Edison campaign takes an Xmas break

By CHRIS DANIELS

With the lure of a Christmas cheque no longer on the table, Edison Mission has gone quiet in its attempt to persuade Contact Energy shareholders to sell.

The United States energy giant has, in the past few weeks, toned down the advertising and public relations campaign it launched with a flurry last month.

Shareholders were told that its $4.14-a-share offer was fair and reasonable.

Contact's independent directors and brokerage firm Forsyth Barr have recommended shareholders accept the offer.

But in the face of opposition from some institutional investors and a perceived lack of interest from the thousands of small shareholders, the deadline was extended to February 3.

Rob Mercer, head of research at Forsyth Barr, said the brokerage would have preferred Edison to have stuck to the original deadline because the extension meant "people will delay their decision, because investors can't recall their acceptance of the offer".

Forsyth Barr was recommending that shareholders accept the offer, because Contact's prospects would be determined by a volatile set of factors.

Wholesale electricity prices were now fairly low, and there was no guarantee of a price spike, which happened this winter, enabling Contact, with its gas-fired thermal power stations, to make big money.

Mr Mercer said he was recommending people accept the Edison offer, but not suggesting that shareholders sell their stakes just yet.

Contact's profitability, and so its value, has a lot to do with weather conditions. One of the main reasons for low prices was the heavy South Island rainfall over the past few weeks.

Meridian Energy, which owns and operates eight hydro stations on the Waitaki River and one at Manapouri, yesterday said its storage lakes now were now at "levels close to normal" for this time of year.

Meridian spokesman Alan Seay said the Waitaki stations were running flat out to make use of the high inflows.

But the flows would have remain strong in the early part of next year to ensure plenty of water for hydro generation.