Tiwai Point smelter at Bluff uses about 13% of New Zealand's electricity and its possible closure could drive down the price of electricity.
The smelter's owner, Rio Tinto, has rejected the New Zealand's Government's offer of a short-term subsidy and is continuing negotiations with Meridian Energy for a cheaper power price deal.
Finance Minister Bill English told Radio New Zealand's Checkpoint programme that, at present, no one knows the cost of risks such as the smelter's closure and Treaty of Waitangi claims.
He said the float process would determine the true value of buying into Mighty River Power.
"No one really knows the answer to how many cents per share each one of them may or may not be worth. And then in the end, because the investor is going to be an owner of this company, they will make their own judgement."
But the Green Party says there is not enough information for investors to adequately assess the risk of putting their money into Mighty River. Co-leader Russel Norman said on Friday it is irresponsible of the Government to have large unquantified risks in the prospectus, yet still ask people to buy.
"People will have to try to make some kind of guestimate of the likelihood and then the likely impact of the Tiwai smelter closing. It does cast a big shadow over the value of the company."
The Government said it is not going to speculate on future events without hard facts, and investors should seek professional advice.
Mighty River Power chairperson Joan Withers on Friday urged investors to look at the available information.
