The privatization of Snowy Hydro is the largest IPO slated for this year with an estimated market capitalization of between A$2.5 billion and A$3 billion. The NSW government wants the sale completed before 30 June so that it doesnÆt get caught in the undercurrent created by the final sale of Telstra shares due in the third quarter.
Credit Suisse wasnÆt among early predictions as the winner of the advisory role, with most pundits picking ABN AMRO because of its connections within government. Michael Lambert, an executive director at ABN AMRO, was the former secretary of the NSW Treasury.
The choice of Credit Suisse shows that the government has a long memory and is prepared to reward past achievements û obviously happy with the work that CSFB did on the privatization of FreightCorp four years ago.
Credit Suisse wonÆt comment on the advisory win, but a source close to the deal says the challenge will be delivering on the timetable. ôThereÆs effectively only four months to get this deal structured and sold before investors start turning their attentions to Telstra,ö he says.
He says as many as three investment banks may be chosen as joint lead managers. ôThe government process requires an intensive contribution from many players, so the lead role is likely to be shared around.ö
ôCredit Suisse is out of the running now because of their role as advisors but I am sure all of the other banks involved in the advisory parade are now reshuffling their cards to play in the lead manager competition.ö
These probably include Citigroup, Deutsche Bank and JPMorgan which advised the state government on its initial plan to sell Snowy Hydro, and are not on the JLM list for Telstra. The Telstra list is made up of UBS, Goldman Sachs JBWere and ABN AMRO.
The other contender for Snowy Hydro might be Macquarie Bank which also missed out on a Telstra role.
ôThe likely JLMs will be those firms that can show distribution capabilities,ö says the source. ôI donÆt think deal management capabilities will figure highly and nor do I think retail distribution will be as important as local and overseas institutional distribution.ö
The NSW Government which owns 58% of the asset cleared a few more hurdles in the sale process this week by getting an assurance from the federal government that it will also sell its 13% minority stake in the float.
Now it is up to the Victorian state government to decide whether it wants to sell its 29% share. If not, then only 71% of the company will be listed.
Snowy Hydro is the supplier of nearly three quarters of AustraliaÆs renewable energy. The company operates the 3756 megawatt Snowy Mountains Scheme, an integrated water and hydro-electric power project located in AustraliaÆs Southern Alps, as well as the 300MW Valley Power gas-fired power station in Victoria.
A float worth A$3 billion would top last yearÆs biggest IPO which was the A$2.12 billion listing of Goodman Fielder (lead managed by Credit Suisse, Macquarie Bank and UBS).
Commentators say there is enough liquidity in the equity markets to absorb both Snowy Hydro and Telstra. The third and final sale of the federal governmentÆs stake in Telstra is said to be worth A$25 billion and is slated for the third quarter.