New Zealand's five biggest power companies traded sharply lower on the sharemarket after international mining group Rio Tinto announced a plan to shut down the country's biggest power consumer, the Tiwai Point aluminium smelter.
The biggest power generator of them all, Meridian, ended at $4.69, down 57c on the day, having earlier lost just under a dollar or $2.4 billion in market capitalisation.
Contact Energy was the worst affected on the day, losing 94c or 14 per cent. Genesis dropped 25c to 2.90, Mercury lost 10c to $4.75 and Trustpower dropped 21c to $6.80.
Before today's announcement, the power companies together made up 13.7 per cent of the S&P/NZX50 index.
New Zealand's power generators - particularly Meridian Energy- are likely to feel the brunt of the closure of the smelter - which consumes about 13 per cent of the country's power.
Meridian chief executive Neal Barclay, in an interview with the Herald, said he was disappointed for the smelter's 1000-strong workforce and the wider Southland region.
After Rio announced a review of the asset in October last year, Barclay said he regarded it as a 50/50 possibility that the facility would close.
"Our company is a big, strong organisation," he said.
"We will adapt and we are sure that the industry will adapt, but today it's about the people of Southland who are being impacted by this decision," he said.
Analysts expect the power companies' dividends to come under downward pressure, long-run power prices to fall, and some of New Zealand's more expensive power generating facilities to shut as a long-term consequence of the closure.
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The announcement came after the share prices of the main power companies had been boosted by investors seeking yield in response to very low interest rates.
Meridian said it was reviewing the decision and would engage with Rio Tinto to assist the smelter owners in an orderly exit from New Zealand.
Harbour Asset Management senior portfolio manager Shane Solly said the gentailer stocks had been driven by falling bond yields, with their dividend yields appearing attractive.
However he said those dividends may now be at risk.
Rio's decision comes after a strategic review concluded that the business was no longer viable given high energy costs and a challenging outlook for the aluminium industry.
In terms of whether consumers will get cheaper power as a consequence of Tiwai closing, much will depend on state-owned grid operator Transpower's ability to build the necessary infrastructure to shift power northwards.
Harbour Asset's Solly said in the long run, the closure would help New Zealand's de-carbonisation efforts.
Salt Funds managing director Matt Goodson expected Meridian and Contact, with their extensive South Island hydro assets, to be hit the hardest.
"Initially the most affected will be Meridian and Contact because you will have stranded hydropower in the South Island with not enough capacity within Transpower to get that power north," he said.
"Depending on the season, there could be a fair degree of spillage down south," he said.
"There will be an enormous focus on Transpower to speed up.
"All the players will be affected because it does mean lower, longer-term power price.
"There will be more competition for retail and industrial customers.
"For some, it will mean lower power prices but it will have a devastating impact on the Southland economy."
Goodson said the one-year notice period was "surprisingly quick" as some analysts had expected a more phased withdrawal.
Rio Tinto now faces the expensive issue of site remediation at Tiwai Pt.
The company came under fire earlier this year over its treatment of hazardous waste at a storage facility at Mataura.