A fund manager says investors don't like plans by the Labour and Green Parties to overhaul the electricity system if they win next year's election.
Harbour Asset Management chartered financial analyst Craig Stent said polls suggest New Zealand could well have a Labour/Greens government after the next election so their plans could become government policy.
He said the consequence was investors would demand a higher risk premium to invest in generators such as the Government's Mighty River Power, currently being floated.
Mr Stent said it effectively removed the free market aspect of the electricity market and in terms of wholesale prices, put a cap on certain generation assets such as hydro, geothermal and gas.
He said it would remove the signals to invest when required that a free market took into account, although that was not an issue in the short term because New Zealand was over capacity.
Mr Stent said the Labour/Greens policy could force the price of Mighty River Power shares below the indicative range set out in the prospectus of between $2.35 and $2.80.
On Friday, Contact Energy shares fell as much as 34 cents, or more than 6%, to $5.12 before recovering to end the day at $5.31 while Trustpower shed as much as 56 cents to $7 before closing at $7.18.
Mighty River Power's share sale price is due to be announced on 8 May following a bidding process among professional investors.
