Hydro lake levels and gas supply will feature in upcoming power company results. Photo / Brett Phibbs / PhibbsVisuals
Hydro lake levels and gas supply will feature in upcoming power company results. Photo / Brett Phibbs / PhibbsVisuals
Investors will get a feel for how the big power generator-retailers dealt with low hydro lake levels and high gas prices when they report this month.
Much of the pressure has been taken off the national grid now Methanex has struck gas supply deals with Contact and Genesis butrecent events, which at one point meant spot power prices exceeded $800 a megawatt hour, highlight issues facing the sector.
Earlier in the year, NZAS – owner of the power-hungry Tiwai Point Aluminium Smelter – struck groundbreaking “demand response” deals with generators to reduce power consumption when the system is stretched.
Investment house Jarden said how the big four companies managed constrained gas supply and low lake levels would be key talking points when they report.
“The current market squeeze due to gas constraints and low hydro lake levels is likely to be a key results season discussion point, as long as no wet weather event occurs ahead of the start of the season,” Jarden said in a research note.
“With wholesale prices averaging over $400/MWh over the past two weeks and rising to over $800/MWh, any gentailer caught short could be in some pain, while any with length would be doing well,” Jarden said.
“However, generally, the companies try to be well hedged over winter.”
The NZAS smelter at Tiwai Point, Southland.
“We expect all to have experienced some negative impact but potentially only Mercury is exposed to a slightly worse outcome due to the materially dry North Island situation, with Meridian and Contact assisted by the call on Tiwai to reduce load,” Jarden analysts said.
Jarden said projects that are committed to this financial year, particularly the wind projects, could signal when the currently short-supply market moves back into balance and potentially into oversupply.
In July, Meridian issued NZAS with a new, larger demand response notice under the agreement, revoking and replacing an earlier demand response notice issued the same month, and giving the system some breathing space.
NZX-listed Contact is the first cab off the rank with its annual result on Monday.
Jarden expects Contact to report earnings before interest, tax, depreciation and amortisation (ebitda) of $668 million, with a dividend of about 23.3c.
Last month, Contact said its newly-completed Tauhara geothermal plant was going through final commissioning.
Tauhara is expected to operate at about 152MW until further modifications are undertaken during the first planned outage, scheduled for October 2025, to secure long-term generation of 174MW.
Contact’s 51.4MW geothermal plant, Te Huka 3, remains on track to be online in the fourth quarter of 2024.
Jarden has an ebitda estimate of $883m for Mercury and forecasts a dividend of 23.3c.
“This a good result relative to expectations, particularly when factoring in the dry final quarter,” Jarden said.
The focus on Mercury’s annual results is usually on the maiden guidance for the following year, with a dry start to the year putting some pressure on the outlook.
Genesis Energy, which runs the coal and gas-fired Huntly Power Station, as well as a handful of other hydro assets, is due to report on Thursday.
Jarden expects Genesis to report ebitda of about $406m, $25m down from the previous corresponding period, as lower dam inflows, Kupe gas field “wash-ups” and difficult trading with lower gas hurting in the final quarter.
Genesis has its three Rankines at Huntly running through the winter months as gas shortages impact the market.
The current gas market conditions are driving a challenging short-term outlook for the country; less gas means more solid fuel and higher generation costs for Genesis.
Meridian is due to report on August 28.
Jarden sees the company posting ebitda of about $904m and a dividend of 20.4c.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
