New Zealand Professional Investment Services Firm

Forsyth Barr

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.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Electricity Sector<br>The Super-Nova of Solar Developments</h2>
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<p>Nova Energy's announcement of a 400MW solar farm near&nbsp;Taupo&nbsp;and a possible 300MW development in the South Island adds to the already extensive solar pipeline, which we now estimate at 2.8GW, a +40% increase since we published&nbsp;House of the Rising Sun&nbsp;on 29 March. As the sixth largest generator/retailer in New Zealand, with flexible generation that can firm solar, the development makes sense. In the context of current high wholesale electricity prices, we view the solar pipeline as a positive in that&nbsp;it helps reduce political/regulatory risk. But if too much solar is developed (and New Zealand is a long way from that being an issue at this stage), there is downside risk to wholesale electricity prices and sector valuations.&nbsp;</p>
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<h3>Nova joins the solar game with the announcement of New&nbsp;Zealand's&nbsp;largest solar project and total intentions yet</h3>
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<p>Nova has announced two grid-scale solar&nbsp;projects, a 400MW solar farm near&nbsp;Taupo&nbsp;in the North Island and a 300MW in the South Island. These projects make Nova the largest grid-scale solar developer in New Zealand, based on announced intentions, surpassing Genesis Energy's (GNE) and&nbsp;FRV's&nbsp;joint venture target of 500MW. The proposed&nbsp;Taupo&nbsp;project is going through consenting and is planned to be built in three stages (150MW, 150MW and 100MW) over a 6–7 year&nbsp;timeframe. Construction is hoped to begin, pending consents,&nbsp;in the summer of 2022/23. We estimate the 400MW project will generate 650GWh to 700GWh, or ~1.6% of New&nbsp;Zealand's&nbsp;generation.</p>
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<h3>Project makes sense given Nova's other generation and retail assets</h3>
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<p>We view Nova's move into grid-scale solar as complimentary to its 200MW gas&nbsp;peakers&nbsp;and ~105,000 electricity customers. Nova is New&nbsp;Zealand's&nbsp;sixth largest electricity retailer. The solar generation should&nbsp;lower the cost of supply to its retail base and the gas-peaking generation can be used to firm its&nbsp;solar generation. The existence of Nova's other assets means it does not face the same funding hurdles as the independent developers.</p>
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<h3>Possible transmission implications in&nbsp;Taupo</h3>
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<p>In our report, House of the Rising Sun, we noted connection issues as one of the main challenges for solar projects. Taupo is an area that has had transmission constraints and ~ten years ago was upgraded to enable additional geothermal capacity. However, that upgrade probably did not factor in a large solar farm, which could pose issues for Contact Energy's and Mercury's long-term geothermal development plans. We would view geothermal developments as being higher quality than solar, as typically geothermal produces ~5x the amount of electricity for the same capacity and it does not have to be firmed. This highlights the importance of transmission and ensuring the right incentives are in place.</p>
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Electricity Sector The Super-Nova of Solar Developments


Nova Energy's announcement of a 400MW solar farm near&nbsp;Taupo&nbsp;and a possible 300MW development in the South Island adds to the already extensive solar pipeline, which we now estimate at 2.8GW, a +40% increase since we published&nbsp;House of the Rising Sun&nbsp;on 29 March. As the sixth largest generator/retailer in New Zealand, with flexible generation that can firm solar, the development makes sense. In the context of current high wholesale electricity prices, we view the solar pipeline as a positive in that&nbsp;it helps reduce political/regulatory risk. But if too much solar is developed (and New Zealand is a long way from that being an issue at this stage), there is downside risk to wholesale electricity prices and sector valuations.&nbsp;


Nova joins the solar game with the announcement of New&nbsp;Zealand's&nbsp;largest solar project and total intentions yet


Nova has announced two grid-scale solar&nbsp;projects, a 400MW solar farm near&nbsp;Taupo&nbsp;in the North Island and a 300MW in the South Island. These projects make Nova the largest grid-scale solar developer in New Zealand, based on announced intentions, surpassing Genesis Energy's (GNE) and&nbsp;FRV's&nbsp;joint venture target of 500MW. The proposed&nbsp;Taupo&nbsp;project is going through consenting and is planned to be built in three stages (150MW, 150MW and 100MW) over a 6–7 year&nbsp;timeframe. Construction is hoped to begin, pending consents,&nbsp;in the summer of 2022/23. We estimate the 400MW project will generate 650GWh to 700GWh, or ~1.6% of New&nbsp;Zealand's&nbsp;generation.


Project makes sense given Nova's other generation and retail assets


We view Nova's move into grid-scale solar as complimentary to its 200MW gas&nbsp;peakers&nbsp;and ~105,000 electricity customers. Nova is New&nbsp;Zealand's&nbsp;sixth largest electricity retailer. The solar generation should&nbsp;lower the cost of supply to its retail base and the gas-peaking generation can be used to firm its&nbsp;solar generation. The existence of Nova's other assets means it does not face the same funding hurdles as the independent developers.


Possible transmission implications in&nbsp;Taupo


In our report, House of the Rising Sun, we noted connection issues as one of the main challenges for solar projects. Taupo is an area that has had transmission constraints and ~ten years ago was upgraded to enable additional geothermal capacity. However, that upgrade probably did not factor in a large solar farm, which could pose issues for Contact Energy's and Mercury's long-term geothermal development plans. We would view geothermal developments as being higher quality than solar, as typically geothermal produces ~5x the amount of electricity for the same capacity and it does not have to be firmed. This highlights the importance of transmission and ensuring the right incentives are in place.


Electricity Sector: The Super-Nova of Solar Developments