30 Mar 2012

Energy co. worried about impact of share index change

1:43 pm on 30 March 2012

Contact Energy is concerned the short time frame for the stock exchange's new index weighting may lead some investors to erroneously question the company's performance.

From June, the stock market will shift to a pure free float model, where an individual firm's weighting will depend on the volume of shares traded.

Strategic holdings of more than 20% will be excluded.

That will prompt fund managers to reduce their holding of Contact Energy, to reflect the power company's weighting dropping by nearly half to 4% because it is half owned by Australia's Origin Energy.

Contact says it would have preferred the changes to be gradually implemented over the next one to two years.

The company is worried some investors may think the selling reflects the performance of the firm, when it is actually related to the reweighting.

However, it says once investors complete their reweighting, Contact's share price will better reflect the company's fundamental value.