Origin Energy's $1.8billion sale of its 53% stake in Contact Energy has been completed, with brokerages positive on Contact's outlook and hundreds of millions of shares changing hands yesterday.
Brokers Forsyth Barr have upgraded the stock from ''neutral'' to ''outperform'' and increased the target price by 20c to $5.80, while Craigs Investment Partners maintain a ''buy'' recommendation, with a target price of $6.68.
Oversubscription meant some brokerages received just 10%-20% allocations.
Origin's sale, at $4.65 per share, was an almost 8% discount on the $5.02 closing price of Contact Energy's (CEN) shares on Monday. CEN's shares resumed trading yesterday, opening at $4.92 and spiking to $5.10, and ended the day at $5.06.
Origin has confirmed it will book a $A270million ($NZ304.3million) impairment on the sale of the shares, which it has held since 2003.
Forsyth Barr broker Andrew Rooney said the largest exchange of CEN shares during the past month had been 1.7 million traded in one day, but by noon yesterday more than 410 million shares had changed hands.
The demand was from numerous quarters, with those selling allocations as the price rose, those who initially missed out buying from the market, increased sales overseas, and purchases by index-weighted funds which are required to hold a stake, he said.
''CEN is the best value electricity company in the sector,'' Mr Rooney said, and had prompted the recommendation upgrade to ''outperform''.
He described $4.65 as ''a great entry price'' for investors to buy into a blue chip New Zea-land stock, being the cheapest in the electricity sector.
Craigs broker Peter McIntyre said this week's announcement confirming the future Tiwai Point electricity supply had ''significantly de-risked'' the electricity sector in general, which should see investor sentiment ''improve markedly and support share prices''.
''Value [in shares] is difficult to find at present, making CEN a very compelling opportunity at $4.65, where CEN shares haven't traded [at that price] in more than three years,'' Mr McIntyre said.
He said given the backdrop of low interest rates, which were likely to remain for some time, investors would likely continue seeking shares in high quality companies, with sustainable and growing dividends.
In its statement to the ASX, Origin said the sale was fully underwritten, with the shares sold to a broad range of New Zealand, Australian and international equity market institutional investors, and New Zealand retail investors, BusinessDesk reported.
''Origin Group will receive net cash proceeds of $NZ200 million and approximately $A1.4 billion upon settlement on August 10, 2015, which will be used to redeem $NZ200 million of redeemable preference shares and repay debt,'' managing director and departing Contact chairman Grant King said.
''In deconsolidating Contact from its account, it is expected an impairment charge of approximately $A270 million will be included in Origin's 2015 financial results''.
Origin disposed of its Contact stake because of pressure on its investment grade credit rating created by its $A25 billion investment in the ALNG liquefied natural gas plant in Queensland, which had experienced cost overruns, coinciding with a drop in global gas prices.
