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>Hydrology remains a concern, with storage levels improving slightly, but Meridian Energy faced another challenging month.</li><li>The electricity sector offers defensive earnings and dividend growth, with Mercury rated as OUTPERFORM while others remain NEUTRAL.</li><li>The Commerce Commission is expected to make an announcement on Contact Energy's proposed takeover of Manawa Energy by 9 May 2025, with a positive decision anticipated.</li></ul>

Hydrology remains a concern, with storage levels improving slightly, but Meridian Energy faced another challenging month.The electricity sector offers defensive earnings and dividend growth, with Mercury rated as OUTPERFORM while others remain NEUTRAL.The Commerce Commission is expected to make an announcement on Contact Energy's proposed takeover of Manawa Energy by 9 May 2025, with a positive decision anticipated.

Power Points Hydro Holding Pattern—May 2025

<ul><li>The backdrop for the sector conference, Downstream 2025, was the ongoing political and regulatory fallout from record-high winter 2024 prices and current worryingly low hydro lake levels.</li><li>The general conference consensus was that limited gas supply—which has not yet been fully replaced by new generation—is the main cause of the current challenges.</li><li>Nevertheless, political and regulatory risk is currently heightened, and the conference underlined that there will be changes to the market coming. </li></ul>

The backdrop for the sector conference, Downstream 2025, was the ongoing political and regulatory fallout from record-high winter 2024 prices and current worryingly low hydro lake levels.The general conference consensus was that limited gas supply—which has not yet been fully replaced by new generation—is the main cause of the current challenges.Nevertheless, political and regulatory risk is currently heightened, and the conference underlined that there will be changes to the market coming. 

Electricity Sector - Upstream Problematic Downstream

<ul><li>Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.</li><li>The sector is resilient to economic downturns and trade wars, offering both growth and a strong dividend yield. 2025 has started with unprecedented low hydro inflows, particularly in the South Island, where storage has fallen -37% since late 2024.</li><li>South Island inflows are the lowest since records started being kept and North Island inflows are not far behind. </li></ul>

Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.The sector is resilient to economic downturns and trade wars, offering both growth and a strong dividend yield. 2025 has started with unprecedented low hydro inflows, particularly in the South Island, where storage has fallen -37% since late 2024.South Island inflows are the lowest since records started being kept and North Island inflows are not far behind. 

Power Points - Getting Very Thirsty—March 2025

<ul><li>The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW), prompting us to lower the probability of clearance to 50%.</li><li>Consequently, we reduce our MNW target price by -27cps (-4.2%) to NZ$6.15 and downgrade our rating to NEUTRAL (from OUTPERFORM).</li><li>In January 2025, inflows and hydro storage levels continued to decline, triggering thermal generation, surging wholesale electricity prices, and pushing ASX futures higher.</li></ul>

The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW), prompting us to lower the probability of clearance to 50%.Consequently, we reduce our MNW target price by -27cps (-4.2%) to NZ$6.15 and downgrade our rating to NEUTRAL (from OUTPERFORM).In January 2025, inflows and hydro storage levels continued to decline, triggering thermal generation, surging wholesale electricity prices, and pushing ASX futures higher.

Power Points - ComCom Raises Clearance Concerns—Feb 2025

<ul><li>It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a drop in earnings for the sector.</li><li>Meridian Energy (MEL) took the brunt of the pain, and we anticipate a record-low six-month result (since listing in 2013) for MEL.</li><li>Very low wholesale electricity prices in 2Q25 benefited Mercury (MCY) and Genesis Energy (GNE) in particular, while we expect Contact Energy (CEN) to report a record half-year result due to the first full six months of Tauhara generation. </li></ul>

It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a drop in earnings for the sector.Meridian Energy (MEL) took the brunt of the pain, and we anticipate a record-low six-month result (since listing in 2013) for MEL.Very low wholesale electricity prices in 2Q25 benefited Mercury (MCY) and Genesis Energy (GNE) in particular, while we expect Contact Energy (CEN) to report a record half-year result due to the first full six months of Tauhara generation. 

Electricity Sector - A Tale of Two Quarters—1H25 Preview

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)

Power Points Hydro Holding Pattern—May 2025

The Commerce Commission is expected to make an announcement on Contact Energy's proposed takeover of Manawa Energy by 9 May 2025, with a positive...

Forsyth Barr

Electricity Sector - Upstream Problematic Downstream

The backdrop for the sector conference, Downstream 2025, was the ongoing political and regulatory fallout from record-high winter 2024 prices and...

Forsyth Barr

Power Points - Getting Very Thirsty—March 2025

Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.

Forsyth Barr

Power Points - ComCom Raises Clearance Concerns—Feb 2025

The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition...

Forsyth Barr

Electricity Sector - A Tale of Two Quarters—1H25 Preview

It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a...

Forsyth Barr

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