Power shares lead fall in stock index

SkyCity shares were down 0.5 per cent to $3.89 yesterday. Photo / NZME.

Investors mull issue of oversupply in electricity markets against sharp rises seen in share prices of utilities.

New Zealand shares fell yesterday, led by Contact Energy after it flagged plans to invest offshore. Genesis Energy and Meridian Energy declined as enthusiasm for the sector cooled.

The NZX 50 Index fell 28.29 points, or 0.5 per cent, to 5758.25. Within the index, 23 stocks fell, 13 rose and 14 were unchanged. Turnover was $108 million.

SkyCity Entertainment Group fell 0.5 per cent to $3.89, recovering from an intraday drop to as low as $3.80. The casino operator has said it will foot the bill for its $402 million convention centre construction, and cut costs with a redesign, rather than seek taxpayer funding for cost overruns.

"It seems to be an assumption, now, SkyCity's only going to have to spend this amount of money and they're going to get all these regulatory concessions," Goodson said. "It will be fascinating to see if that is the case."

NZX was the best performer on the benchmark index, up 2.5 per cent to $1.21. The stock market operator is due to report its first-half earnings this morning.

Spark New Zealand rose 0.6 per cent to $3.35.

Outside the benchmark index, Eroad fell 0.3 per cent to $3.79. The electronic road user charges and transport services company said today it is offering $10,000 signing bonuses for software engineers.

Contact dropped 9 per cent to $6.30. The energy generator and retailer kept its first-half dividend unchanged and said it would look offshore for better returns after first-half earnings fell in what it called an oversupply in the electricity market.

"There's two things in the result are disappointing, one is the lack of a sharp increase in the dividend which was certainly expected by some and hoped for by most," said Matthew Goodson, managing director at Salt Funds Management.

"Secondly, is them signalling that New Zealand is largely ex-growth and they may go invest some money overseas. Without knowing what might be considered there would be an extreme degree of nervousness."

Contact's result weighed on competitors, as investors mulled the issue of oversupply of power in the electricity markets against the sharp rise utilities share prices have had, pushed higher by investors looking for reliable dividend paying stocks. Genesis fell 2.2 per cent to $2.26. Meridian declined 1.6 per cent to $1.87. Mighty River Power rose 0.5 per cent to $3.375.

"Obviously it's all the same market," Goodson said. "There are major structural headwinds as electricity efficiency improves significantly and there has been a degree of permanent change where the big factories, and the pulp and paper mills that suck up all the electricity that hard, heavy manufacturing part of the New Zealand economy has been hollowed out to a degree."