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Daily ShareChat: Contact Energy [Aegis Equities Research]

By Jenny Ruth

Friday 19th June 2009

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 Jenny Ruth

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.

 

 



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