Contact Energy is expected to book a return to earnings growth - following two halves of decline - when it reports its trading figures for the first half to December tomorrow.
However, the imminent reshuffling of state-owned enterprises' electricity assets may not bode well for consumers expecting more competitive pricing.
Craigs Investment Partners broker Peter McIntyre said that following the two-halves declines, Craigs was forecasting growth returning with a 13% "bounce" in earnings during that period.
While many of the issues which had caused the declines, such as grid constraints and equipment reliability, were still present, the recent environment had not created some of the costs associated with dry-year constraints, he said.
A year ago, Contact's half-year result beat some forecasts but disappointed the market with its failure to provide some profit guidance for the full year. Indications at the time were that there would be some tough times ahead for the company, which reported operating earnings of $224.7 million, down 20% on the $281.9 million reported last year.
Mr McIntyre was forecasting an after-tax profit for Contact of $92 million, higher than other analysts' predictions by $7 million, based on the lessening grid and equipment constraints and SOE reshuffle.
The reshuffle meant that while more participants were allowed to compete in the South Island, the Government directive last year that SOEs improve their return on assets through dividends "implies that retail price competition may not intensify" - meaning more profits for Contact and less choice and savings for consumers.
"The pending SOE reshuffle is likely to keep the market on edge until the method of change and full impact is clearer," Mr McIntyre said.
Forsyth Barr broker Peter Young also expected Contact's first half for 2010 to "comfortably beat" the first-half 2009 result.
He forecast group earnings before interest and tax at $168 million and profit levels up at $102 million, with a 11c dividend.
"While wholesale prices have been lower, there hasn't been the big split in pricing," he said.
Offsetting that positive would be higher gas costs and lower customer numbers, although retail price increases would also come through in the results.
He expected Contact to update its big projects, in particular gas storage and gas peaking plant due for completion in the middle of this year as those investments would likely provide it with a "significant earnings boost" in 2011.
"I suspect they may keep the interim dividend at 11c per share, and will lower the final dividend if necessary," he said.
Contact Energy on Friday filed resource consent applications for the second phase of its development of the Tauhara geothermal resource near Taupo.
Contact managing director David Baldwin told NZPA the 250MW Tauhara 2 development was a particularly important energy project for New Zealand.
