Uncertainty still dogs MRP shares

JASON KRUPP
Last updated 10:34 28/06/2013

Relevant offers

Industries

Insurers hit with 2500 Cyclone Debbie claims, brace for more Chinese company Binxi withdraws takeover offer for Southland's Blue Sky Meats Queenstown plans for new Holiday Inn Express unveiled Xero finds machine-learning from the cloud will be trickier than expected Australian mining boss Gina Rinehart turns to netballers to cut costs at Roy Hill mine Xero passes million-customer milestone Another New Zealand Post and Kiwibank closes its doors Chart of the day: How many Kiwis are jetting overseas from Auckland Airport? Kiwis for kiwi reap sweet rewards from Whittaker's partnership Focus, not politics, the order of the day in Silicon Valley

The announcement that Mighty River Power's Ngatamariki geothermal station has been ramped up to full capacity during testing appears to have done little to soothe the uncertainty stalking the share price.

MRP shares fell 0.9 per cent yesterday to $2.24, bucking a 0.5 per cent gain on the benchmark NZX 50 Index.

At this level, the state-controlled power company is trading 4 cents off its all-time low.

That is a notable drop from the $2.73 level seen when the shares made their debut on May 10.

Yet the addition of the 82-megawatt plant to the firm's generation portfolio has been highly anticipated by institutional investors, who expect it to boost MRP's cash flows.

Forsyth Barr electricity analyst Andrew Harvey-Green, in a recent brokerage note, said he expected the shares to climb to $2.35 in 12 months' time, boosted by base-load generation from Ngatamariki.

That would take 2014 earnings before interest, tax, depreciation, amortisation and fair value movements to $505 million, or $7.5m above Mighty River's own prospectus forecasts.

According to the brokerage's reckoning, that should see the share price gain 1.3 per cent over a 12-month period and, with a next dividend yield of 5.6 per cent, deliver a total return of 6.9 per cent.

"Whilst MRP's growth and development phase is coming to an end, MRP is moving into a new phase of focusing on generating cash to be returned to shareholders," Harvey-Green said.

Mighty River said several months of testing still need to be completed before the station is officially declared fully operational in the middle of 2013, but Harvey-Green anticipates full power output will be achieved by the end of the year.

Ad Feedback

- BusinessDay

Comments

Special offers

Featured Promotions

Sponsored Content