By Jenny Ruth
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Thursday 25th June 2009 |
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Lower wholesale electricity prices are only partly account for his downgrade of Contact Energy's 2009 results, says Jason Lindsay at First NZ Capital.
He lowered his 2009 operating earnings forecast by $26 million to $455 million.
"Approximately a third of this downgrade can be attributed to the reduction in wholesale electricity price (and thermal generation) from our previous forecasts," Lindsay says. His previous forecast operating earnings were $40 million below concensus and at the bottom of the range of analysts.
Lower wholesale electricity prices give Contact less opportunity to run its thermal power stations.
"Other reasons for our downgrade include less retail gas customers - these have been falling at a faster rate than electricity customers - less electricity customers .. and higher operating expenditure due to additional plant maintenance."
Lindsay previous forecast Contact would lose 35,000 electricity customers before returning to a net gain position. He now thinks the company will lose 40,000 customers.
Figures released by the Electricity Commission show Contact lost 37,676 customers between October last year and May this year but the monthly rate of loss is abating. It lost 9,825 in November and 7,990 in December but only 2,230 in May.
Lindsay says positive publicity around Contact's price freeze in Wellington and Christchurch should help it retain customers.
BROKER CALL: First NZ Capital rate Contact Energy (NZX: CEN ) as outperform.
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