Mighty River Power says it plans to buy back up to $50 million of its own shares - less than five months after the shares began trading.
Company chair Joan Withers says the board believes the buyback is a prudent use of capital and is in the company's best interests.
Mighty River Power shares began trading on the New Zealand Stock Exchange in May.
Joan Withers says Mighty River Power has about $100 million less debt than was forecast when the Government sold 48% of its shares in May and the buyback decision is part of prudent capital management.
"Absolutely no government directive involved, this is a board decision. As with most of the companies, and I think we've seen quite a few in recent times including Air New Zealand embark on similar buy back programmes.
"So there is absolutely no influence from the Crown and the Meridian IPO is totally coincidental."
When the Government sold just over 48% of the company shares were $2.50.
The shares have consistently traded below the issue price and closed on Wednesday at $2.20.
The announcement comes in the middle of the sale period of up to 49% of the shares in another government-owned power company, Meridian Energy.
'Act of desperation'
The Labour Party is describing the share buyback as an act of desperation to prop up a falling share price.
Labour's state-owned enterprises spokesperson Clayton Cosgrove says it shows the total folly of the Government's asset sales programme.
"One minute the Government is saying 'the MRP shares are the best thing since sliced bread in a bag', the next minute the company is using $50 million of taxpayers' money to buy them back, at the same time the Government is selling off another state-owned enterprise, Meridian.
"It's a really good thing the Government doesn't own a brewery because they've just proved they couldn't organise a drink in one."
Clayton Cosgrove says the $50 million could have been used for the benefit of all taxpayers.
New Zealand First says Mighty River Power's decision is nothing short of financial roulette with taxpayers' money.
New Zealand First leader Winston Peters says the buyback totally undermines the Government's asset sales programme.
And he says it's a very high risk move, especially if there's a drought this summer.
And the Greens say the buyback is an attempt to prop up Mighty River's share price during the partial sale of Meridian Energy.
But a spokesperson for State Owned Enterprises Minister Tony Ryall says the buyback of shares is not unusual and is a matter for the company.
The spokesperson says it has nothing to do with the asset sales programme, and the opposition is just playing politics by saying it does.
The Prime Minister meanwhile says the asset sales programme has not failed as a result of Mighty River Power's decision to buy back shares.
John Key, says it's not unusual for a listed company to buy back shares, and he views it as a sign of confidence in Mighty River Power.
No coincidence - funds manager
A funds manager says it can't be just a coincidence that Mighty River Power's decision to buy back some of its shares is happening while a share float of Meridian is under way.
Brian Gaynor says the sharemarket was expecting a buy-back at some time, but the timing is surprising.
He says the company's AGM would have been the more usual time for such a move.
Mr Gaynor says as the company's board is Government-appointed, people suspect that politics may be involved.