NZ sharemarket surges as Tiwai Point smelter deal ends uncertainty - Market close

The leading energy stocks all had big gains after a new long-term deal supplying power to the Tiwai Point aluminium smelter was agreed. Photo / Mike Scott

A new long-term deal supplying power to the Tiwai Point aluminium smelter boosted the leading energy stocks and drove the New Zealand sharemarket to one of its biggest single-day rises in years.

The S&P/NZX 50 Index climbed steadily all day and closed at 11,867.29, surging 310.08 points or 2.68 per cent and ending a run of five successive falls. The index had increases of 1.98 per cent on November 11, 2022 and 2.05 per cent on December 8, 2021.

The index was up 0.75 per cent for the week and 0.85 per cent for the year.

There were 89 gainers and 46 decliners on the main board with 130.49 million shares worth $942.04m changing hands.

Trading was extended for the May quarterly review of the MSCI indices. Ebos Group, removed from the MSCI Large Cap Index, was down $2.27 or 6.43 per cent to $33.05 on trade worth $493.43m as passive investment funds offloaded their holdings.

It was the day the energy generators, and the country, had long been waiting for when they signed 20-year supply agreements with New Zealand Aluminium Smelters, starting on July 1.

The future of the smelter, a backbone of the Southland economy, had been overhanging the market for some time; and the smelter will remain open until at least December 2044.

Meridian Energy was up 64c or 10.46 per cent to $6.76; Mercury gained 38c or 6.03 per cent to $6.68; and Contact increased 42c or 4.77 per cent to a new all-time high of $9.22.

To run the three pot lines at the smelter, Meridian will provide a base load of 377MW of electricity, Mercury 50MW and increasing to 75MW in 2027, and Contact 120MW from January 1.

Separate contracts with Meridian and Contact will enable up to 185MW of dry-year demand response to be made available.

Mercury said the agreement provided confidence to increase renewable energy and it will look at expanding the Kaiwera Downs wind farm in Southland.

South Port NZ, which handles the aluminium exports at Bluff, gained 5c to $5.57 and said the new agreement is worth $2m in net profit.

Paul Robertshawe, chief investment officer with Octagon Investment Funds, said the smelter news removed uncertainty from the market. The energy stocks form a large part of the market, and they now have more certainty over their earnings and can firm up their dividend profiles.

The MSCI weightings of Fisher and Paykel Healthcare and Auckland International Airport (like Meridian) were increased and they gained $1 or 3.5 per cent to $29.50 and 28c or 3.72 per cent to $7.78 respectively.

The airport has just completed a A$250m ($270.6m) seven-and-a-half-year bond issue with applications exceeding A$610m.

Chorus was up 11.5c to $7.40 after telling the market its allowable fibre revenue for 2023 was under by $54m and a total balance of $105m, including 2022, will be carried forward to 2025. Chorus’ regulated asset base increased from $5.7 billion to $5.9b.

Infratil, the majority shareholder of Wellington Airport, was up 9c to $10.60 after the Wellington City Council decided to sell its 34 per cent stake in the airport worth about $300m.

Robertshawe said the market is waiting to see if Infratil wants “to play the game or let the shareholding go to another bidder”.

Port of Tauranga was up 15c or 3.09 per cent to $5; Fletcher Building gained 11c or 3.67 per cent to $3.11; and Scales Corp added 16c or 4.94 per cent to $3.40.

Seeka gained a further 13c or 5.42 per cent to $2.53; a2 Milk was up 18c or 2.4 per cent to $7.69; Fonterra Shareholders’ Fund added 11c or 2.83 per cent to $4; and AFT Pharmaceuticals collected 8c or 2.65 per cent to $3.10.

The property sector rebounded. Argosy increased 5.5c or 5.34 per cent to $1.09; Precinct was up 4.5c or 4.02 per cent to $1.165; Property for Industry gained 5c or 2.44 per cent to $2.10; Stride added 4c or 3.23 per cent to $1.28; and Goodman Trust was up 5c or 2.34 per cent to $2.19.

The Warehouse was down 7c or 6.25 per cent to $1.05; Briscoe Group declined 12c or 2.76 per cent to $4.22; Comvita fell 12c or 8 per cent to $1.38; and Accordant eased 2.5c or 5.56 per cent to 42.5c.

Synlait, down 2.5c or 5.38 per cent to 44c, increased its farmgate milk price to $8 per kg/MS for the 2024-25 season, up from the present $7.80. Synlait is forecasting an average 28c per kg/MS incentives above the base price for the two seasons.