Contact Energy shares slumped more than 4 per cent today as rumours gathered pace that California-based Edison Mission would sell its 51 per cent at a large discount.
The stock dropped 22 cents to 500 and have dropped over 12 per cent in just over two weeks as concerns have mounted
about Edison making a placement to institutions at well below the then prevailing price.
Adding to Contact's woes, wholesale power prices have fallen sharply this month, putting pressure on profits.
ABN Amro Craigs broker Keith Ferguson said investors were nervous.
The share price began its descent on January 26 after Edison chief executive Tom McDaniel announced he had resigned from the Contact board.
He said he was too busy with restructuring Edison to continue as a Contact director.
Edison in November announced it was putting all its overseas assets on the block including its stake in Contact. Analysts speculate Edison wants to sell all its overseas holdings to one buyer, but they said there were few, if any, likely buyers.
The rise of the New Zealand dollar has made Edison's stake less attractive to an overseas buyer.
As a result of these negatives, the option of a placement has gathered momentum.
Edison's stake at today's market price is worth just around $1.47 billion -- around US$1 billion.
It paid $1.2 billion for its original 40 per cent stake bought from the Government in May 1999 at $5.00 a share, which was then worth about US$838 million.
It topped that up to 51 per cent two years later at $3.10 a share (the same price the shares were sold to the public) at a cost of $197 million, then worth US$83 million.
- NZPA
