3 Oct 2013

Analysts positive about Meridian prospects

1:32 pm on 3 October 2013

Analysts are in broad agreement that Meridian Energy is a favourable investment, but not without its risks.

The New Zealand Stock Exchange has commissioned five research companies to look at the state-owned company, which is due to list on the market.

Presenting their findings on Thursday morning, there was a general consensus that the biggest risk facing potential investors is the Labour-Green policy to shake up the way electricity is bought and sold.

There is also agreement that the company is well run.

Woodward Partners wrote one of the research reports and a partner there, Nick Lewis, says Meridian is a conversative investment with the ability to pay a predictable dividend.

He says investors should be thinking about the overall cash returns versus stock growth.

"The company also has low cost generation, which positions it well under a wide range of potential market conditions," he says.

Mr Lewis says Woodward believes Meridian is worth $1.81 a share, so the Government's price cap of $1.60 could make it a good investment.

However, he says there are risks that could affect its share price and dividend payout in the future, such as dry years and more retail competition.

Most of the analysts put the share price at about $1.70, although the full range is between $1.43 and $1.90.