Energy sector share prices

A broker has sent through a research note on and Mighty River which I found interesting. The notes look at what the base price of the two companies should be, and the effect in their prices of Tiwai Point and the Labour/Green nationalisation policy.

They say:

  1. Base case scenario – MRP a target price of $2.60, 17% higher than current market price of $2.22, and Contact a target price of $6.00, 12% higher than current market price of $5.37
  2.  Should Tiwai Point be fully exited, our analyst sees this applying an 8.5% hit to his Contact valuation, but only 6.6% to MRP
  3. The Labour / Green proposal, if implemented, is far more damaging, resulting in a 23.3% drop in his Contact valuation but a far larger 31% hit to MRP (dropping the valuation to $1.78)

 

That’s an (un)impressive amount of sabotage. So not only would we end up destroying the market for power generation, and increasing the risk of black outs, we’d also wipe out a quarter to a third of the value of investors in those two companies.

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