At their results, Forsyth Barr expects to hear more from the power companies about their project development pipelines as they move towards their final investment decisions - the stage where they decide to push on with their planned projects.
“The standout performer will be Contact Energy as it reports record half-year earnings before interest, tax, depreciation, amortisation and financial instruments [ebitdaf],” Forsyth Barr analysts said in a research note.
“However, its outlook for the remainder of 2024 is likely to be the most subdued due to the effects of its Tauhara geothermal project not coming online as expected.”
Forsyth Barr expects Contact to report ebitdaf of $328 million for the half, up from $246m in the previous corresponding period, despite suffering technical issues over the period.
Contact’s Taranaki-based gas-fired turbine - GT22 - which supplies power to the grid during peak demand, broke down in September.
The company expects the repaired unit to arrive back in New Zealand in May this year - well ahead of the original March 2025 date.
Contact’s Taranaki Combined Cycle plant - which supplies baseload power to the grid, is expected to be running this winter after an outage in December.
The company has also pushed out the start time for its Tauhara geothermal project to the third quarter of 2024 from its original plan of the first quarter, which alters the market’s views on the timing of future earnings.
However, Auckland-based Jarden said Contact’s first-half performance would give the company enough “runway” to meet or beat its current 2024 guidance of $600m and Jarden’s estimate of $609m.
Overall, power company operating costs are expected to continue to trend higher, only partially offset by rising energy prices.
Forsyth Barr said Genesis would face the greatest headwinds from lower North Island hydro generation in the half and increased generation costs.
The outage at Genesis Energy’s gas-fired turbine at Huntly - Unit 5 - meant additional generation from the company’s coal and gas-fired Rankine units was required to support the wholesale electricity market.
Unit 5 - which supplies continuous or baseload power to the grid - returned to service on January 20 after breaking down last June.
“Genesis and Mercury are well-placed, with Genesis returning Unit 5 to service and Mercury currently benefiting from a near full Lake Taupō,” Forsyth Barr said.
Only Mercury and Meridian Energy are expected to increase their interim dividends.
The power companies are all heavily involved in renewable power projects, and future development plans will be a key focus.
Contact has three projects that are expected to reach FID in the second half: Its Wairakei geothermal replacement project; Kowhai Park solar; and a battery at Glenbrook.
As always, the subject of the plans of the country’s biggest power user - the Rio Tinto-controlled NZAS, which runs the Tiwai Point aluminium smelter near Bluff - will be top of mind for power companies when they report their results.
Summary of first-half ebitdaf forecasts:
Monday
Contact Energy $328m (from $246m)
Tuesday
Mercury $440m (from $452m)
Thursday
Genesis $196m (from $298m)
Wednesday, Feb 28
Meridian $444m ($425m)
(Source - Forsyth Barr)
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
