Contact Slumps as NZ Opposition Proposes Split: Wellington MoverTracy Withers
Contact Energy Ltd. fell the most in four years after New Zealand’s main opposition parties said the nation’s electricity generators would have to split their retailing units if they formed a government next year.
The proposal from the Labour and Green parties includes creating a new industry regulator to act as the sole buyer of wholesale electricity with the power to set prices, according to the Labour website. Labour trails the ruling National Party in opinion polls ahead of an election due by the end of 2014.
Shares in Contact, the nation’s biggest publicly-traded power company, slumped 4.6 percent to NZ$5.46 as at the 5 p.m. close in Wellington, the biggest drop since March 30, 2009. TrustPower Ltd., a smaller rival, fell 3.1 percent to NZ$7.56.
The government has begun selling shares in its three state-owned generators, with the offer of as much as 49 percent of Mighty River Power Ltd. Offers of shares in Meridian Energy Ltd. and Genesis Power Ltd. are also planned. All three companies have retail units, as do Contact and TrustPower.
“This policy is likely to have an impact on share prices,” Labour leader David Shearer said in a statement on the website, adding that he has asked the Mighty River Power board and its shareholding ministers to issue a supplementary disclosure to the offer documents.
Under Labour, power companies would have to separate their retail arms into standalone companies with their own management and boards, according to the plan. They won’t initially need to be spun-off, although this may be necessary to ensure benefits to retail customers, it said.
The new industry entity, to be called NZ Power, would pay generators a return for their actual costs, and would therefore be able to sell power to retailers at lower prices, Labour said. NZ Power would plan for new generation and invite offers to build plants. It would replace the Electricity Authority and take over the relevant powers of the Commerce Commission and the Ministry of Business, Innovation and Employment.