Keeping the lights on
- Decarbonisation and keeping the lights on will need significant investment
- Investment needs a stable policy environment
- Policy risk may have lessened with reviews targeted at better information sharing
Back to Core Banking
A virtual tour through Australian banking issues
- More tailwinds for the banking sector
- Medium term, the banking sector faces pressure to continue to invest heavily in their digital consumer platforms
- Differentiated strategies are appearing as banks rebuild their client focus
It’s not easy being green
- The Climate Change Commission’s final advice to the Government is due to be released next Wednesday. This follows a review of interested party submissions and feedback from the initial draft report.
- We do not see the key draft recommendations changing, but at the margin we might see some alterations to the Commission’s recommendations.
Are the lights going to go out?
- Hydro lake storage is at about 60% of normal levels; low lake levels may provide risks to the near-term earnings of the electricity sector.
- Commercial electricity users on spot power pricing are facing significant cost increases.
- Dry conditions may mean we burn more coal and gas, which highlights the importance of more investment in geothermal and wind energy projects.
‘Four More Years’
- Rio Tinto and Meridian have today announced an extension to the Tiwai contract through to December 2024.
- The government has not as yet needed to provide any support
- We would expect further announcements on project development with Contact progressing the Tauhara geothermal plant and Meridian developing their Harapaki wind farm.
Shadow banks shine light on mortgage deferrals
- Some of New Zealand’s non-bank mortgage lenders have provided detailed data that illustrates they appear well-positioned to weather an increase in non-performing loans when COVID-related loan deferrals expire
- Our various probes into the big banks indicate no cause for alarm, albeit we expect loss provisioning needs to rise and small to medium-sized enterprise (SME) lending trends need to be monitored
Are we ‘Thinking Big’ Again?
- Electrification of industrial and process heat makes sense
- Pumped storage would be a massive project, but could help achieve the Government’s 100% renewable objective
- Substantial challenges remain in terms of cost, engineering, and resource consenting
- Scoping study results unlikely to be published quickly with sector uncertainty to remain in the short term
‘Blame it on Rio’
- Rio to leave, another Think Big Project bites the dust
- Rio Tinto has announced the closure of the New Zealand Aluminium Smelter (NZAS) from August 2021.
- Short term, the biggest impact on earnings will be felt by Contact Energy and Meridian Energy with stranded generation in the lower half of the South Island.
- Is it time to move forward and focus on transmission investment and de-carbonisation?