KEY POINTS:
Contact Energy shares followed those of its majority owner Origin Energy higher yesterday after Origin rejected a A$13.6 billion takeover offer.
But market watchers say Contact's gains were about domestic factors rather than the tussle for control of its parent.
Origin yesterday rejected UK company BG Group's improved
takeover offer of A$15.50 cash per share citing the increased value of its coal seam gas reserves.
The power retailer has unveiled a 121 per cent increase in its proved, probable and possible coal seam gas reserves to 10,122 petajoules.
BG Group said that up until yesterday the two companies were engaged in putting the "final touches to the agreement" and it was "surprised to learn" that Origin had broken off those discussions.
Origin Energy shares soared as much as 9 per cent while those in Contact Energy, which were in a New Zealand Exchange-imposed trading halt until yesterday's announcement, also rose. They closed up 37c at $9.48.
However, a local energy analyst pointed out that the market believed BG had little interest in Contact and if it had succeeded in its Origin offer, would likely have sold its 51 per cent stake in the electricity generator and retailer to a trade buyer.
Yesterday's move higher, the analyst said, was likely a function of wider market sentiment - the benchmark NZX-50 index was up by 20 points or over half a per cent at the time - combined with rising anxiety about the security of electricity supply over winter.
Contact, which generates most of its power by burning gas or through geothermal plants, is generally expected to benefit from periods of reduced hydro generation.
BG Group yesterday said it had received a draft copy of Origin's recently commissioned report into its reserves, resources and prospects in the coal seam gas market and concluded that its assumptions and conclusions were "unrealistic".
While Origin says it has significantly larger coal seam gas reserves than previously estimated, it is understood that BG has concerns about whether Origin's claims over all of those reserves are solid.
In a release yesterday, BG noted "a significant number of their coal seam gas tenements in Queensland are subject to rights of third parties to a retransfer of up to 45 per cent of Origin's interest in those tenements".
Origin shares reached a record high of A$15.85 early yesterday before easing back to close at A$15.60.
Origin said the increase in reserves and the announcement yesterday of a A$2.6 billion deal between Santos and Malaysia's Petronas to build an LNG plant in Queensland using coal seam gas as feed were the catalysts for the rejection.