Power price squeeze saps energy companies as Manawa tumbles - Market close

Gentailers were weaker as a spike in energy prices stresses the sector.

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

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.

Manawa Energy led the market lower, sinking 7.9% to $3.94, with the North Island electricity generator cutting earnings guidance after a power retailer defaulted on its payments for supply 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,” said Matt Goodson, a managing director at Salt Funds Management. “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 timeframe to complete was pushed out to calendar 2025.

Goodson said the result was in line 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 commercial property investors were mixed. Precinct Properties NZ slipped 0.4% to $1.215 on a volume of 2 million shares, Kiwi Property Group was unchanged at 88c with 1.4 million shares traded, Property For Industry rose 0.9% to $2.19 on a volume of 1.2 million, and Goodman Property Trust decreased 0.2% to $2.06, with 1.1 million units traded.

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

The central bank’s survey of expectations today showed inflation expectations eased, although Goodson pointed out that yesterday’s wage data showed wage inflations remained sticky, and Australia’s central bank governor Michele Bullock today said 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 42c 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 27% and generating positive earnings.

Among the more heavily traded companies, Arvida reported the biggest volume with 6.5 million shares changing hands as it 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.