Daily ShareChat: Contact Energy [Aegis Equities Research]

Contact Energy's operational issues as well as volatile energy prices will negatively impact its 51.4% shareholder, Australia-based Origin Energy, in the short term, says Stefan Hansen at Aegis Equities Research in Sydney.

After Contact downgraded its earnings guidance last week, Origin said its annual profit is unlikely to be more than 20% above the previous year. Origin's previous guidance was for a 20% to 25% increase.

"Origin is investing for the future in a number of growth projects, particularly in its generation segment," Hansen says.

"However, we expect the current difficult economic conditions to be a major factor in curbing growth in the near term."

Origin will not be able to recoup about $A40 million ($NZ50.5 million) in losses after the Australian Supreme Court ruled the Queensland Competition Authority should have set benchmark tariffs for 2008/09 at 9.06% above the previous year, not the QCA's original 5.38% decision.

"However, the 2009/10 tariff will be benchmarked against the revised QCA decision which should provide a benefit for Origin's retail margins going forward," Hansen says.

He is forecasting Origin's net profit before one-offs will be $A527 million, up from $A443 million in 2008, and will rise to $A653 million in 2010.

BROKER CALL:  Aegis Equities Research rate Contact Energy (NZX: CEN ) as neutral.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

UPDATE Contact increases dividend as FY earnings rise; quits wind projects
Contact increases dividend as FY earnings rise in competitive market
Contact shares drop to 2-month low, says 'hard to see' investment under Labour-Greens plan
Contact Energy, parent Origin mull redemption of $2.03 bln of notes after S and P change
Solid first half for Contact, despite retail margins squeeze
Contact sells mothballed New Plymouth power station for $24 mln
Contact Energy's King hints at greater returns as cash mounts
Contact energy beats FY profit forecast as revenue surges
Elliott leaving Contact for Origin role
Contact sees 2014 cash-flow boost as projects put on ice