Generators good bet for NZ investors
FOLLOWING the sale of assets by Contact and Trustpower, those businesses now have surplus capital and are in a position to return capital to shareholders.
Forsyth Barr broker Damian Foster said he had increased his 2019 financial year dividend forecasts for both businesses, helping to increase the average sector yield.
‘‘The electricity sector is looking the best value relative to the property sector and the 10year swap rate in more than 18 months.’’
Investors were getting a more than 20% higher gross dividend yield in the electricity sector than property and a 5.6% spread over the 10year swap rates, he said.
Wholesale electricity prices fell in July, averaging $81.90 MWh at Otahuhu and $70.50 MWh at Benmore. National demand fell 0.7% from June as July temperatures were unusually higher.
National hydro storage levels also contributed to the fall in wholesale electricity prices as lake storage levels rebounded to 118% of average.
The popularity of electric vehicles and solar power generation trended in opposite directions in July, Mr Foster said. EV registrations topped 500 for the month and were a record 1.5% of total light vehicle registrations on a 12month rolling basis — an all time high.
In contrast, new solar installations fell 46% from July last year to 230, the lowest level of solar installations since January 2017.
‘‘We believe the longterm sector thematics are positive and that the electricity sector offers good value.’’
All the generator/retailers offered an attractive yield but limited nearterm earnings growth.
Forsyth Barr had an ‘‘outperform’’ rating on Mercury and Trustpower and neutral ratings on Contact, Genesis Energy and Meridian, he said.
The Government announced this week another $3.9 million of cofunding into 19 projects ranging from improving the range of electric camper vans to building a series of charging stations as part of its goal to get 64,000 electric vehicles on the road by 2021.
The funding was provided by the Low Emission Vehicles Contestable Fund, introduced by the previous administration in 2016 as a wider plan to lift the uptake of electric vehicles.
The balance came from its commercial and notforprofit partners, who have to match or beat the grants.
So far, the Government had provided $14 million, which has been matched by $23 million in thirdparty funding. As of March 31, there were 7232 EVs on local roads.
‘‘This is about demonstrating the rapidly evolving technology that is making electric vehicles a practical option for a growing number of businesses,’’ Energy and Resources Minister Megan Woods said in a statement.