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.

Thematic (Sector/Industry)

<ul><li>We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.</li><li>That has meant sector cost of generation has increased, particularly impacting Genesis Energy (GNE). T</li><li>he standout performer will be Contact Energy (CEN) as it reports record half year EBITDAF, however, its outlook for the remainder of 2H24 is likely to be the most subdued due to the effects of its Tauhara geothermal project not coming on line as expected. </li></ul>

We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.That has meant sector cost of generation has increased, particularly impacting Genesis Energy (GNE). The standout performer will be Contact Energy (CEN) as it reports record half year EBITDAF, however, its outlook for the remainder of 2H24 is likely to be the most subdued due to the effects of its Tauhara geothermal project not coming on line as expected. 

Electricity Sector - Earnings Growth Stalls — 1H24 Sector Preview

Equity Bottom-Up

<ul><li>Genesis Energy's (GNE) 2Q/1H24 operating performance saw near average hydro generation, strong retail netback growth and a big decline in Kupe volumes ahead of the new well being brought into production.</li><li>Forecasts are little changed as a result but we lift our target price +10cps (+3.8%) to NZ$2.70, with lower interest rates lifting our multiple and dividend yield based valuation metrics.</li><li>GNE remains our preferred electricity exposure. OUTPERFORM. </li></ul>

Genesis Energy's (GNE) 2Q/1H24 operating performance saw near average hydro generation, strong retail netback growth and a big decline in Kupe volumes ahead of the new well being brought into production.Forecasts are little changed as a result but we lift our target price +10cps (+3.8%) to NZ$2.70, with lower interest rates lifting our multiple and dividend yield based valuation metrics.GNE remains our preferred electricity exposure. OUTPERFORM. 

Genesis Energy - Operating on Gas Again — 2Q24 Op Stats External Inbox Updates

<ul><li>December 2023 saw hydro lake levels fall, wholesale electricity prices rise, and more thermal generation being used; the market will be keen to avoid a dry January.</li><li>Whilst it is too early to be overly concerned, NIWA’s climate outlook points to below average river flows being likely to the end of March 2024.</li><li>We view Genesis Energy (GNE) as the main beneficiary if conditions remain dry, with Contact Energy (CEN) the most exposed. </li></ul>

December 2023 saw hydro lake levels fall, wholesale electricity prices rise, and more thermal generation being used; the market will be keen to avoid a dry January.Whilst it is too early to be overly concerned, NIWA’s climate outlook points to below average river flows being likely to the end of March 2024.We view Genesis Energy (GNE) as the main beneficiary if conditions remain dry, with Contact Energy (CEN) the most exposed. 

Power Points - Dry January Not What the Sector Wants — January 2024

<div><div><div><div><ul><li>New build was the key theme in November 2023. The month saw the completion of Mercury’s (MCY) Kaiwera Downs I wind farm, first power from Meridian Energy’s (MEL) Harapaki wind farm, and first power from Lodestone’s Kaitaia solar farm, New Zealand’s first grid scale solar farm.</li><li>The month also saw Contact Energy (CEN) announce substantial delays and cost increases at its Tauhara geothermal plant.</li><li>Looking to 2024, we expect 2.0TWh+ of generation to start construction, which is in addition to the ~3.4TWh under construction. </li></ul></div></div></div></div>

New build was the key theme in November 2023. The month saw the completion of Mercury’s (MCY) Kaiwera Downs I wind farm, first power from Meridian Energy’s (MEL) Harapaki wind farm, and first power from Lodestone’s Kaitaia solar farm, New Zealand’s first grid scale solar farm.The month also saw Contact Energy (CEN) announce substantial delays and cost increases at its Tauhara geothermal plant.Looking to 2024, we expect 2.0TWh+ of generation to start construction, which is in addition to the ~3.4TWh under construction. 

Power Points - Building Boom Set to Continue — Dec 2023

<ul><li>In the beginning Genesis Energy (GNE) was focussed on thermal generation, but it is now joining the exodus to renewable generation with a target of being 95% renewable by 2035.</li><li>To achieve that goal, GNE plans to invest ~NZ$1.1b in solar, wind, and batteries, use its balance sheet more and offtake agreements less.</li><li>The strategy update moves GNE's position in the market away from dividends towards a more growth oriented business, with the -2.6cps cut to the dividend (now 14cps) the cost of using its balance sheet more. </li></ul>

In the beginning Genesis Energy (GNE) was focussed on thermal generation, but it is now joining the exodus to renewable generation with a target of being 95% renewable by 2035.To achieve that goal, GNE plans to invest ~NZ$1.1b in solar, wind, and batteries, use its balance sheet more and offtake agreements less.The strategy update moves GNE's position in the market away from dividends towards a more growth oriented business, with the -2.6cps cut to the dividend (now 14cps) the cost of using its balance sheet more. 

Genesis Energy - Thermal Exodus — 2023 Investor Day

New Zealand

Genesis Energy Ltd. generates, transports, and retails electricity. The Company owns and operates hydroelectric generating stations to produce electricity, as well as explores natural gas and bottled liquefied petroleum gas.

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Genesis Energy (GNE NZ)

Electricity Sector - Earnings Growth Stalls — 1H24 Sector Preview

We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.

Forsyth Barr

Genesis Energy - Operating on Gas Again — 2Q24 Op Stats External Inbox Updates

Genesis Energy's (GNE) 2Q/1H24 operating performance saw near average hydro generation, strong retail netback growth and a big decline in Kupe volumes

Forsyth Barr

Power Points - Dry January Not What the Sector Wants — January 2024

December 2023 saw hydro lake levels fall, wholesale electricity prices rise, and more thermal generation being used; the market will be keen to...

Forsyth Barr

Power Points - Building Boom Set to Continue — Dec 2023

Looking to 2024, we expect 2.0TWh+ of generation to start construction, which is in addition to the ~3.4TWh under construction.

Forsyth Barr

Genesis Energy - Thermal Exodus — 2023 Investor Day

In the beginning Genesis Energy (GNE) was focussed on thermal generation, but it is now joining the exodus to renewable generation with a target of...

Forsyth Barr

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