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Meridian Energy trades at modest premium in IPO

Nick Perry, Associated Press

WELLINGTON, New Zealand (AP) -- Securities in New Zealand's largest electricity generator traded at a modest premium during an initial public offering Tuesday.

Meridian Energy started trading at 1.08 New Zealand dollars ($0.90) after the government sold 49 percent of the company in a contentious asset-sales program.

Under the terms of sale, investors initially paid NZ$1 for Meridian installment receipts. They will be required to pay another NZ$0.50 in 18 months' time.

The sale will raise NZ$1.9 billion for the government, money it says it will use to reduce public debt and pay for schools, hospitals and roads. The government earlier this year raised NZ$1.7 billion from selling 49 percent of another energy company, Mighty River Power.

The government plans to sell shares in a third power company, Genesis Energy, and a small stake in national carrier Air New Zealand to raise a total NZ$5 billion.

"The government share offer program has been an important part of our overall economic plan for New Zealand, in particular by adding more depth and vitality to our capital markets," said Finance Minister Bill English at the IPO Tuesday.

Stock market participation in New Zealand is low when compared with many other developed nations. New Zealanders tend to invest more in property, leading to a housing market that the country's Reserve Bank says is overvalued.

But opposition lawmakers have called the asset-sales program a failure and a fire sale. They point to recent independent valuations that indicated Meridian was worth more than the government sales price.

Opponents this year gathered more than 300,000 signatures, forcing a national referendum on whether people support the sales. The result will likely be only symbolic, however, because it won't compel the government to change its plans.

Meridian Energy is listed on both the New Zealand and Australian stock markets. The company generates about 30 percent of New Zealand's electricity from hydro dams and wind farms.