Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Could Genesis Be Best Of the Power Company Partial Sales?

25 March 2014

Could Genesis Be The Best Of the Power Company Partial Sales?

The editors of respected sector weekly NZ Energy & Environment Business Alert say a general consensus seems to be forming over the Genesis float - It could be a handy investment in the short to medium term. Analysts have noted the high dividend yield with Forsyth Barr describing it as “turbo charged.” Like a protective parent Genesis Energy CEO Albert Brantley has also hit back at descriptions of his company as the "ugly duckling" of the power generators, saying critics did not grasp its diversification. In Brantley’s opinion this makes Genesis a safer bet than many would think. He may be right, but like all power utilities it seems to be facing an uncertain long term future.

NZ Energy & Environment Business Alert's editors note Generation wise, Genesis has the largest power station, in Huntly, which is always going to make a lot of money when the hydro lakes run low and is a steady earner most of the time. Some people also forget Genesis does have hydro assets in both islands to balance out its profile. However like all generators it is dealing with limp demand, the uncertainty about the future of the Tiwai smelter and what its closure will mean, and the unknown effect of a potential Labour/Green govt.

The editors say Genesis can point to the largest customer base - electricity (27% market share) and gas (44% market share) - and its considerable investment in electricity smart meters. But customer bases which can be won can also be lost and so far Genesis seems to be making little use of its investment in meter technology. Genesis’s 31% stake in Kupe is another point of difference, which, as Forsyth Barr says, allows the company to offer a dividend yield of between 13.5% and 16.5%. Whether this will be maintained beyond the forecast period though is another matter, however there is potentially more wealth to be squeezed out of the lucrative field.

But NZ Energy & Environment Business Alert's editors say much will depend on the share price, with Forsyth Barr saying the yield is “impressive and cannot be ignored.” The brokers put Genesis as an outperform rating if the final offer price is set at $1.54 or below. At $1.55 or above, they give it a neutral rating. The price range set for the offer is $1.35 to $1.65. For investors who like to balance risk a mix of Meridian and Genesis shares might make sense considering the two companies strengths and weaknesses.

The editors conclude in the long-term all the power utilities are facing the challenge of new technologies, the risk of customers turning into small scale generators and this with other uncertainties leaving the future shape of the market as a matter of speculation. Behind closed doors some longer term thinkers are starting to look into the future and wonder whether there is room in NZ for four major power utility companies.

www.nzenergy-environment.co.nz

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

PGPs: New Programme Sets Sights On Strong Wool

A new collaboration between The New Zealand Merino Company (NZM) and the Ministry for Primary Industries (MPI), announced today, aims to deliver premiums for New Zealand's strong wool sector... More>>

ALSO:

Restrictions Lifted: No Further Tau Flies Found

The Ministry for Primary Industries (MPI) confirms that all restrictions on the movement of fruit and vegetables in Manurewa, Auckland, due to the Tau fly, have been lifted as of 2.26pm on Sunday 7 February. More>>

Crowdfinding: Awaroa Beach To Become Public Land If Appeal Succeeds

Conservation Minister Maggie Barry says a privately-owned beach will become part of the Abel Tasman National Park if an online crowdfunding campaign to buy it succeeds... More>>

ALSO:

Meat Workers Union: Waitangi Mondayisation Flaunted By Large Employer Of Maori

At the AFFCO Talley owned meat plant in Rangiuru, the company has resorted to bullying and threats... saying they could be disciplined and their union sued for an unlawful strike if workers exercise their rights to a paid day off tomorrow. More>>

Earlier:

ETS Review: Modelling Documents Released

Three technical documents are being released to help New Zealanders engage with the Emissions Trading Scheme (ETS) review, Climate Change Minister Paula Bennett says. More>>

ALSO:

Northland: Govt Plan Targets Transport, Web, Maori Assets

The government has released a 10-year plan to attract investors and lift economic growth in Northland, a region that perennially underperforms the rest of the country even while being endowed with natural beauty, productive land, minerals, a potential workforce, scope for manufacturing, forestry and aquaculture, and proximity to Auckland. More>>

ALSO:

Statistics: Unemployment Rate Falls To 5.3 Percent

The unemployment rate fell to 5.3 percent in the December 2015 quarter (from 6.0 percent), Statistics New Zealand said today. This is the lowest unemployment rate since March 2009. There were 16,000 fewer people unemployed than in the September ... More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news