The announcement of a special dividend for Contact Energy shareholders could mean the electricity generating company was being prepared for sale, Harbour Asset analyst Craig Stent said yesterday.
Instead of exploring the potential for global investment in geothermal projects, Contact said it would deliver prospective cashflows back to shareholders.
The company also announced an improved dividend policy and a commitment to ongoing capital management.
''So, what does this mean? From a dividend perspective, shareholders will receive a 50c special dividend, fully imputed, on June 23.
"This largely clears out Contact's tax imputation credit balance within the country. Some investors have also read into this the shareholding structure of the company is up for review,'' Mr Stent said.
At a stretch, that could mean the majority shareholder - Origin Energy- was readying the business for sale, he said.
Most probably, it could just mean a financially prudent move by the management team.
However, in a recent presentation to investors in Sydney, Origin chief executive Grant King highlighted that with a sustained period of low oil prices, the company had less balance sheet flexibility.
Origin placed on the table various actions, including divesting assets, Mr Stent said.
That could include Origin's New Zealand Kupe stake or other assets in Australia but it might also include Contact.
''If this eventuated, it could set in motion a rationalisation of the New Zealand electricity market.''
Alternatively, Origin had a structural view on the outlook for the industry generally, he said.
Improving solar generation and cheaper battery storage were key thematics globally that had the potential to significantly change the shape of the industry.
While still in the early state of implementation, the rate of change in technology and cost reductions in terms of production might bring forward the adoption of the technology.
In the last three months, both Origin and AGL, in Australia, had adopted strategies to promote those technologies - partly to protect their existing assets, it was suspected, Mr Stent said.
New Zealand had a largely renewable generation portfolio, so the impact of new solar and battery technology might be more muted.
However, there were risks the utility companies should be considering.
In the near term, the market was waiting for a potential announcement from New Zealand Aluminium Smelters on July 1 when the smelter, near Bluff, had the first of several windows to make a statement regarding its electricity contract with Meridian, he said.
