TRUST POWER

[ananda77]

So TPW wants to be a standalone green energy producer to meet future demand from the electrification and decarbonisation of the NZ economy.
So they sell their green energy producing assets in the form of TILT first?
Then they sell their retail business to have the cash to build up their portfolio of green generating assets?

This does not make any sense to me unless
it is only a matter of time till TPW will also sell their existing green energy assets and cease to exist.

[Snoopy]

So TPW wants to be a standalone green energy producer to meet future demand from the electrification and decarbonisation of the NZ economy.
So they sell their green energy producing assets in the form of TILT first?
Then they sell their retail business to have the cash to build up their portfolio of green generating assets?

This does not make any sense to me unless
it is only a matter of time till TPW will also sell their existing green energy assets and cease to exist.

Good bit of insight. There is certainly long term risk in running a 'generation only' portfolio. With electricity prices spiking higher, we are probably at the opportunity end of that risk right now though. If 'Trustpower Rump' (I think that more accurately describes the company than the old 'Trustpower' monicker) can lock in a long term supply contract at today's prices, my inkling is they will do very well. The problem is 'long term' in power supply terms probably means 10 years, maybe 20 years at the outside. Hydro generation assets may have a life of hundreds of years. I can predict that some time well within the life of those hydro-generation assets, the risk profile will turn and selling power at a multi-year market low price will be the reality. At that point 'Trustpower Rump' is probably dead, and will be taken out by whatever company is on the other side of the long term power purchase contract.

Or we may see an orderly sale of those hydro generation assets much earlier.

SNOOPY

[Davexl]

So TPW wants to be a standalone green energy producer to meet future demand from the electrification and decarbonisation of the NZ economy.
So they sell their green energy producing assets in the form of TILT first?
Then they sell their retail business to have the cash to build up their portfolio of green generating assets?

This does not make any sense to me unless
it is only a matter of time till TPW will also sell their existing green energy assets and cease to exist.

Ouch, share price still tanking...

Based on your insight Ananda77, seems like TPW need to put out a clarification announcement...

[ananda77]

Good bit of insight. There is certainly long term risk in running a 'generation only' portfolio. With electricity prices spiking higher, we are probably at the opportunity end of that risk right now though. If 'Trustpower Rump' (I think that more accurately describes the company than the old 'Trustpower' monicker) can lock in a long term supply contract at today's prices, my inkling is they will do very well. The problem is 'long term' in power supply terms probably means 10 years, maybe 20 years at the outside. Hydro generation assets may have a life of hundreds of years. I can predict that some time well within the life of those hydro-generation assets, the risk profile will turn and selling power at a multi-year market low price will be the reality. At that point 'Trustpower Rump' is probably dead, and will be taken out by whatever company is on the other side of the long term power purchase contract.

Or we may see an orderly sale of those hydro generation assets much earlier.

SNOOPY

Yes. I can not see any company taking the risk of locking in power prices at current levels over the longer term (10 to 20 years), so I think we will see a sale of green generating assets within 2 years

[Snoopy]

Yes. I can not see any company taking the risk of locking in power prices at current levels over the longer term (10 to 20 years), so I think we will see a sale of green generating assets within 2 years


Actually as a generator without a retail arm it is quite normal to lock in a power agreement for the expected life of the generation asset. This is exactly what Tilt Renewables did with Genesis Energy with 130MW Waverley Wind Farm.

https://www.genesisenergy.co.nz/about/media/news/genesis-and-tilt-renewables-move-forward-with-the

The agreement is for twenty years with a price reset at ten years. So I see it as highly probable that 'Trustpower Rump' can continue for twenty years as is. But the market as it does may provide a takeover opportunity for a third party over that time.

SNOOPY

[ananda77]

Actually as a generator without a retail arm it is quite normal to lock in a power agreement for the expected life of the generation asset. This is exactly what Tilt Renewables did with Genesis Energy with 130MW Waverley Wind Farm.

https://www.genesisenergy.co.nz/about/media/news/genesis-and-tilt-renewables-move-forward-with-the

The agreement is for twenty years with a price reset at ten years. So I see it as highly probable that 'Trustpower Rump' can continue for twenty years as is. But the market as it does may provide a takeover opportunity for a third party over that time.

SNOOPY

Thank You, Snoopy

[ananda77]

Actually as a generator without a retail arm it is quite normal to lock in a power agreement for the expected life of the generation asset. This is exactly what Tilt Renewables did with Genesis Energy with 130MW Waverley Wind Farm.

https://www.genesisenergy.co.nz/about/media/news/genesis-and-tilt-renewables-move-forward-with-the

The agreement is for twenty years with a price reset at ten years. So I see it as highly probable that 'Trustpower Rump' can continue for twenty years as is. But the market as it does may provide a takeover opportunity for a third party over that time.

SNOOPY

Thank You, Snoopy

[huxley]

The share price moment could just be holders moving out of a stable dividend business, didn’t the announcement mention they would review the dividend profile later on this year? Maybe more of the cashflow will be invested rather than paid out..

[Davexl]

The share price moment could just be holders moving out of a stable dividend business, didn’t the announcement mention they would review the dividend profile later on this year? Maybe more of the cashflow will be invested rather than paid out..

"Trustpower will consider capital structure, dividend policy and opportunities for re-investment of the proceeds as settlement of the transaction approaches. A further update will be provided at the Annual Shareholder meeting on 22 September 2021."

Unfortunately the announcement increases the uncertainty rather than clarifying things. Waiting until Sept 22 seems an inordinately long time to wait for clarity IMO...

[Davexl]

Ouch, share price still tanking...
Based on your insight Ananda77, seems like TPW need to put out a clarification announcement...

"Media Reports" clarification https://www.nzx.com/announcements/374364

(https://www.nzx.com/announcements/374364)Slight clarification, SP looking oversold at this point also, new Morningstar valuation of $6.70 out...

Excerpt:

...Liquidity in Trustpower shares is affected by the very low free float of near 22%. Trustpower agreed to sell its retail division to Mercury NZ.

Event analysis

Trustpower agreed to sell its retail division to larger peer Mercury NZ for NZD 441 million. Trustpower has secured a good price, representing a relatively lofty enterprise value/fiscal 2022 EBITDA multiple of 8 times. But we don't think Mercury has overpaid as it is likely to strip out significant costs and look for cross sell opportunities. The deal is expected to complete by early 2022, assuming approval by Trustpower shareholders and the Commerce Commission. We will incorporate the transaction into our forecasts when there is further detail but don't expect any material changes to fair value estimates. Mercury and Trustpower's narrow moat ratings, which mainly stem from their low cost and flexible hydroelectric schemes, are unchanged.

The retail industry is highly competitive, and scale is very important to leverage fixed costs across larger customer bases. This is the impetus for both Mercury making the acquisition and for Trustpower selling. Sale proceeds will put Trustpower in a strong financial position with pro forma fiscal 2021 net debt/EBITDA falling from 3.6 times to 1.8 times. Its strong balance sheet will allow reinvestment in its more moaty generation business and, potentially, payment of special dividends.

While Trustpower commands a relatively large retail market share of about 13% in electricity, profit margins are slim. Retail EBITDA was just NZD 47 million in fiscal 2021, compared with Generation EBITDA of NZD 154 million. Following the sale, Trustpower will maintain all generation assets, energy trading capabilities, commercial and industrial electricity customers, and power purchase agreements with Tilt Renewables. We think earnings should be defensive and predictable in the medium term as it will sell all electricity to Mercury under a fixed price, fixed volume contract following completion of the sale. The exact contract price is confidential, but management implied it will be a little above NZD 100 per megawatt hour.

[JohnnyTheHorse]

From a traders perspective looks pretty ripe for a bounce from here. Daily RSI in oversold and sitting in area of previous major support.

[Davexl]

From a traders perspective looks pretty ripe for a bounce from here. Daily RSI in oversold and sitting in area of previous major support.

I think you're right, but I thought it was oversold at the $8 level (previous support), then it dropped further...Would be nice to see a volume trade at this level to kick the rebound off...

[Ferg]

The exact contract price is confidential, but management implied it will be a little above NZD 100 per megawatt hour.
Davexl
I'm curious where you get that figure from? I'm trying to work some projections on what is left of TPW. A metric tonne of COGS, overhead & IFRS gets ripped out of the financials and whilst the remaining C&I retail business should be profitable, I'm guessing it will be high volume / low margin. It looks like they retain 6% of the retail customers but 27% of the top line retail electricity revenues.
Cheers
Ferg

[JohnnyTheHorse]

I think you're right, but I thought it was oversold at the $8 level (previous support), then it dropped further...Would be nice to see a volume trade at this level to kick the rebound off...

Looking good with strong volume traded yesterday (same as previous large down day). Zero follow through on the bear break of previous support. Depth on this stock can be a bit cat and mouse... but there's a hidden buyer at 760. Targeting a bounce back to the 790's.

[kiora]

Why its better to be a electricity generator than a electricity retailer?
https://www.newshub.co.nz/home/money/2021/06/some-businesses-facing-six-figure-power-bill-increases.html?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Thursday+24 +June+2021

[BlackPeter]

Why its better to be a electricity generator than a electricity retailer?
https://www.newshub.co.nz/home/money/2021/06/some-businesses-facing-six-figure-power-bill-increases.html?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Thursday+24 +June+2021

Hmm - from above article:


"Scarcity of gas supply is a contributing factor"


You sort of wonder whether the glorious decision of our Labour government to stop any gas exploration on NZ soil has anything to do with the current electricity shortages?

We probably just got what we asked for.

[peat]

You sort of wonder whether the glorious decision of our Labour government to stop any gas exploration on NZ soil has anything to do with the current electricity shortages?

We probably just got what we asked for.
I've had this argument on Twitter ... to me it seems a bit disingenuous to claim that the decision is too fresh to affect current actual gas outputs. But an industry knows when its not wanted and investment is going to slow down dramatically after such a policy is put in place. Some of that investment goes into existing fields and maintaining their outputs. Though, once again the time frame between the govt decision and the decline in gas output is a bit tight to suggest it is a direct cause. But it sure aint gonna help.

coal is much better ;+)

[Davexl]

Originally Posted by Davexl
"The exact contract price is confidential, but management implied it will be a little above NZD 100 per megawatt hour."



Davexl
I'm curious where you get that figure from? I'm trying to work some projections on what is left of TPW. A metric tonne of COGS, overhead & IFRS gets ripped out of the financials and whilst the remaining C&I retail business should be profitable, I'm guessing it will be high volume / low margin. It looks like they retain 6% of the retail customers but 27% of the top line retail electricity revenues.
Cheers
Ferg

Figure came directly from the Morningstar analysis "Latest recommendation report" icon displayed in my Watchlist display on ASB Securities login.

[Davexl]

- from above article:

"Scarcity of gas supply is a contributing factor"

You sort of wonder whether the glorious decision of our Labour government to stop any gas exploration on NZ soil has anything to do with the current electricity shortages?
We probably just got what we asked for.

Originally Posted by JohnnyTheHorse
"I wonder whether the current issues with Pohokura / NZ gas supply will help boost the price they get for it. Gas prices have been quite elevated."


Would love to get an *update* on precisely what the issues with Pohokura are?
We know about Kupe's compression projects (& timing) to resolve gas supply, but nothing much about Pohokura's situation?

It would help resolve a lot of debate about the oil & gas ban pros & cons as well and if Pohokura is a short term situation or not.
Could it be that the situation of Pohokura gas shortage is being "gamed" by OMV to discredit the oil & gas ban by Labour?

https://www.rnz.co.nz/news/business/431939/problems-at-offshore-fields-lead-to-reduced-natural-gas-production

(https://www.rnz.co.nz/news/business/431939/problems-at-offshore-fields-lead-to-reduced-natural-gas-production)Article from last year but:

"The primary issue appears to be with the Pohokura field where there has been an unexpected and unexplained fall in production.

The field's operator, Austrian-owned OMV, has been investigating why Pohokura's output has fallen as much as 15 percent after maintenance work on several wells earlier in the year."

[Davexl]

Looking good with strong volume traded yesterday (same as previous large down day). Zero follow through on the bear break of previous support. Depth on this stock can be a bit cat and mouse... but there's a hidden buyer at 760. Targeting a bounce back to the 790's.

Nice one Johnny, ended up here today after going as high as ~ $8. Slow appreciation from here as the uncertainty unwinds closer to the deal concluding...

[JohnnyTheHorse]

Nice one Johnny, ended up here today after going as high as ~ $8. Slow appreciation from here as the uncertainty unwinds closer to the deal concluding...

Yes a nice oversold bounce. Have been slowly scaling out day by day (due to low liquidity).

[ananda77]

Maybe traders smarter than me have worked out that buying Mercury instead of Trustpower is the way to go. I mean, it is most likely imo that Trustpower will be swallowed by Mercury anyway...only a matter of time

[Waikaka]

https://www.stuff.co.nz/business/126512194/mercury-cleared-to-buy-trustpower-retail-business-for-441m

Be interested in the opinion of others.

Do you think TECT dividends to only Mercury/Trust Power customers will be a deal breaker?

[Snoopy]

https://www.stuff.co.nz/business/126512194/mercury-cleared-to-buy-trustpower-retail-business-for-441m

Be interested in the opinion of others.

Do you think TECT dividends to only Mercury/Trust Power customers will be a deal breaker?


It does sound like an unusual arrangement. A quick perusal of that article would suggest that the former Trustpower retail customers would have to be ringfenced as the sole future beneficiaries of the TECT (Tauranga Energy Consumer Trust) payouts. In the past, this arrangement has meant consumers were paying higher than average power rates to qualify for receiving a TECT dividend at the end of the year. I guess Mercury could offer such consumers a special rate (read higher rate) if they want this arrangement to continue into the future. But if Mercury does offer the same power unit rate to everyone, then the former Trustpower customers would be in the box seat regarding their power bills. Since TECT is completely independent of Mercury and all the other NZ power retail companies, I am not sure if the commerce commission can have any say in what TECT do with their income?

SNOOPY

discl: MCY shareholder

[Jaa]

It does sound like an unusual arrangement. A quick perusal of that article would suggest that the former Trustpower retail customers would have to be ringfenced as the sole future beneficiaries of the TECT (Tauranga Energy Consumer Trust) payouts. In the past, this arrangement has meant consumers were paying higher than average power rates to qualify for receiving a TECT dividend at the end of the year. I guess Mercury could offer such consumers a special rate (read higher rate) if they want this arrangement to continue into the future. But if Mercury does offer the same power unit rate to everyone, then the former Trustpower customers would be in the box seat regarding their power bills. Since TECT is completely independent of Mercury and all the other NZ power retail companies, I am not sure if the commerce commission can have any say in what TECT do with their income?

SNOOPY

discl: MCY shareholder

TECT has stunk from its creation and always been a tool of Trustpower. In practice only ever existed to subsidise shareholders. A situation which Infratil took full advantage of and continues too by trying to include it as part of the sale.

TECT dividends should go to all power users in Tauranga regardless of supplier to ensure the region has real competition. Of course that would devalue the sale price but is in Tauranga's long term interest.

[Getty]

Strong Half year results released this morning, but no strong buying support to emerge yet...

[Beagle]

https://www.youtube.com/watch?v=BQ3Q9SJDgsE

Brilliant Advertisement, maybe too brilliant, made me want to go and adopt a three legged dog rather than join Trust power.

[see weed]

Thought I would drag TPW out and give it a good dusting over. Not much talk on here about the special div to be paid out in the near future plus the normal div. that is 35c + about 17c = to about 52c div. Please correct me if I am wrong. I hope I am not wrong:)

[huxley]

Thought I would drag TPW out and give it a good dusting over. Not much talk on here about the special div to be paid out in the near future plus the normal div. that is 35c + about 17c = to about 52c div. Please correct me if I am wrong. I hope I am not wrong:)

Correct, but remember the special dividend is taxed at 33%

Here’s their new website: https://www.manawaenergy.co.nz/

[see weed]

Correct, but remember the special dividend is taxed at 33%

Here’s their new website: https://www.manawaenergy.co.nz/
I don't mind paying a bit of tax. I get most of it back as a refund at the other end:)

[huxley]

I don't mind paying a bit of tax. I get most of it back as a refund at the other end:)

Yeah that’s fair, however I kinda see this transaction as the company handing shareholders capital back to them. Maybe a buy back would be more efficient, especially since they’ll likely need to raise capital as they look to build new generation. Interesting times though, you have to look at TPW as the pacific pillar of IFT’s renewable development business.

[Jaa]

Manawa Energy looks like a trip back to Trustpower's roots as Kaimai Joint Generation. All solid long life hydro assets with good regional diversity that will tick along for many decades.

Only issue is Manawa's small stations are making good money (~$17.1m) from Avoided Cost of Transmission (ACoT) revenues which are set to fall in FY2024 due to proposed changes to the Transmission Pricing Methodology. These changes tend to see-saw back in forth to justify a lot of dead weight loss imposed on the sector by government and the market system so they will likely balance out over the long term.

Infratil still have majority control and they consider it a core asset with lower risk and targeted returns of 8-10%. Will need to develop more hydro/solar/wind power stations to achieve that level of return which they have plenty of experience doing.

Conclusion: A very low risk investment with reasonable dividend returns and moderate growth.

[see weed]

(MNW) Am looking forward to big juicy 51c div in 4 weeks time. Wasn't a bad annual report and results last Monday.

[nztx]

(MNW) Am looking forward to big juicy 51c div in 4 weeks time. Wasn't a bad annual report and results last Monday.


I see that - then what after the special div for sale spoils is distributed ? - will the SP head south more than 51c
as things return to normality ? ;)

Is there anything else left that can be hocked off for another large Special Div in the future ? :)

[nztx]

I see that - then what after the special div for sale spoils is distributed ? - will the SP head south more than 51c
as things return to normality ? ;)

Is there anything else left that can be hocked off for another large Special Div in the future ? :)

Maybe IFT might be interested in coming up with some outrageous coin for the rest of the job ?

[ziggy415]

(MNW) Am looking forward to big juicy 51c div in 4 weeks time. Wasn't a bad annual report and results last Monday.
The market working well .....buyers and sellers with opposing views, for me I,m expecting share price to fall away after special divvy so am selling my holding , time will tell which plan works the best...if share price drops more than 51 cents I,m on a winner if not well done to you, will lick my wounds and head to whanga to plan my revenge....

[see weed]

Am going to stick with power companies over winter and these uncertain times. My power bills will jump from $100 to $400 in next couple of months but not too worried about that. My motto if you can't beat them, join them, and expecting $30k+ in divs from these quite secure investments. Also have WHS HLG STU and expecting a big come back with HLG in August Sept. They all pay great divs. MNW goes ex div in 2 weeks 10/6/22, 51c including special div. ;)

[see weed]

That was a bit of a bummer dropping a bit over a dollar after ex div, probably due to the looming recession. Looking positive in last week, up 28c.

[ziggy415]

That was a bit of a bummer dropping a bit over a dollar after ex div, probably due to the looming recession. Looking positive in last week, up 28c.

Not sure it was the recession seaweed, when they mooted selling their customers they sent an info booklet explaining the plan and usually I would flick thru it and bin it but I read this one right thru and they gave examples of future divvies and looks like divvies will drop to 24 cents next year...( my estimate ) or a little under 4% on present share price.....I guess the special divvy covers the drop for next few years so not all bad.

Cant help wonder why they sold retail side and what they have planned....solar...hydrogen....tidal...mice in a tread mill :p

[kiora]

Because wholesale price for power is to go up by 10%?

[ziggy415]

Because wholesale price for power is to go up by 10%?

But if you produce it then sell it you pass on the cost....they must have some plan going forward

[777]

Big drop in interim dividend.

Interim dividend to be paid per share
7.5 cents
17.0 cents
-56%

[nztx]

Big drop in interim dividend.

Interim dividend to be paid per share
7.5 cents
17.0 cents
-56%



Indeedy .. was there a reason why they shrunk the dividend ?

Aside from hocking off Crusty Power Retail to another outfit ?

SP might be under pressure, unless there are further goodies that can be trotted out to fill the gap :)

[RTM]

Indeedy .. was there a reason why they shrunk the dividend ?

Aside from hocking off Crusty Power Retail to another outfit ?

SP might be under pressure, unless there are further goodies that can be trotted out to fill the gap :)

Outlook
Interim FY-23 dividend of 7.5 cents/share
• Targeting a 16 cents/share full year dividend, subject to FY-23 2H performance being in line with expectations
• Manawa Energy’s dividend policy is to pay out 70%-90% of free cash flow1, on average, over time
• In setting the FY-23 interim dividend we have considered the forecast cash flows over the next three years and have normalised for weather related impacts on FY-23 1H
• We will seek to balance providing a dividend yield to shareholders over the medium term with our growth aspirations.

Page 19 of the presentation. Hmmmmm.

[nztx]

so Special Div of 35c in June, presumably goodies from hocking off the retail silver,
but that means roughly half the prior annualised normal dividend (ignoring the specials
shelled out) going forward ..

Market didn't appear to like the smell of things yesterday either (9 Nov) shedding 49c
or 8.67%. It wouldn't be surprising if the SP slid further either..

The usual Interim and Final past ordinary dividends have been in the 15.5c, 16.0c & mostly
17.0c range - say between 32.5 - 35.0c annualised

A meagre 16c targeted FY Dividend on the $5.16 close still looks expensive IMO - infact less
than interest on money in the bank .. The Board probably need to shake their tail
feathers to dislodge something a fair bit better going forwards in these inflationary times

The price of Power isn't going backwards is it ? :)

Nor will the Directors fees shared out around the Boardroom table many may imagine ..

How much extra did they award themselves for ditching part of the Trust Power silver
to eager suitor(s) waiting with arms outstretched ?

If hocking off bits of the Trustpower empire saw just a 35c special distribution of what is presumably surplus from these assets (with No Imputation credits = Holders got slugged for a third of it in Withholding Tax) and the net result is half dividend going forwards, then it doesn't appear a very good outcome has been achieved by the Board for shareholders heading into the future.

[bull....]

not much of a yield on this stock now at current prices

[RTM]

not much of a yield on this stock now at current prices

“…..with our growth aspirations.”
Well, they have growth aspirations, and that doesn’t come free. If you believe they might achieve them, then hang on to your shares and wait while enduring a modest dividend, the value of the shares should go up over time. If you don’t, time to sell I think.

[Marilyn Munroe]

Several years ago Trustpower proposed to canal the water from Lake Coleridge down to the Canterbury Plains to optimise the hydraulic head obtained.

I have heard nothing further about this plan recently. I would have thought with the world wide energy crunch and veneration of sustainable emery sources these plans would have been dusted off.

Boop boop de do
Marilyn

[BlackPeter]

Several years ago Trustpower proposed to canal the water from Lake Coleridge down to the Canterbury Plains to optimise the hydraulic head obtained.

I have heard nothing further about this plan recently. I would have thought with the world wide energy crunch and veneration of sustainable emery sources these plans would have been dusted off.

Boop boop de do
Marilyn

Wasn't the purpose of this proposal to increase the reliability of the Canterbury Irrigation scheme?

Irrigation scheme is going ahead, but without the storage option ... from memory it was the Greenies busting the storage bit.

Not sure though, whether generating more power was part of that proposal - was it?

[Marilyn Munroe]

Wasn't the purpose of this proposal to increase the reliability of the Canterbury Irrigation scheme?

Irrigation scheme is going ahead, but without the storage option ... from memory it was the Greenies busting the storage bit.

Not sure though, whether generating more power was part of that proposal - was it?

You are right, I recall Central Plains Water being part of the TrustPopwer proposed scheme. Central Plains Water going it alone must have put the kibosh on it.

One interesting aspect of the plan was to siphon water under the Rakaia River to feed the Highbank station on the southern bank.

Boop boop de do
Marilyn

[nztx]

The SP Graph since early Feb 2021 shows an unmistakable trajectory, sliding from
almost 9 bucks to today's 5.00

Have to also watch the dickie last year Div Yield buoyed up by last years Special on NZX site
and research a bit so as to not become a participant in the MNW SP slide competition ;)

Last year's 68 cps down to - is it twice 7.5 cps for current year is a heck of a Div reduction :)

15.0 c / $5.00 SP - what sort of miserable cash Div yield is that for 2022/23 ? ;)

[Sideshow Bob]

https://www.nzx.com/announcements/409260

FY23 guidance
• MNW expects EBITDAF for the year to 31 March 2023 to be around the top end of the current EBITDAF guidance of $127.5m to $140.0m. This is due to strong Q4 trading conditions, driven by solid wholesale prices and generation volumes.
• Capital expenditure guidance of $45m to $55m remains unchanged.

FY24 guidance
• MNW expects EBITDAF for the year to 31 March 2024 to be in the range of $120m to $140m.