New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Contact Energy's (CEN) first-time FY25 EBITDAF guidance and dividend guidance was a big disappointment.</li><li>In essence, CEN is short generation and needs to cover its position in a market with elevated wholesale electricity prices.</li><li>The modest-to-flat dividend outlook means investors will have to wait, possibly another three years, before there is meaningful dividend growth. </li></ul>

Contact Energy's (CEN) first-time FY25 EBITDAF guidance and dividend guidance was a big disappointment.In essence, CEN is short generation and needs to cover its position in a market with elevated wholesale electricity prices.The modest-to-flat dividend outlook means investors will have to wait, possibly another three years, before there is meaningful dividend growth. 

Contact Energy - Caught Short — Expectations Revised Lower

<ul><li>Contact Energy (CEN) has got through a tricky 3Q24 largely unscathed and is well positioned for 4Q24 with above average hydro storage.</li><li>In addition, CEN should see the month-long reliability run of its Tauhara geothermal development project, which may now be fully commissioned before the end of FY24, ~three months ahead of CEN's revised timetable.</li><li>We have lifted our FY24 EBITDAF forecast +5% and CEN only has to match FY23 performance to deliver a result ~+NZ$40m ahead of its FY24 EBITDAF guidance. </li></ul>

Contact Energy (CEN) has got through a tricky 3Q24 largely unscathed and is well positioned for 4Q24 with above average hydro storage.In addition, CEN should see the month-long reliability run of its Tauhara geothermal development project, which may now be fully commissioned before the end of FY24, ~three months ahead of CEN's revised timetable.We have lifted our FY24 EBITDAF forecast +5% and CEN only has to match FY23 performance to deliver a result ~+NZ$40m ahead of its FY24 EBITDAF guidance. 

Contact Energy  - Steaming Ahead — March 2024 Op Stats

<ul><li>Contact Energy (CEN) reported a record half year 1H24 EBITDAF result as expected, albeit only just.</li><li>The NZ$323m result (after market making losses) was up +27% on 1H23, with stronger retail and wholesale electricity prices the main driver.</li><li>CEN lifted FY24 EBITDAF guidance, with better retail pricing the key factor, although guidance looks conservative in light of the strong January 2024 operating performance. </li></ul>

Contact Energy (CEN) reported a record half year 1H24 EBITDAF result as expected, albeit only just.The NZ$323m result (after market making losses) was up +27% on 1H23, with stronger retail and wholesale electricity prices the main driver.CEN lifted FY24 EBITDAF guidance, with better retail pricing the key factor, although guidance looks conservative in light of the strong January 2024 operating performance. 

Contact Energy - Pipeline ConFIDence — 1H24 Result

<ul><li>We calculate Contact Energy (CEN) will report a record six month EBITDAF result on 19 February 2024, but strong headwinds means it faces a challenging 2H24.</li><li>The strong 1H24 result has been driven by a big lift in the mass market retail netback, with the effects of the delayed start of CEN's Tauhara geothermal project the main negative impacting 2H24.</li><li>These negative headwinds facing CEN should be transitory, and the effect of lower interest rates has lifted our target price +35cps (+4.8%) to NZ$7.70.</li></ul>

We calculate Contact Energy (CEN) will report a record six month EBITDAF result on 19 February 2024, but strong headwinds means it faces a challenging 2H24.The strong 1H24 result has been driven by a big lift in the mass market retail netback, with the effects of the delayed start of CEN's Tauhara geothermal project the main negative impacting 2H24.These negative headwinds facing CEN should be transitory, and the effect of lower interest rates has lifted our target price +35cps (+4.8%) to NZ$7.70.

Contact Energy - Speed Wobbles Ahead — Dec '23 Op Stats

Thematic (Sector/Industry)

<ul><li>October 2024 was another strong hydro inflow month, with lake levels rising well above average, helping to suppress wholesale electricity prices and relieve winter 2025 anxiety.</li><li>Energy Margin analysis indicates Mercury (MCY) had the strongest month operationally of the generator/retailers, with Meridian Energy (MEL) still held back by the high cost hedging it took out.</li><li>With Methanex recommencing operations, November 2024 should be a more representative month for the generator/retailers. </li></ul>

October 2024 was another strong hydro inflow month, with lake levels rising well above average, helping to suppress wholesale electricity prices and relieve winter 2025 anxiety.Energy Margin analysis indicates Mercury (MCY) had the strongest month operationally of the generator/retailers, with Meridian Energy (MEL) still held back by the high cost hedging it took out.With Methanex recommencing operations, November 2024 should be a more representative month for the generator/retailers. 

Power Points - Hydro Recovery Continues — November 2024

New Zealand

Contact Energy Limited is a diversified and integrated energy company which focuses on the generation of electricity and the sale of electricity and gas in New Zealand.

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Contact Energy (CEN NZ)

Contact Energy - Caught Short — Expectations Revised Lower

The modest-to-flat dividend outlook means investors will have to wait, possibly another three years, before there is meaningful dividend growth.

Forsyth Barr

Contact Energy - Steaming Ahead — March 2024 Op Stats

Contact Energy (CEN) has got through a tricky 3Q24 largely unscathed and is well positioned for 4Q24 with above average hydro storage. In...

Forsyth Barr

Contact Energy - Pipeline ConFIDence — 1H24 Result

CEN lifted FY24 EBITDAF guidance, with better retail pricing the key factor, although guidance looks conservative in light of the strong January...

Forsyth Barr

Contact Energy - Speed Wobbles Ahead — Dec '23 Op Stats

We calculate Contact Energy (CEN) will report a record six month EBITDAF result on 19 February 2024, but strong headwinds means it faces a...

Forsyth Barr

Power Points - Hydro Recovery Continues — November 2024

October 2024 was another strong hydro inflow month, with lake levels rising well above average, helping to suppress wholesale electricity prices...

Forsyth Barr

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