Electricity generator Mighty River Power produced some impressive statistics for the three months ended June but the ongoing uncertainty about the future of Tiwai Point continues to weigh on investor sentiment.
New Zealand Aluminium Smelters, which operates the Tiwai Point aluminium smelter, is due to make its decision on the future of the smelter on August 3.
In the latest quarterly report, MRP said demand for electricity rose 2.4% in the three months ended June compared with the previous corresponding period.
After adjusting for lower temperatures, demand was estimated to have risen 1.8%, reflecting growth across all sectors: dairy processing 0.6%, rural 0.5%, urban 0.4%, industrial 0.1% and South Island irrigation 0.1%.
Thermal capacity rationalisation continued,
Genesis confirming on June 29 it was retiring a second Huntly coal/gas unit.
Craigs Investment Partners broker Chris Timms said despite the latest trends, ASX future prices were down $18.25 per MWh for 2016 and $6.73 per MWh for 2017.
The reductions reflected a recovery in national hydro storage during the fourth quarter of the 2015 financial year, decreased perceived dry-year risk priced into future years and the ongoing speculation about the level of future demand from the Tiwai Point smelter.
Energy companies produced good dividends but investors were becoming wary about the future of the smelter and the effect a closure could have on the electricity sector, he said.
NZAS had three options, two of which would have little effect on the market. The first option was NZAS finding a cheaper supplier than Meridian, the present supplier, which was doubtful as Meridian was the cheapest generator in New Zealand.
Secondly, NZAS could try to renegotiate a cheaper price from Meridian.
The third option was closing the smelter, which would be negative for the sector as Meridian transferred its excess electricity on to the market. The companies that would be hurt most by that action would be those which had non-hydro generating assets, Mr Timms said.
• The smelter owners have been told there is no scope for further Government assistance, Prime Minister John Key says.
