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14/1/2019 — Economics, Politics and Government
Analysts watch for regulation risk

The financial markets are watching for what could be far-reaching industry reviews from Government initiatives this year.

Journalist Jamie Gray from the New Zealand Herald reported at the weekend that a raft of reviews are under way that cover telecommunications, petrol, dairy and banking. In aviation, the Commerce Commission completed its final report on pricing last year.

Gray said while regulation changes generally don't cause much of an upset, there was always potential for them to do so, according to Josh Wilson, senior portfolio manager at NZ Funds said.

“Regulatory risk is front and centre for a number of our largest listed companies in 2019,” he reportedly said.

Wilson said it "feels like" there are an unusually high number of regulatory reviews in progress at present, some of them stemming directly from the change in Government in 2017.

“The market expectation is for relatively benign conclusions to these reviews, but there is always the chance of a rogue decision, like we saw with Chorus earlier in the decade,” he said.

The Herald said back in 2013, Chorus's share price was punished by investors, falling as the Government struggled with a legislative response to Telecommunications Commissioner Stephen Gale's proposal to regulate price cuts. Through a protracted process, the Commission backed away from enforcing as deep a cut as first proposed.

Jamie Gray said some industry reviews currently under way are:

  • Pricing and terms on which Chorus delivers copper and fibre access services from 2020 onwards has been the subject of a lengthy review. Under the proposed framework, Chorus's recent fibre investment will be regulated in much the same way as other utility businesses, such as electricity lines and gas networks.
  • The Commerce Commission is undertaking a study of mobile phone markets. The purpose is to better understand how mobile markets are developing and performing and how the competitive landscape for mobile may evolve as technology changes. The Commission expects to publish its preliminary findings in April.
  • The Ministry of Business Innovation and Employment review is looking at whether the current electricity market delivers a fair and equitable price to consumers. The review released its first report late last year and expects to publish a preliminary options paper near the end of February. The panel expects to deliver its final recommendations to Minister of Energy Megan Woods by mid-2019.

The Herald said this review potentially could have implications for the power companies, Meridian Energy, Genesis Energy, Contact Energy, MercuryNZ and TrustPower.

Source: nzherald.co.nz

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