Mighty River reaches new low

Photo / Alan Gibson

Mighty River Power's share price fell yesterday to its lowest point since listing, while the broader market was also weak in line with softer overseas trends.

By late afternoon, the generator and energy retailer's share price was at $2.25, well short of its $2.50 issue price and down from the $2.73 peak when it debuted on the NZX in May. It eventually closed down 8c at $2.26.

Much of Mighty River's post-float weakness has been put down to selling by overseas institutions. The Labour-Greens plan to intervene in the electricity generation market has also weighed on Mighty River and its main competitor, Origin-controlled Contact Energy, which closed at $5.01, around its lowest price since last December.

One fund manager said politics may be to blame for the weakness of both Mighty River and Contact. The Government wants Mighty River shares to perform well, paving the way for the next company to be partially privatised, Meridian Energy.

The fund manager said Labour had said recently that hydro assets should be treated as "sunk" cost assets that the taxpayer had already paid for, and so should be valued as such.

"The problem is that investors ... are paying for the assets on a fair market basis, so the Government is already being paid out for the asset value," he said. While institutional investors weren't overly concerned when the policy first arose, the resignation of Revenue Minister Peter Dunne may have added to concerns, even though Dunne's departure was unlikely to change the balance of power.