Power price squeeze saps energy companies as Manawa tumbles

Electricity generator-retailers pushed the local stock market down today as a spike in energy prices stresses the sector and manufacturers dialling back their operations.

Thursday, August 8th 2024, 6:21PM

by BusinessDesk

The S&P/NZX 50 Index fell 68.89 points, or 0.6%, to 12,257.28. Across the main board, 75 stocks declined, 49 were unchanged and 55 rose.

Turnover was $118.3 million, with Fisher & Paykel Healthcare accounting for $15.3m of that.

Energy stocks

Manawa Energy led the market lower, sinking 7.9% to $3.94. The North Island electricity generator cut earnings guidance after a power retailer defaulted on its supply payments and as its own soft generation volumes forced it to pay expensive wholesale prices to meet its commitments.

Other gentailers were similarly hit, with Meridian Energy falling 3.3% to $6.21 and Mercury NZ sliding 1.6% to $6.69. Even Genesis Energy, which stands to benefit given its backup Huntly generator, slipped 1.1% to $2.185, while Contact Energy bucked the trend, unchanged at $8.46.

“We desperately need some rain to fill up the lakes,” Matt Goodson, a managing director at Salt Funds Management, said. “We don’t have the gas that we used to have since the exploration ban and disappointments at Kupe.”

Infratil, which holds a 51% stake in Manawa, increased 0.7% to $10.61.

Vital Healthcare Property Trust was among the day’s bigger decliners, falling 3.1% to $1.865. The healthcare property investor reported a 0.5% decline in adjusted funds from operations – a key earnings metric – as smaller devaluations helped narrow the annual loss to $101.5m.

Still, a planned joint venture was delayed with the potential partner’s expectations falling short of Vital Healthcare’s, and the completion timeframe was pushed out to calendar 2025.

Goodson said the result aligned with expectations, though investors were disappointed that the partnership wasn’t completed.

“A challenge is the Australian private health sector – insurers are doing well, but healthcare providers are really struggling, and there’s a risk around their ability to pay the current rent,” he said.

Other stocks

Other commercial property investors were mixed. Precinct Properties NZ slipped 0.4% to $1.215 on a volume of 2m shares, Kiwi Property Group was unchanged at 88 cents with 1.4m shares traded, Property for Industry rose 0.9% to $2.19 on a volume of 1.2m, and Goodman Property Trust decreased 0.2% to $2.06, with 1.1m units traded.

The future track of interest rates remains a big issue for investors, who are increasingly clamouring for the Reserve Bank of NZ (RBNZ) to cut the key rate.

The RBNZ’s survey of expectations today showed inflation expectations eased. However, Goodson pointed out that Wednesday’s wage data showed wage inflations remained sticky. Reserve Bank of Australia governor Michele Bullock said on Thursday that the board didn’t expect to cut its target cash rate this year.

Cinema software developer Vista Group International extended gains, rising 4.7% to $2.65 as it posed the biggest gain on the benchmark index. The company was upbeat about the coming six months when reporting a narrower first-half loss earlier this week.

Retailer KMD Brands rose 2.4% to 42 cents, and travel software developer Serko advanced 2.3% to $3.59.

Outside the benchmark index, Tower rose 2.8% to $1.12 after raising its earnings forecast for underlying profit to be at least $45m in the September year and for gross written premium growth to be at the upper end or beat its 10%-15% guidance.

Goodson, whose Salt Funds is a substantial shareholder of Tower, said the weather helped on the insurer’s claims experience and the premium growth was strong.

Smart refrigeration firm AoFrio rose 12%, or 0.8 of a cent, on a light volume of 7,490 shares. The firm last week maintained its earnings guidance, lifting first-half revenue by 27% and generating positive earnings.

Among the more heavily traded companies, Arvida reported the biggest volume, with 6.5m shares changing hands, which rose 0.6% to $1.63, while Ryman Healthcare advanced 1.6% to $4.57. F&P Healthcare slipped 0.2% to $32.88 on a volume of 466,000.

Tags: Market Close