Govt will back MoM to bolster energy security

New Zealand’s government has committed to backing Crown-owned energy companies’ investments in critical electricity infrastructure, telling the mixed-ownership model generator-retailers Genesis Energy, Mercury NZ and Meridian Energy it will support funding requests that support security of supply as part of a wider package to address issues in the sector.

Major energy companies were generally weaker in overnight trading, with the likes of BP and Chevron following Brent crude prices lower amid speculation OPEC nations will increase production.

Meanwhile, global markets are facing up to the growing likelihood of another US federal government shutdown after President Donald Trump failed to cut a deal with Democrat leaders pushing to keep Obamacare subsidies.

Stocks on Wall Street are fading into the end of the quarter with investors fretting key data won’t be available for the Federal Reserve when it reviews interest rates this month, although Pfizer led gains among pharmaceutical companies after the drugmaker cut a deal with the White House to lower prices to avoid tariffs.

Power struggles

Finance minister Nicola Willis and energy minister Simon Watts today unveiled a raft of initiatives aimed at shoring up New Zealand’s energy supply after a review of the sector found the government-controlled gentailers’ investment plans have been stymied by the Crown’s 51% ownership.

The government has committed to support capital requests from Mercury, Genesis and Meridian for funding requests for strategic and commercially rational investments that support energy security.

“This is to ensure a perceived lack of access to Crown capital does not stand in the way of New Zealand’s energy security,” Willis said in a statement. “The government is committed to maintaining its legally mandated 51% stake in the MoM companies, and we accept we would need to participate in any equity raise required for major new investments.”

Among other measures to bolster the sector, the government will launch a formal procurement for an LNG import facility and explore how all-of-government contracts can be used to underwrite new energy projects.

The NZX-listed gentailers had a mixed September quarter, with Mercury gaining 11% through the period, Genesis advancing 3.3% and Contact up 1.1%, while Meridian fell 5.6%.

Globally, energy companies were generally weaker in overnight trading, following oil prices lower with Brent crude futures down 1.4% at US$66.18 a barrel amid growing expectations OPEC will increase production in the coming months. Chevron was down 1.1% in late trading, while Exxon Mobil fell 2% and London-listed BP dropped 2%.

Higher ground

Stocks on Wall Street are poised for a soft close to the end of the September quarter, with the S&P 500 index down 0.2% in late trading as investors brace for another US federal government shutdown after policymakers failed to find common ground.

Democrat leaders are pushing to keep enhanced subsidies on Affordable Care Act health-insurance plans that are set to expire, something their Republican counterparts aren’t willing to accept.

“US equities are little changed overnight, with hopes for a last-minute deal to avoid a government shutdown fading, which would create uncertainty and delay the publication of key economic releases,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.

A shutdown will delay the release of economic data, meaning the Federal Reserve won’t have access to the latest jobs report when reviewing policy this month. The kiwi dollar traded at 57.98 US cents at 7am in Auckland from 57.90 cents yesterday.

Meanwhile, drugmakers rallied, with Pfizer up 6.2% in late trading after the firm agreed to cut prices on all drugs sold to the Medicaid programme to avoid President Donald Trump’s tariff regime.

At the same time, Trump unveiled a direct-to-consumer website for America’s to buy drugs, called TrumpRx, and said more drugmakers will make similar deals in the coming weeks.

The antipodes are set for a soft start to October, with Australian futures pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman. New Zealand’s S&P/NZX 50 index posted its strongest quarter of the year in September as it grew 5.5%, taking its gains so far this year to 1.4%.

Fonterra Cooperative Group and its Shareholders’ Fund shed rights to their dividends toady.

Local data today include Statistics New Zealand’s building permits for August, while Ryman Healthcare will make its debut on the ASX with the retirement village operator taking a secondary listing across the Tasman.

Reporting by Paul McBeth. Image from Curious News.