‘Political risk’ prompts broker to cut big four power valuations by $1.3b

Friday, 7 November 2025

Broker Forsyth Barr has reduced its estimate of the value of the big four power companies by between 2.2% and 4.5% because of an “elevated risk” they could be targeted by policies negative to them after the next election.

The broker said electricity was more likely to be an election issue than at any time since 2014, when Labour and the Greens proposed introducing a “single buyer model” that would have required large power firms to sell all their electricity via a state-owned buyer at a price that reflected their actual generation costs and a reasonable profit margin.

The downgrades shaved $1.3b off Forsyth Barr’s estimate of the power firms’ fair value, which currently totals about $37b.

Its largest downgrade was to Meridian Energy, because of the dominance of cheap hydro generation in its generation mix, and was enough to shift the recommendation it attaches to its shares to “neutral”, from outperform.

ACT Party leader David Seymour unveiled its energy policy on Wednesday, calling for the Government to sell its shares in Meridian, Mercury and Genesis and an “adult conversation” on nuclear power, while championing “investment certainty”.

Seymour’s statement highlighted differences between the party and coalition partner NZ First, whose deputy leader Shane Jones has suggested it could consider re-nationalising the gentailers and/or splitting their retail and generation arms, and who dismissed ACT’s policy statement as an “ideological spit-ball”.

Labour has yet to release its energy policy. Current spokesperson Megan Woods did not propose a fundamental overhaul of the market when energy minister between 2017 and 2023.

Forsyth Barr said none of the policy suggestions to date — including NZ First’s re-nationalisation talk — were “a material cause for concern”.

But with the election about 12 months away, “the potential is there”, it said.

Assuming investors were compensated at market value, there should be limited downside risk from re-nationalisation, it said.

Forsyth Barr said it was easier to envisage NZ First policies being enacted if it went into coalition with Labour after the next election.

“Shane Jones appears to have lost confidence in the market, whereas National and ACT appear to have not.”

Much might depend on how the power market played out next winter, it said, as that could determine how much it was in the public eye ahead of the election.

“A repeat of winter 2024 … will place a lot of unwanted attention on the sector. The sector will want to fly under the radar as much as possible, and a wet 2026 winter should help reduce the number of headlines,” it said.

Transpower has reported the country’s hydro lakes were about 40% fuller than usual for the time of year, following strong inflows.