Shares flat as smelter deal emerges

New Zealand's headline share index was flat today with news of an extension of operations at the Tiwai Point aluminium smelter having little impact on the already elevated share prices of Meridian Energy and Contact Energy.

Thursday, January 14th 2021, 6:33PM

by BusinessDesk

The S&P/NZX 50 Index fell 4.4 points, or 0.03 percent, to 13,115.87. Within the index, 22 stocks rose, 21 fell and seven were unchanged. Turnover was $138.2 million.

Mining multinational Rio Tinto said today it had struck a deal with Meridian to keep the Southland aluminium smelter in business for another four years.

The smelter had been scheduled to close in August this year, which would have caused major disruption for South Island power producers - Meridian and Contact in particular.

However, both stocks showed minimal reaction to the news as they have already been bid up to record highs by global clean energy index funds.

Contact - which is now 14.4 percent owned by global investment giant BlackRock - fell 2.6 percent to $9.69, while Meridian Energy crept 0.6 percent higher to $7.94, stemming four days of sharp losses.

In November, Forsyth Barr analysts said there was “limited/no share price upside" if Rio Tinto decided to keep the smelter open longer.

Meridian chief executive Neal Barclay will host a teleconference for investors on Monday.

Other electricity generators were also mixed: Mercury NZ saw the biggest fall of the day, down 2.7 percent at $7.10, but Genesis Energy was up 1.1 percent at $3.74.

Stock market operator NZX had the day’s biggest gain, rallying 3.4 percent to a record $2.16, after Forsyth Barr analyst Jamie Foulkes predicted the company would beat its own earnings guidance.

The analyst gave the stock a 12-month target price of $2.25, saying the future pipeline of initial public offerings and wealth technology contracts was encouraging.

Pushpay Holdings recovered 1.3 percent to $1.60, despite receiving a less upbeat review from Foulkes who cut 30 cents from its 12-month target, bringing it to $2.

“Disappointing customer growth and the “threat of further shareholder sell downs” is weighing heavily on the stock, he said.

The New Zealand dollar dropped back below 72 US cents as the American currency rallied on the promise of increased fiscal stimulus relief.

With Democrats now holding a majority in both houses of government, an increase in income support cheques from US$600 to US$2,000 is expected to pass-through Congress quickly.

The kiwi dollar was trading 71.90 US cents at 5pm in Wellington, down from 72.26 cents yesterday.

The trade-weighted index was at 74.44 at 5pm, from 74.64 yesterday. The kiwi traded at 92.83 Australian cents from 93.07 cents, 74.80 yen from 74.84 yen, 59.20 euro cents from 59.15 cents, 52.72 British pence from 52.79 pence, and 4.6526 Chinese yuan from 4.6643 yuan.

Tags: Market Close