Contact Energy - CEN Chart [Archive] - Page 4

Snoopy

21-02-2015, 01:26 PM

I am not a lawyer but I suspect if CEN buys overvalued assets from ORIGIN that entails total spending overseas of 1 billion there will be legal remedies which I for one will be seeking.
I suspect there are a few lawyers on this thread that could share their knowledge.

Fish, the relevant quote from the Gaynor article is below:

----

Origin has a number of geothermal interests, including a 49.9 per cent stake in Energia Andina S.A., Chile's leading geothermal exploration company, and a geothermal concession in Indonesia.

The concern is that Contact could purchase one or both of these assets from Origin for $225 million or lower, a figure below the 5 per cent sharemarket value that triggers the requirement for Contact to obtain shareholder approval. Contact would then have to contribute substantial capital to the development of these offshore geothermal assets with CEO Dennis Barnes indicating that the total expenditure could be up to $1 billion.

-----

If Contact buy a group of assets for up to $225m from Origin, (or anyone else), that is not enough money spent to warrant a special shareholders meeting to approve the deal. The suggestion is that in the ensuing years Contact may rack up total of up to one billion ( i.e. $775m more) developing these assets.

I don't think there is an avenue to object to the first part of the transaction because it is not material to the overall size of Contact. Likewise, once a business unit is established, I can't see there is any way to influence how management develop that asset.

I share your concern about overpaying for assets. I don't recall any objections at the time about Contact acquiring Rockgas from Origin. It seemed to me a sensible bit of vertical integration at the time as an alternative use for take or pay Maui gas. Perhaps in hindsight the deal wasn't so good. But the deal would have been made with various end line usage assumptions on the table and assumptions are not necessarily what happens in reality. Does Gaynor have a case here of being wise with the benefit of hindsight? I think it is a bit of a stretch to say that Contact will end up paying too much for Origin Geothermal assets, because they 'apparently' did so for Rockgas.

SNOOPY

Snoopy

21-02-2015, 01:34 PM

I for one waited long enough. I will start unloading my holdings and concentrate on MELCA as far as energy sector is concerned. It's a nice journey but yes the CEN Board towing to Origin is obviously the problem here.

But Meridian is dominated by the government as a 51% shareholder. So won't the Meridan board just be towing the government line? Granted the respective majority shareholders (origin for CEN, NZ government for MELCA) may have a different philosophical outlook. But if your objection is a board potentially/actually towing the line of a majority shareholder, shouldn't you sell out of both CEN and MELCA?

SNOOPY

Snoopy

21-02-2015, 01:41 PM

Pandering to a Panda is always going to result in high fees.

Not necessarily. Remember when the shareholders association queried the executive pay of then CEO David Baldwin (an Origin appointee)? IIRC There was a mismatch in what he was declared to be earning in the CEN annual report and what it was declared he was earning in Australia. Then it came out that Origin was topping his salary up, independently of what he was earning as CEO of Contact. Some story about seeing his overall pay was sufficient to make sure he wasn't poached (he wasn't and is still working for Origin).

So in this case, the Contact shareholders were not disadvantaged in cash terms.

SNOOPY

Stranger_Danger

21-02-2015, 02:30 PM

But Meridian is dominated by the government as a 51% shareholder. So won't the Meridan board just be towing the government line? Granted the respective majority shareholders (origin for CEN, NZ government for MELCA) may have a different philosophical outlook. But if your objection is a board potentially/actually towing the line of a majority shareholder, shouldn't you sell out of both CEN and MELCA?

SNOOPY

This Government doesn't have a "line" - that is the point.

The MELCA chart, back when there a chance of a Government with a "line" being elected, was not pretty!

PSE

22-02-2015, 11:43 AM

Got CEN since its IPO and even introduced my kids to owning shares on that IPO. I built up what I would consider substantial amount of shares of it since then but it's only now that I'm thinking that this is no longer the sort of boring and keep it on the drawer kind of shares without that excess capital being returned to us. I for one waited long enough. I will start unloading my holdings and concentrate on MELCA as far as energy sector is concern. It's a nice journey but yes the CEN Board towing to Origin is obviously the problem here.
MELCA has awesome assets rgr I was very keen at $1 and $.90 but am not remotely interested at $2 or wherever the nutbars have driven the price up to today. Be careful..

NZSilver

22-02-2015, 02:27 PM

RGR367

22-02-2015, 04:55 PM

MELCA has awesome assets rgr I was very keen at $1 and $.90 but am not remotely interested at $2 or wherever the nutbars have driven the price up to today. Be careful..
PSE, I know and if memory serves me right, MELCA has started even better than CEN from its IPO. Gut feel, GEN and MELCA are the only two I'm considering on their sector. GL to us all after CEN.

tim23

22-02-2015, 05:23 PM

PSE, I know and if memory serves me right, MELCA has started even better than CEN from its IPO. Gut feel, GEN and MELCA are the only two I'm considering on their sector. GL to us all after CEN.

Melcas start way superior to CEN - Cen share price fell well back below issue price (so did Melca briefly), meanwhile you chart Gurus - could a chart have told you that CEN directors were going to hold on to the cash?

Baa_Baa

22-02-2015, 05:55 PM

A simple daily price chart did put out enough warning signs before the announcement, that one might have tightened up a stop loss. Of course it could not predict the directors decision.

BAA

Melcas start way superior to CEN - Cen share price fell well back below issue price (so did Melca briefly), meanwhile you chart Gurus - could a chart have told you that CEN directors were going to hold on to the cash?

Snoopy

22-02-2015, 06:00 PM

I will make a note to myself to look at what Origin are doing in Indonesia.

This from the 2nd September 2010 Origin Energy News Release.

------

Origin Energy Limited (‘Origin’) advises that, as part of a consortium, it has been successful in bidding for a geothermal exploration concession in Northern Sumatra, Indonesia.

Origin and Tata Power of India, in consortium with PT Supraco Indonesia, have been awarded the Sorik Marapi geothermal exploration concession following a competitive bidding process. It is estimated the Sorik Marapi concession could support the development of 200–300 MW of geothermal generation capacity. Origin will hold a 47.5 per cent effective interest in the concession

<snip>

“Sorik Marapi is a ‘conventional’ geothermal resource similar to established geothermal generation in New Zealand. Origin has expertise in this area through its majority owned subsidiary Contact Energy – one of New Zealand’s leading generators of geothermal energy,” she (Origin’s Executive Director, Finance and Strategy, Ms Karen Moses) said.

<snip>

Indonesia is situated on the Pacific ‘Ring of Fire’ and is expected to have approximately 27,000 MW of potential conventional geothermal resources – considered the largest in the world. Indonesia currently has 1,196 MW in geothermal generation in operation.

----

From p34 of the US Roadshow, March 2013

"Negotiations for the sale of power have commenced with state owned utility, PLN"

---------

Then from the 15th February 2015 Origin results presentation:

----

"Successfully negotiated and signed PPA (power purchase agreement) for Sorik Marapi project"

-----

I haven't seen anything not to like so far!

SNOOPY

macduffy

22-02-2015, 06:03 PM

Kept an eye on CEN, thought it was looking good but this latest saga puts me right off - seems like origin is going to use the cash for its own ventures or move it into there own coffers... Thanks for the posts very enlightening

Not quite a done deal yet - although most posters here seem to see it that way! Just as we once - or was it twice - assumed that ORG's takeover of CEN would succeed.

;)

Snoopy

22-02-2015, 06:17 PM

Then from the 15th February 2015 Origin results presentation:

----

"Successfully negotiated and signed PPA (power purchase agreement) for Sorik Marapi project"

-----

I haven't seen anything not to like so far!

More information on the project funding:

http://thinkgeoenergy.com/archives/9761

-----

Indian news report today, that the country’s “leading private power producer Tata Power expects to pump an equity investment of about $125 million in a joint venture to develop the 240 MW geothermal project in Indonesia.

The company along with its consortium partners Australia’s Origin Energy and PT Supraco Indonesia is developing the Sorik Marapi geothermal project in Northern Sumatra, Indonesia.

“For the geothermal (project), the total cost is estimated to be about $ 850 million, out of which 30 per cent is equity,” Tata Power Managing Director Anil Sardana told PTI.

“So, it will about $ 240 million and out of that 50 per cent will be from our side, the remaining 50 per cent from Origin … So, it will be about $ 125 million (from Tata Power),” he said.

The project’s expected Commercial Operation Date (COD) is June 2015. It would be developed by PT Sorik Marapi Geothermal Power, a Special Purpose Vehicle of the consortium. In this, Tata Power and Origin Energy has 47.50 per cent stake each and the rest is with PT Supraco Indonesia.

-----

That power project is quite highly leveraged. If the total value is $850m that certainly would be significant for Contact shareholders should they buy Origin out. However because so much of the capital is borrowed, the actual potential capital required by Contact is only $125m - not material enough for a special general meeting for Contact shareholders.

That doesn't seem right. Putting massive leverage on an investment so that the potential Contact shareholder capital contribution remains off the warning radar!

SNOOPY

fish

23-02-2015, 05:33 AM

More information on the project funding:

http://thinkgeoenergy.com/archives/9761

-----

Indian news report today, that the country’s “leading private power producer Tata Power expects to pump an equity investment of about $125 million in a joint venture to develop the 240 MW geothermal project in Indonesia.

The company along with its consortium partners Australia’s Origin Energy and PT Supraco Indonesia is developing the Sorik Marapi geothermal project in Northern Sumatra, Indonesia.

“For the geothermal (project), the total cost is estimated to be about $ 850 million, out of which 30 per cent is equity,” Tata Power Managing Director Anil Sardana told PTI.

“So, it will about $ 240 million and out of that 50 per cent will be from our side, the remaining 50 per cent from Origin … So, it will be about $ 125 million (from Tata Power),” he said.

The project’s expected Commercial Operation Date (COD) is June 2015. It would be developed by PT Sorik Marapi Geothermal Power, a Special Purpose Vehicle of the consortium. In this, Tata Power and Origin Energy has 47.50 per cent stake each and the rest is with PT Supraco Indonesia.

-----

That power project is quite highly leveraged. If the total value is $850m that certainly would be significant for Contact shareholders should they buy Origin out. However because so much of the capital is borrowed, the actual potential capital required by Contact is only $125m - not material enough for a special general meeting for Contact shareholders.

That doesn't seem right. Putting massive leverage on an investment so that the potential Contact shareholder capital contribution remains off the warning radar!

SNOOPY
There are remedies under the companies act 1993 if directors act in a manner prejudicial to the interests of minority shareholders.
All directors are supposed to act in the interests of all shareholders.
I must thank you for your research.
If a decision is made to go overseas the directors have duties in relation to minority shareholders.
It may be that the deal is a good one-guaranteed prices for electricity generated and low interest rates.
A win for all.

Snoopy

24-02-2015, 04:15 PM

I will make a note to myself to look at what Origin are doing in Indonesia. But if a business case can be made, I am not at all averse to Contact going in there.

The other place that Origin have significant geothermal interests that might be of interest to Contact (sic) is Chile:

From: http://www.originenergy.com.au/3456/Geothermal

"In Chile, Origin has a 40 per cent interest in Energía Andina S.A., (EASA) Chile's leading geothermal exploration company. EASA has established a portfolio of eight geothermal exploration projects in the Northern and Central regions of Chile. Preliminary assessment of the geothermal potential of Chile indicates a possible 16,000 MW of resource available. Chile is located on the Pacific 'Ring of Fire' and has considerable prospective geothermal hot spots, estimated to make up 60 per cent of the total Latin American geothermal resources."

That seems a rather optimistic summary of the potential in Chile. If you go to the EASA website and look up the frequently asked questions (in Spanish):

http://www.energiandina.cl/category/geotermia/preguntas-frecuentes/

Q6 suggests that the geothermal resource in Chile is between 1,000 MW and 16,000MW. A realistic plan would be to extract 3,200MW after twenty years development!

We also learn from Q12

"To date there is no geothermal power plant in Chile, nor in South America. In our country this development is at an early stage exploration to quantify the geothermal potential."

So obviously the venture in Chile is at a much earlier stage than that in Indonesia!

This is confirmed from Q14. The time frame for constructing a geothermal plant in Chile is between 4 and 7 years (!). This includes resource exploration and plant construction, in addition to the transmission line.

I wait with interest to see if Origin wants to sell their interests in Chile to Contact. It doesn't look anywhere near as attractive as the Indonesian joint venture as I write this!

SNOOPY

rbel038

24-02-2015, 10:56 PM

The other place that Origin have significant geothermal interests that might be of interest to Contact (sic) is Chile:

From: http://www.originenergy.com.au/3456/Geothermal

"In Chile, Origin has a 40 per cent interest in Energía Andina S.A., (EASA) Chile's leading geothermal exploration company. EASA has established a portfolio of eight geothermal exploration projects in the Northern and Central regions of Chile. Preliminary assessment of the geothermal potential of Chile indicates a possible 16,000 MW of resource available. Chile is located on the Pacific 'Ring of Fire' and has considerable prospective geothermal hot spots, estimated to make up 60 per cent of the total Latin American geothermal resources."

That seems a rather optimistic summary of the potential in Chile. If you go to the EASA website and look up the frequently asked questions (in Spanish):

http://www.energiandina.cl/category/geotermia/preguntas-frecuentes/

Q6 suggests that the geothermal resource in Chile is between 1,000 MW and 16,000MW. A realistic plan would be to extract 3,200MW after twenty years development!

We also learn from Q12

"To date there is no geothermal power plant in Chile, nor in South America. In our country this development is at an early stage exploration to quantify the geothermal potential."

So obviously the venture in Chile is at a much earlier stage than that in Indonesia!

This is confirmed from Q14. The time frame for constructing a geothermal plant in Chile is between 4 and 7 years (!). This includes resource exploration and plant construction, in addition to the transmission line.

I wait with interest to see if Origin wants to sell their interests in Chile to Contact. It doesn't look anywhere near as attractive as the Indonesian joint venture as I write this!

SNOOPY

Chile is very frontier in terms of geothermal development and the climate , topography and accessibility make building the plants very expensive, lots of subsurface work and expensive exploratory drilling required. The indonesian government is very committed to making geothermal work and so have been knocking down alot of hurdles e.g recent legislation passed to differentiate geothermal activities from mining activities to make it easier to get consent in national parks.
Indonesia is definitely a good bet for someone like Contact to come in and design/build/operate the plant against a long term power purchase agreement.

GoldenStag

23-03-2015, 03:37 PM

Still seems to be a bot selling for the last week or so. Seems to be bottoming out at $6, but not sure. I think there might be another bot on the buying side as well - I can't tell because the selling bot puts a bunch of tiny sales to wipe out the trade history.

Are there any big fund managers in CEN with us minority shareholding which are now selling down on the news? I haven't seen a SSH notice come out of any 1% changes yet so it seems weird to see the selling pressure sustained for so long without an announcement.

GS

troyvdh

23-03-2015, 08:43 PM

Giday golden...Ive held CEN since inception....I am probably a bit naïve ...now that's not totally true...I just dislike any Aussie intervention in any company I have shares in...but today ...just for fun I asked CEN if they could confirm my suspicion that "they" have a policy in place to suppress the share price of CEN (obviously to the benefit of Origin should it wish to fully take over the company)....and could one infer that (last year ) an inference of intention of returning some capital to shareholders (knowing off course that the share price would appreciate )...then doing an about turn on that ...is akin to market manipulation.....I hasten to add of course this is only conjecture on my part and I have no information factually to back this up..but does one need to ask the question....

Jantar

24-03-2015, 09:03 AM

....and could one infer that (last year ) an inference of intention of returning some capital to shareholders (knowing off course that the share price would appreciate )...then doing an about turn on that ...is akin to market manipulation......
If CEN did infer an intention of returning capital, then you could be correct. However the only indication I saw of that was a rumour on this forum after the SP started to climb excessively. Can you show anywhere that CEN did actually indicate such an intention? Or are you also treating rumour as fact?

Harvey Specter

24-03-2015, 10:18 AM

GoldenStag

25-03-2015, 12:07 PM

If CEN did infer an intention of returning capital, then you could be correct. However the only indication I saw of that was a rumour on this forum after the SP started to climb excessively. Can you show anywhere that CEN did actually indicate such an intention? Or are you also treating rumour as fact?

Iceman references this article in post #747...
http://www.stuff.co.nz/business/opinion-analysis/66426305/hell-hath-no-fury-like-a-fund-manager-foiled
Contact's chairman Grant King, the long-serving managing director of the company's 53.1 per cent majority shareholder, Origin Energy of Australia, first waved the capital return wand at the 2012 annual meeting. "With the current capital investment programme coming to end, the Contact board will be considering how best to utilise the significant cash-flow of the business and how this could best be applied to the benefit of shareholders," King said back then

Notice that he says shareholders in the plural. If he meant for the benefit of just Origin i.e. risky expansion, then he would have used singular, as in shareholder, as in Origin. If he meant shareholders, plural, like he said, then this would mean all of us, and a return of capital would be the correct and prudent thing for the board to decide.

So, the inference was fairly direct from my perspective.

GoldenStag

25-03-2015, 12:11 PM

By the way, the selling bot is absent today. The share is recovering a little.

Harvey Specter

25-03-2015, 12:39 PM

Notice that he says shareholders in the plural. If he meant for the benefit of just Origin i.e. risky expansion, then he would have used singular, as in shareholder, as in Origin. If he meant shareholders, plural, like he said, then this would mean all of us, and a return of capital would be the correct and prudent thing for the board to decide.

So, the inference was fairly direct from my perspective.Tht is a cleverly worded statement and could mean anything. I had a look at the 2013 slide pack to a explicit reference and couldn't see one. However they did set out the amount of ASC (available subscribed capital) they have which is only relevant if you are going to do a capital return. Not sure if they were being very careful in what they did actually say but the inference was clear and was picked up by media, investors which they didnt correct if it was a mis-interpretation.

Biscuit

25-03-2015, 03:29 PM

By the way, the selling bot is absent today. The share is recovering a little.

Hi GoldenStag. How do you tell if there is a buying/selling bot?

GoldenStag

26-03-2015, 10:36 AM

CEN half year...

https://www.nzx.com/files/attachments/210340.pdf

...with these comments...

"Moving forward Contact will be a strongly cash generative business, providing new opportunities to create value for shareholders.The New Zealand electricity market is mature with no material growth in electricity demand expected and risks around the future
of the Tiwai aluminium smelter, and continued erosion of retail margins. Given this context we have begun to investigate
opportunities to invest overseas.

When we made the announcement in mid-February that we were looking at opportunities to invest overseas we saw a negative
response from investors through a drop in our share price. As a management team and Board our focus is on creating and
delivering long-term value for our shareholders and we see international markets as providing the best opportunity to leverage
Contact’s long history in geothermal and hydro development and operations. At this point we are investigating options to best
utilise our skills and experience in international markets with our initial work indicating there could be value adding opportunities
for us to pursue. This investigation is at an early stage and I will continue to speak with a wide range of investors about the
opportunities we see and the appropriate balance between distributions to shareholders and investing for growth."

babymonster

26-03-2015, 11:18 AM

Although ppl don't like it, they will still go with it.. Errr

babymonster

26-03-2015, 11:21 AM

Shorters are back... I should sold mine when it was 7 dollar plus..now holding with 10% lost.. Wondering what I should do with these shares.

GoldenStag

26-03-2015, 11:24 AM

Although ppl don't like it, they will still go with it.. Errr

Well, this seems to be another of their ambiguous statements. I believe he is acknowledging the issue and then leaving the door open for the board/exec to do a back down and sensibly return capital to investors. The fact that he acknowledged the share price etc, leads me to believe he is seeding for a back down if they have to. But you read it the other way, so it looks like they've covered both bases with the one statement. Efficient comms!

(maybe I'm just an optimist)

But seriously, they should return capital. 'nuff said.

IAK

26-03-2015, 12:34 PM

Sold my shares a few weeks ago at $6.18, I've held them since the IPO in 1999. Can't be bothered with their games any more.

babymonster

26-03-2015, 03:37 PM

just wrote to the investor relation email on contact website to moaning about the sp.. lol.. anyway.. imo, if we all whinging and moaning about it, the board might change their mind..

Snoopy

29-03-2015, 02:16 PM

Underlying profit of $227m equates to an eps of 30.9c.
Dividends paid out over the period FY2014 amounted to 25c.

At a share price of $6 this is a net dividend yield of 0.25/6= 4.2%, equivalent to a gross yield of 6%. I think $6 for CEN is looking like fair value.

I am looking a bit deeper into the Contact Energy dividend yield. I think it is useful to look over a period of several years to get some idea of dividend variability. I am looking at the years 2008 onwards. This is the 'post GFC' period. From that time growth in the NZ energy market slowed significantly. This period is, IMO, the best comparative period for the years going forwards.

Actual DividendAdjustment FactorAdjusted Dividend

FY200828c577/73322.0c

FY200928c599/73322.5c

FY201028c605/73323.1c

FY201125c695/73323.7c

FY201223c718/73322.5c

FY201323c733/73323c

FY201425c733/73325c

FY201526c733/73326c

I have adjusted previous years dividends by an 'adjustment factor'. The adjustment factor is needed because Contact Energy has issued many new shares, mainly as part of a dividend reinvestment plan, over this time. If the dollar value of historical dividends were paid out over the current number of shares, then the amount received per share today would be less. This is the reason for making the adjustment, to maintain a fair comparison for past profits distributed over the current number of shares.

The average 'adjusted dividend' over this eight year period is 23.5cps. This is lower than the announced FY2015 dividend. But I prefer to use an average figure. This better accounts for future dividend variability in an uncertain energy market going forwards.

To get the actual cash received for a 30% taxpayer, we need to divide that net yield by 0.72 (to account for the 28% company tax) and then multiply that figure by 0.7 ( 1-0.3 = 0.7 ). That will produce the dividend received by our shareholder, net of withholding tax.

23.5 x (0.7/0.72) = 22.85c

To translate that to a gross dividend yield for our 30% tax rate shareholder, we have to divide that figure by 0.7

22.85c/0.7 = 32.6c

This is the long way of doing things, for explanatory purposes. I could have got exactly the same result by simply dividing the net dividend by a factor representing the company tax rate.

23.5/0.72 = 32.6c

At a share price of $5.98, this represents a gross dividend yield of:

32.6/598 = 5.5%

With my current call account paying me 3.5%, this looks to be about the right premium for a utility share. If interest rates were to rise one might expect the share price of CEN to fall from here.

SNOOPY

Snoopy

29-03-2015, 03:24 PM

23.5/0.72 = 32.6c

At a share price of $5.98, this represents a gross dividend yield of:

32.6/598 = 5.5%

With my current call account paying me 3.5%, this looks to be about the right premium for a utility share. If interest rates were to rise one might expect the share price of CEN to fall from here.

Contact Energy management have a different view of the company going forwards than 'Mr Market'. Contact do not anticipate paying out all of their free cashflow as dividends. Contact want to take any retained earnings and use these to invest in as yet unspecified geothermal projects offshore. These may or may not prove beneficial to shareholders. But if they are successful, then an investor might consider that buying Contact Energy at today's 5.5% yield will give them a 'free ticket' to these future overseas expansions.

If that is your view, then perhaps buying CEN at $5.98 starts to look more attractive.

SNOOPY

GoldenStag

29-03-2015, 04:56 PM

I'm in already at a slightly higher price with the same thought process but with the other side of the coin as the bonus ie there is a chance that CEN management backs down and returns capital. So an upside chance as well if this happens. So, a decent price with two potential up sides.

GS

babymonster

30-03-2015, 10:05 AM

Oh well, I did get reply from contact via email and a phone conversation. I was surprised. Anyway, there is nothing that you guys don't know. My feeling is they might return a bit to us and invest some overseas. The good thing is they know we are unhappy and don't like the uncertainty. Hopefully they will choose the investment wisely.

just wrote to the investor relation email on contact website to moaning about the sp.. lol.. anyway.. imo, if we all whinging and moaning about it, the board might change their mind..

Snoopy

30-03-2015, 10:08 AM

Oh well, I did get reply from contact via email and a phone conversation.

Good news for shareholders. Contact pass the 'Percy' test!

SNOOPY

GoldenStag

14-04-2015, 03:03 PM

If that is your view, then perhaps buying CEN at $5.98 starts to look more attractive.SNOOPY

The price is now at 587c today.

Following on from your calculations, I did a pretty chart - because I like charts...

7271

GoldenStag

23-04-2015, 08:31 AM

I see CEN is out in Oz with NZTE shopping their geothermal capabilities.

I guess this is a sideshow/front, because if CEN board really are going to push ahead with with geothermal investments, against all the minor shareholders' better judgements, then that means the board are weak enough to have already gone "Oh look, we found an investment which aligns with Origin Energy's investment strategies". Instead they will wrap it up in "look who we found at the energy conference". I wonder if Dennis thinks we're a bit daft.

babymonster

23-04-2015, 11:19 AM

the sp just keep going down.. looks like a head and shoulders pattern.. the 5.80 support broken and the next support will be low 5s (around 5.30) imo... might be a good buy when it drop to 5.30

Snoopy

23-04-2015, 11:26 AM

The price is now at 587c today.

Following on from your calculations, I did a pretty chart - because I like charts...

7271

Nice chart GoldenStag, although I might be a bit biased because it is made from my data!

I should reiterate that the 'average dividend' is indeed an average taken over several years. I am using this because I don't believe it is a given that power demand will inevitably grow from here. Indeed we may see some retail price pressure put the squeeze on Contact's profits going forwards.

The current dividend yield is a little higher than that shown in the graph because current dividends are slightly higher than the historical average. The chart figures are a way of building a small 'factor of safety' into my future investment decisions. Yet the implied rise in future dividend yield as the share price falls, and is so avidly shown by Golen Stag's chart, has my attention.

I wonder if babymonster's prediction of the share price dropping around another 10% will happen? My strategy from here will be to wait for another bumbling announcement from management on investing overseas then increase my holding, at a rather discounted price from today's market! Of course if babymonster is wrong I will be stuck with the CEN shares I already have.

SNOOPY

IAK

23-04-2015, 06:21 PM

I'm over at the world geothermal conference this week. It appears that NZ companies and research institutions are very highly regarded. A lot of countries are looking to develop geothermal power stations, not only for electricity but also to reduce CO 2 emissions. The govt subsidies in the EU are ridiculous.

GoldenStag

23-04-2015, 09:37 PM

In sailing circles there is the story of the man who spends six years restoring/building a boat. The question you have to ask is, is he a sailor? Or is he a boat builder?

So, is CEN a geothermal project services shop? Or are they an energy seller? I vote energy seller.

macduffy

24-04-2015, 08:15 AM

GoldenStag

24-04-2015, 08:29 AM

Gentailer means generation and retailing. It doesn't include Generator Plant building. So, they generate it for wholesale and sell it for retail. I am happy if they stick with this model.

I accept that they have expertise in the geothermal plant building area, but they also have a very valuable opportunity to provide an excellent return for their shareholders. It doesn't happen often, so they should seize it with both hands. This includes letting the geothermal staff go, or spinning them off somehow, cutting the costs down to only generating and retailing, then providing a wonderful return to shareholders over the next five to ten years. It would be a great cash generating business model and is the way the other gentailers are going.

The other gentailers have outperformed the NZ50, whereas CEN, well, let's just say it isn't pretty. See the chart below...

7300

GoldenStag

30-04-2015, 12:18 PM

Snoopy

30-04-2015, 04:37 PM

At 553c today which by Snoopy's calcs gives a 5.9% gross dividend.
Not sure what is happening with this share. I just know I've lost quite a bit so far. Looks like the stag will be eating grass for a while yet.

CEN caught in the downwash from the Genesis profit downgrade GoldenStag. Not really justified IMO, and it has bounced strongly on the intraday trading since your post. Trading at $5.61 as I write this! But as you say, that yield of 5.9% (long term average) with the possibility of growth from a geothermal investment in Indonesia, or a capital return (or a bit of both?) to top that return up makes an attractive investment case.

I managed to buy a small parcel today at $5.50 to add to my holding. That was based on the gut feeling that investors wouldn't let it slip below $5.50, a feeling that has so far proved correct. Average price paid overall is now $4.81, with a steady stream of decent dividends to add to my return over the years. My original holding was bought at float time (1998)! I have added to that since both through buying more and the dividend reinvestment scheme as funds permitted. Have never sold any. Owning CEN shares today isn't a get rich quick scheme. But it has proved a great core portfolio investment.

SNOOPY

PS Share price closed the day at $5.68! I sure nailed the timing on this purchase today.

trader_jackson

25-05-2015, 09:16 AM

https://www.nzx.com/companies/CEN/announcements/264737

Should provide a lift to the share price no doubt...
(Relief rally)

macduffy

25-05-2015, 09:48 AM

https://www.nzx.com/companies/CEN/announcements/264737

Should provide a lift to the share price no doubt...
(Relief rally)

See, they're good guys after all!

;)

Harvey Specter

25-05-2015, 09:56 AM

https://www.nzx.com/companies/CEN/announcements/264737

Should provide a lift to the share price no doubt...
(Relief rally)Wow - I wonder how many sold out based on the change in plans. Will it gap up?

RGR367

25-05-2015, 09:59 AM

https://www.nzx.com/companies/CEN/announcements/264737

Should provide a lift to the share price no doubt...
(Relief rally)

About time for an old boring stock :)

Harvey Specter

25-05-2015, 10:01 AM

Wow - I wonder how many sold out based on the change in plans. Will it gap up?Opened at $6.30 so up 13% and climbing. Where will it be at the end of the day?

GoldenStag

25-05-2015, 10:38 AM

I just danced a jig in my office. My coworkers (who aren't investment minded) were somewhat bemused.

RTM

25-05-2015, 10:48 AM

The cynical side of me really wonders why the company has publicly gone through this exercise.
I am with you Golden Stag. Pretty happy with the announcement. But was it all necessary ?

Harvey Specter

25-05-2015, 11:00 AM

Well the price is holding up with over $10m traded. I would do a happy dance but it is only a small holding - it has been underperforming the market for some time but it does provide a constant dividend flow, soon to get much bigger.

Jim

25-05-2015, 07:35 PM

Toasty

26-05-2015, 09:55 AM

CEN caught in the downwash from the Genesis profit downgrade GoldenStag. Not really justified IMO, and it has bounced strongly on the intraday trading since your post. Trading at $5.61 as I write this! But as you say, that yield of 5.9% (long term average) with the possibility of growth from a geothermal investment in Indonesia, or a capital return (or a bit of both?) to top that return up makes an attractive investment case.

I managed to buy a small parcel today at $5.50 to add to my holding. That was based on the gut feeling that investors wouldn't let it slip below $5.50, a feeling that has so far proved correct. Average price paid overall is now $4.81, with a steady stream of decent dividends to add to my return over the years. My original holding was bought at float time (1998)! I have added to that since both through buying more and the dividend reinvestment scheme as funds permitted. Have never sold any. Owning CEN shares today isn't a get rich quick scheme. But it has proved a great core portfolio investment.

SNOOPY

PS Share price closed the day at $5.68! I sure nailed the timing on this purchase today.

I have to admire your timing Snoopy. Well done.

BIRMANBOY

26-05-2015, 11:05 AM

Timing is transitory ....belief is long term and at $4.81 the beagle deserves a cuddle...good work Snoopy.
I have to admire your timing Snoopy. Well done.

Snoopy

28-05-2015, 06:36 AM

11 cents dividend and 50 cents special dividend, Wow !!

Here is the bit of the announcement that confused me:

"As the company has accumulated a significant balance of imputation credits from capital raisings over recent years, the company has determined to return $367m (50cps) to shareholders through a fully imputed special dividend to be paid on 23rd June."

I thought imputation credits reflected tax already paid by the company on behalf of shareholders. How does raising new capital create imputation credits, when the new capital is not money earned by the business in operations? Can any accountants out there explain?

SNOOPY

PS I am pleased to see Goldenstag back in the black too!

fish

28-05-2015, 06:45 AM

I have held CEN since its listing and have never been asked to contribute capital.
I wonder if it is some accountancy thing-appreciation of value of assets which they have paid tax on

Harvey Specter

28-05-2015, 08:02 AM

I thought imputation credits reflected tax already paid by the company on behalf of shareholders. How does raising new capital create imputation credits, when the new capital is not money earned by the business in operations? Can any accountants out there explain?You dont receive IC from capital raising. Excess IC are generated when your taxable profit is greater than the amount of dividends distributed (gross simplification). My guess is their tax manager didn't review that press release and will now be the ridicule of the profession.

Crackity

28-05-2015, 08:04 AM

They gave shares instead of cash for dividends for a few years a while ago - maybe it is arising from this but if not it baffles me as well.....

Harvey Specter

28-05-2015, 09:18 AM

They gave shares instead of cash for dividends for a few years a while ago - maybe it is arising from this but if not it baffles me as well.....Could be. that was a good little tax dodge while it lasted and I guess could be refered to as capital.

fish

29-05-2015, 05:38 AM

Could be. that was a good little tax dodge while it lasted and I guess could be refered to as capital.

I don't believe it was a tax dodge.I took the shares instead of cash and believe shares were paid on net dividend taking and imputation credits/withholding tax came with the shares

Snoopy

29-05-2015, 06:02 AM

I don't believe it was a tax dodge.I took the shares instead of cash and believe shares were paid on net dividend taking and imputation credits/withholding tax came with the shares

I took Contact shares through the DRP when that was operative too fish. My primary motive was not to dodge tax, but to increase my holding in CEN which I considered as 'underweight' at the time. My memory on the matter does not co-incide with yours though.

I seem to recall getting a tax statement full of zeroes from Contact showing that I had paid zero tax on my 'dividend(s)' as a result, because I had received zero income - a fair trade off. IIRC, Contact structured their DRP so that shareholders got new bonus shares to the same value as if they had got their dividend as cash and invested that money on market in more CEN shares. But in reality, shareholders were never paid a dividend in any conventional sense. This resulted in a significant increase in market capitalisation of CEN, even as the share price remained largely static. Perhaps this is the answer to this 'imputation credit' capital raising conundrum?

Those imputation credits from 'virtual dividends' associated with the DRP days were never paid out. Thus the result was an increase in imputation credits on the books due to the 'capital raising(s)' from the DRP. The coming 50c special dividend will 'fix' those excess imputation credits that are now on the CEN books.

SNOOPY

Harvey Specter

29-05-2015, 09:16 AM

I don't believe it was a tax dodge.I took the shares instead of cash and believe shares were paid on net dividend taking and imputation credits/withholding tax came with the sharesOf course it was which is why the IRD shut it down (required a law change as they had given binding rulings to the companies). It wasn't a DRP - you got the choose between bonus shares (not taxable income) or dividends (taxable income). You can do one or the other, not offer the choice. SkyCity also took advantage of it along with a couple of others.

Aaron

29-05-2015, 09:18 AM

Those imputation credits from 'virtual dividends' associated with the DRP days were never paid out. Thus the result was an increase in imputation credits on the books due to the 'capital raising(s)' from the DRP. The coming 50c special dividend will 'fix' those excess imputation credits that are now on the CEN books.
SNOOPY
What you and Crackity suggest sounds reasonable. With the Bonus Shares I guess you effectively paid the company the dividend value for more shares instead of a dividend being paid out with imputation credits attached. I guess they accumulated imputation credits by doing this. Sadly not an owner anymore. With a normal DRP you receive the dividend and then purchase additional shares.

GoldenStag

02-06-2015, 09:29 AM

I wonder how CEN will go this week prior to the registry recording. Some recent observations...
- I noticed some big off market trades at the end of last week.
- I have been a little surprised that the support for the share has been weaker than I expected after the announcement. The share price still seems a little lower where I would expect it to be given the resetting of the CEN plan. It is almost like only the special dividend is priced in, but not the future share buy backs etc. that they described in the announcement. Maybe people a little jaded from CEN announcements and an issue of trust?
- Someone (big) seemed to cap the share after the announcement at about 634 which meant they sold and held the price down. But no SSH 1% announcements. This coupled with the block trades last week should've meant someone is obliged to announce something? Maybe not considering the size/value of CEN.

hmmm...

workingdad

02-06-2015, 01:36 PM

Not so good by the look of it.....

My thinking is along the same lines as yours, thought it would have gone up more, I am a bit in two minds, want to see it go up as I have some holdings, part of me wants to see it go down so I can get more not just for the special divy but anticipated additional benefit down the line. Maybe I am missing something here - wasnt long ago it was at $7.30 not struggling to stay above $6 with a 50c divy priced in.

hmmm indeed......

PSE

02-06-2015, 05:20 PM

I don't believe it was a tax dodge.I took the shares instead of cash and believe shares were paid on net dividend taking and imputation credits/withholding tax came with the shares
My understanding is that the bonus share scheme was a tax dodge for the majority shareholder Origin, who weren't paying any NZ tax on their dividends by receiving them as bonus shares. Pretty darn offensive for the PAYE taxpayer but par for the course with our asset sell offs.
Workingdad, don't assume the market is always rational - short term fluctuations mean nothing.
I am very encouraged that management have yielded to the internal and external pressure and have cancelled the big payments for geothermal in third world countries.

workingdad

02-06-2015, 05:44 PM

My understanding is that the bonus share scheme was a tax dodge for the majority shareholder Origin, who weren't paying any NZ tax on their dividends by receiving them as bonus shares. Pretty darn offensive for the PAYE taxpayer but par for the course with our asset sell offs.
Workingdad, don't assume the market is always rational - short term fluctuations mean nothing.
I am very encouraged that management have yielded to the internal and external pressure and have cancelled the big payments for geothermal in third world countries.

Rational..... when it comes to women and the market I would never have such an expectation :p

Certainly interested to increase holdings at some stage but waiting for the right (or rational) moment haha.

Harvey Specter

09-06-2015, 08:58 AM

GoldenStag

09-06-2015, 12:08 PM

Article on NBR (paywalled) suggesting Origin may be wanting to sell. The special dividend just being paid uses up the IC's which is a sign. Not sure they would find a buyer for 50% though ($2B worth since markect cap is $4b)

http://www.sharechat.co.nz/article/811ddfd7/origin-energy-says-it-remains-committed-to-contact.html?

Could this be why someone seemed to be a big seller of the shares over the period of the bonus dividend announcement? Someone seemed to hold the price down with biggish sell offs. Though I would've thought that, on the face of it, Origin selling out could be a good thing for the share?

GoldenStag

09-06-2015, 12:25 PM

NZHerald article here:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11454565

Toasty

09-06-2015, 02:14 PM

This is probably a very obvious question but is it too late to buy in for the special distribution?

777

09-06-2015, 02:16 PM

This is probably a very obvious question but is it too late to buy in for the special distribution?

Yes it is too late. They were ex div yesterday. Hence the large drop in price.

Toasty

09-06-2015, 02:29 PM

Yes it is too late. They were ex div yesterday. Hence the large drop in price.

Thanks. I saw record date on the investor section of Contacts website saying 10 June so I wasn't sure what that meant.

limmy

09-06-2015, 09:45 PM

I think the record date is for their internal procedures only. You should use the ex-div date.

macduffy

10-06-2015, 09:19 AM

I think the record date is for their internal procedures only. You should use the ex-div date.

Not really. "Record date" is a formal NZX term for the date at which holdings on the share register will qualify for the dividend, issue etc. Share transfers are settled , and recorded on the register - "settlement date" - three business days following the transaction. "Ex" date is the first day of trading without rights to the div, issue, etc. In this case, Friday the 5th was the last day of trading "cum" div: Monday the 8th was the first day trading ex div; Today, Wednesday the 10th is record date for the div.

Phew!

Harvey Specter

10-06-2015, 09:29 AM

I think the record date is for their internal procedures only. You should use the ex-div date.I think record date has to do with settlement times. It needs to be a few days later to account for the trade on the day before ex-date. Not sure why it needs to be reported as it really is just an admin thing I assume.

Goldendigger

10-06-2015, 03:34 PM

I'm sick of watching such a price roller coaster and knowing I could've bought and sold a few times to make a few gains. - timid buy and hold investor.

workingdad

10-06-2015, 05:18 PM

I'm sick of watching such a price roller coaster and knowing I could've bought and sold a few times to make a few gains. - timid buy and hold investor.

Roller coaster implies ups and downs, since ex divvy only seems to be going the latter rather than the former.....

I bought some more today so have both pre and ex divvy but notice the morning star recommendation hasn't helped much haha

Goldendigger

10-06-2015, 10:07 PM

fish

11-06-2015, 05:41 AM

Well I sold a while ago for 710c which was a good return from my 468c buy in, unfortunately I decided to buy again at 620c to secure the 50c fully imputed dividend... I expected a drop in price after the record date but not a big fat -14% in my portfolio!

Expect the unexpected.
Don't beat yourself up when the price drops after you buy-on average it will happen 50% of the time!.
If your decision to buy was sound the sp will rise sometime in the future to give you a nice profit.
In the meantime enjoy the dividends.
Quite a few of us are buying-I also bought more yesterday-my rational is based on many factors-one is the return of capital.
Have you considered what shareholders are likely to do with this-I am using part of mine to reinvest-and the best time is when its oversold such as now.
Sure I wont receive the dividend until after I have to pay for the shares but that is not a problem with a margin lending account.

Joshuatree

12-06-2015, 12:29 PM

Rumour going round the bourse that Origin is looking to sell its holding of Contact.

macduffy

15-06-2015, 08:50 AM

Rumour going round the bourse that Origin is looking to sell its holding of Contact.

From today's SMH.

http://www.smh.com.au/business/origin-energys-rethink-on-contact-opens-up-potential-19-billion-sale-20150614-ghngr0.html

GoldenStag

15-06-2015, 09:11 AM

This confuses me. The sale of Origin's controlling stake in CEN is a good thing in my mind. And when you read the SMH article (thanks Macduffy) it gets even better with one of the scenarios being that CEN would have to dual list onto the Aussie market as well. I see this as quite positive for the share.

But... the flip side is that the NZ dollar is tanking and a lot of the big boys seem to be pulling money back to the US (from what I can infer). So there is big downward pressure on the share price.

I expected a little support for CEN on the back of this, and I expected a lot more support for the 50c divvy. But I've been getting it wrong a lot recently.

Is there something I'm missing about the Origin selling CEN that is a negative that I'm missing?
(I don't expect the sale to be a downward pressure because it would be done in a block sale/IPO thing but maybe I'm mistaken)

GS

Harvey Specter

15-06-2015, 09:55 AM

Is there something I'm missing about the Origin selling CEN that is a negative that I'm missing?
(I don't expect the sale to be a downward pressure because it would be done in a block sale/IPO thing but maybe I'm mistaken)IF they did a trade sale, the buyer would have to do a full takeover I think - so unless they wanted 100%, would have to be at a price they were sure people would say no (ie. they could probably get away with a small premium to market). More likely is selling to institutions which being $2B worth, would have to be at a discount to market. As such, Insto's have no incentive at the moment to support the shareprice as it can only work in their favour if it drops.

macduffy

15-06-2015, 10:07 AM

Now that Origin has shelved thoughts of "encouraging" CEN into offshore ventures I wouldn't have thought that a sale of their stake would have a significant effect on CEN's shareprice. It would remove the future possibility of any conflict between the interests of Origin and minority shareholders, should the former revive its ideas about overseas expansion for CEN at any time but on the other hand a lot would depend on where the Origin shareholding went.

Plenty of scope for speculation about that and whether a sale actually happens, I would have thought.

Snoopy

15-06-2015, 10:27 AM

From today's SMH.

http://www.smh.com.au/business/origin-energys-rethink-on-contact-opens-up-potential-19-billion-sale-20150614-ghngr0.html

The two most important quotes from the article as I see them:

--------------------

"What I've said in the past is that Contact plays an important role in our credit rating because of the way the agencies calculate the credit metrics. That role is no longer as significant and therefore Contact is like any other asset in the business," chief executive Grant King said.

----

Origin's rating was cut to BBB- in April by Standard & Poor's, which pointed to the absence of any action taken by the company to support its balance sheet despite the drop in oil prices.

-------------------

It is hard to conclude anything else from here that Origin's controlling stake in Contact is definitely up for sale. I guess I should have figured it out earlier when with the announcment of the 50c special dividend cleaning out the impuatation credit account. Brokers/Institutions did make this very point, even though it was outright denied by Origin at the time.

Perhaps this is the appropriate time for NZ Government to step in and buy back the controlling stake in NZs best run gentailer?

SNOOPY

sb9

23-06-2015, 10:30 AM

Excerpt from CEO's letter today to shareholders:

Revised distribution policy
Our Board has concluded that we can support increased distributions to shareholders and as a result has revised our distribution policy to target an average ordinary dividend equivalent to approximately 100% of underlying earnings after tax1 (previously 80%). Contact expects free cash flow to be in excess of the ordinary dividend level described above and will make additional distributions in the form of special dividends or share buybacks.

Could expect more dividends to shareholders in times ahead...

workingdad

23-06-2015, 10:58 AM

sb9

23-06-2015, 03:07 PM

Anyone here got the money into their account for special divvy being the payment day. Haven't got mine yet..

workingdad

23-06-2015, 03:15 PM

Anyone here got the money into their account for special divvy being the payment day. Haven't got mine yet..

nope but probably overnight.

interesting share price today, they put an announcement out effectivey increasing divy's by 20% and it still loses ground :confused:

sb9

23-06-2015, 03:19 PM

nope but probably overnight.

interesting share price today, they put an announcement out effectivey increasing divy's by 20% and it still loses ground :confused:

I think part of the blame lies with Origin's uncertainty and other part with Tiwai Point's hangover (with some indication on Jul 1st)...

workingdad

23-06-2015, 03:28 PM

I think part of the blame lies with Origin's uncertainty and other part with Tiwai Point's hangover (with some indication on Jul 1st)...

yeah I agree, uncertainty in the current market which hasnt exactly been bullish the last few months, overseas investers pulling money out with our dollar dropping proabably having some impact too. Just keep banking the divy and see where the cookie crumbles

Hoop

23-06-2015, 10:54 PM

yeah I agree, uncertainty in the current market which hasnt exactly been bullish the last few months, overseas investers pulling money out with our dollar dropping proabably having some impact too. Just keep banking the divy and see where the cookie crumbles

There are many reasons which could be causing the downtrend ... a combination ..however the announcement back in February looks like the one that broke the Camels back and started this rot with nearly all electrical stocks..a lower result that Mr Market expected + "no foreseeable opportunities in the NZ Electrical market" so increased rate of profit returns to shareholders..
Also mentioned was quote "looking overseas"..Well!!.. with the NZ$ plummeting that's certainity made CEN's overseas expansion life much harder...but these are more assumptions to add to SB9 and workingdads collection..

Good thing about TA is that TAist don't have to figure out what's causing the downtrend and get into trouble when buying shares using wrong assumptions.....The charts are a photo history of traders behaviour (feelings)..Traders use all these assumptions and more to trade and that behavioural history can be seen below...Trading hasn't been optimistic....eh

Below is CEN Chart
Note:.. Hardly any indicators added as most that aren't leading didn't work well (sh1t happens)..but ....it's a chartist's educational dream :) ..a whole textbook in one chart..

Firstly....A Island Cluster..these candlestick patterns are rare and usually occur at the top (bearish) or bottom (bullish)..CEN is halfway down, so as I never seen one half way down before I had to google and got very limited results..What I think from Googling is that the pattern is very strongly bearish as it is a very well structured pattern like a pimple sticking out of a downtrend channel hence the purple shading.
2....The spooky support 6.05 line + the 1.5year uptrend line the island cluster sat on.
3....The 3 spooky gaps that appeared at the support/resistance 5.75 line...(traders should keep this S&R 5.75 area in mind for future reference..a price area where strange things happen)
4....A slightly off-shaped Head and Shoulder (H&S) pattern....as this pattern is the most reliable of all chart patterns a neckbreak should be treated as a strong sell warning..the FAIL pull back after the break is the lucky second chance to sell as well as a future H&S pattern bearish result confirmation....

So where to from here??
Still downwards it appears.....
Hopeful signs...Risk of falling price is becoming less risk. Risk V reward investors may have CEN on their watchlist now as they look for a bounce off the very long term 14 year Primary Uptrend support at ~$5.10 (just in view on right handed side bottom of Chart).. if that fails there is a hazy zone of multiple weak supports down to 4.75... if all that fails the next major support is the 2012 year double bottom at $4.60 (lowest point since Spring 2003).

As with all other medium termTA displine advice...wait for buy signals to enter back owning this baby...Afraid of missing out on sudden upswings?..The Momentum indicator (see chart below) has been a good leading indicator so far (as with all TA things..entering using one indicator only is risky, but there are Technical and Fundamental price points where entering using risk v reward is worth it)

For the Chartist purists....I know the chart below is not adjusted for the 50c dividend...even if it was it would only flatten out the downward trendline somewhat the rest (including patterns) still applies

http://i458.photobucket.com/albums/qq306/Hoop_1/CEN%2023062015.png (http://s458.photobucket.com/user/Hoop_1/media/CEN%2023062015.png.html)

workingdad

24-06-2015, 08:17 AM

I cant open the chart but it will be a result of the limitations in work system I am on than anything.

I wish I had your depth of knowledge and have a lot to learn, someone playing a smarter game may have sat back a bit longer before topping up but its a learning curve and I am still happy with the risk versus reward at present and think they are already oversold. With the numbers of shares being sold there is an equal number of buyers and throwing a bit of a guess out there that some large buys will be coming soon as the value becomes tempting to pass up.

I look at the share price when they did make the statement about overseas investment, share price took a hammering but still meet resistance mid $5's then the bonus divy was announced followed up by yesterdays statement of 100% earnings distribution, possible buy backs and monthly report with increasing demand and a cold start to the winter. Flip side, potential tiwia (my take is business being business playing a hard game to get a better pricing structure) and even Origin selling up which I cant see them doing unless the price is right ruling out on market.

I may be wrong on this but the market is looking anxious to me, some suprising drops from nervous traders with itchy trigger fingers in excess of what would be justified such as Air NZ. I have only been doing this share market thing for 2 years so my experiance is very limited but my feeling is things arent as good as they were, CEN is something I have parked some money in and could be there for quite some years, the econmy is not looking great, electricy is a stable earner in a poor economic climate which is my rationalle.

I will certainly feel more confident in this if the price starts coming back up and feel free to educate me further, I am keen to learn and appreciate it :)

airedale

24-06-2015, 09:51 AM

Hi Hoop, I don't follow CEN but I notice there you said there was a recent 50 cent divi.As the SP gets closer to $5, a 10% divi looks attractive.

iceman

24-06-2015, 10:23 AM

Hi Hoop, I don't follow CEN but I notice there you said there was a recent 50 cent divi.As the SP gets closer to $5, a 10% divi looks attractive.

That was a special dividend announced after they dumped their plans for overseas expansion. Came into the bank yesterday :-)

robbo24

24-06-2015, 10:30 AM

That was a special dividend announced after they dumped their plans for overseas expansion. Came into the bank yesterday :-)

The special dividend means that CEN does not see any current prospects for growth - that's not good for a share price... However...

CEN also announced that their dividend policy is changing from 80% of NPAT to 100% of NPAT.

Watch this space - CEN will offer some great dividend value as the price keeps going down!

sb9

24-06-2015, 10:31 AM

Hoop

24-06-2015, 11:10 AM

Hi Hoop, I don't follow CEN but I notice there you said there was a recent 50 cent divi.As the SP gets closer to $5, a 10% divi looks attractive.

We all tend to get very excited when we hear special dividend, I guess its a behavioural thing rather than a financial thing. After 40 years in and out of the stockmarket game I get very wary as to why a special dividend gets announced..I treat special dividends as an exercise in robbing Peter to pay Peter (not Paul:))) and if we swap the wording "giving a special dividend" to reducing shareholder assets to give to shareholders the excitement somewhat lost...eh?

I'm not sure of the imputation but 19% rings a bell, therefore high income earners being taxed more than 19% will lose a small part of their CEN asset to the taxman, definitely no excitement now.

OK... there are times when a special divy is beneficial to the shareholder...Off the top of my head a few scenarios spring to mind:-
1....Defence mechanism to make a company less financially attractive to a possible hostile takeovers
2....The NZ imputation "use it or lose it" clause when a controling shareholder is planning to sell down or out.. (The market thinks this is CEN's reason..unofficially denied;) )
3....Company Management with a reputation of cash burn and capital destruction and shareholders view their liquid shareholder assets would be better ultilised by them rather than left to Management to waste.
4....Company can't find opportunities to expand within their markets (common thread) [CEN reason which the market doesn't totally believe, thereby creating a question mark to Management ability].
5....Growing companies paying out to maintain their gearing ratio sweetspot...Not sure if this CEN announcement of new finance debt packages yesterday after a shareholder payout is a good idea as I perceive CEN is signaling future low growth..My opinion, which could be wrong, is low growth companies within a low inflationary environment should "make Hay while the sun shines" (reduce debt)...maybe Snoopy or Winner could apply their expert opinions here.
6...probably some other scenarios...

workingdad

24-06-2015, 01:23 PM

Yep, got the money credited last night, very happy.

Very good post Hoop, not very good with charts and TA but good insight nevertheless.

My gut feel is once we know about Tiwai point, things will be on the move. With FY results round the corner, I wouldn't be surprised if the full year divvy is slightly higher than what's been...

Yep I agree, Tiwai point uncertainty is a big factor for all the gentailers. Aluminium prices are low but the NZ dollar dropping would be of benefit to them.

There is a school of thought they they will keep the 400MW and hunt for a deal on the other 172MW. We will know in a week..... It reminds me of my nemisis hole on a certain golf course, looking at it after a decent tee shot its death or glory to go for the green on a par 5 - with regards to CEN, I am going for glory haha

Joshuatree

24-06-2015, 01:31 PM

Competition is heating up amonst the retailers of electricity.New "wholesale" outfits are springing up. In tauranga we now have re 12-15 companies trying to get us onboard and the incumbent Trustpower has actually lost more then most in the last month

Snoopy

24-06-2015, 02:06 PM

Its a learning curve and I am still happy with the risk versus reward at present and think they are already oversold. With the numbers of shares being sold there is an equal number of buyers and throwing a bit of a guess out there that some large buys will be coming soon as the value becomes tempting to pass up.

I look at the share price when they did make the statement about overseas investment, share price took a hammering but still meet resistance mid $5's then the bonus divy was announced followed up by yesterdays statement of 100% earnings distribution, possible buy backs and monthly report with increasing demand and a cold start to the winter.

Flip side, potential tiwai (my take is business being business playing a hard game to get a better pricing structure) and even Origin selling up which I cant see them doing unless the price is right ruling out on market.

I have only been doing this share market thing for 2 years so my experiance is very limited but my feeling is things arent as good as they were, CEN is something I have parked some money in and could be there for quite some years, the economy is not looking great, electricy is a stable earner in a poor economic climate which is my rationalle.

I will certainly feel more confident in this if the price starts coming back up and feel free to educate me further, I am keen to learn and appreciate it :)

Workingdad, buying shares in CEN is not a get rich quick strategy, and I think you know that. Since you are looking at staying in for several years, I feel it is worth looking a little further back that Hoop's one year chart.

I have been a CEN shareholder from the beginning, which is over 15 years now. I have never sold a CEN share. However my 'median holding time' is only four years. That indicates I have been buying more in recent times than earlier years. I am invested in Contact primarily for the dividend stream. The dividend stream is left out of most charts. If the company's profit steam is not growing in the medium term, then you should not expect the share price to rise in the medium term. Given the non growth outlook for all the gentailers since the GFC, this premise applies to Contact Energy.

Back on 30th June 2011, the share price was $5.36.

As I write this the share price on 24-06-2015 is $5.15. Superficially this is showing a loss over four years of 21cps. Not a great result. However, in the intervening time the following fully imputed dividends have been declared, and paid:

12, 11, 12, 11, 14, 11, 15, 11, 50

That adds up to $1.47. (1)

The first three of those dividends were paid to me when the dividend reinvestment plan (DRP) was running. I took those as shares rather than cash. So did many others. As a result of the DRP the total number of shares on issue increased from 695.068m to 733.308m, an increase of 5.5%. My own number of shares went up by 7% over that time because of the DRP. So I had an extra 'gain' of shares over and above the average gain of:

7% - 5.5% = 1.5%

This is extra value attributed to me in excess of the average punter. With a CEN share price today of $5.15, in dollar terms this 'extra value' is

0.015 x $5.15 = 7.7c (2)

This means my total income gain over four years is (1) + (2):

147 + 7.7 = 154.7c

Removing my capital loss over the period of 21c, my gain reduces to 133.7. Divide by 4 to get a per year gain per share over the four year median holding period of 33.4cps.

Based on a share price of $5.15 today, this represents a net yield of:

33.4 / 515 = 6.5%

Using a 28% company tax rate, the gross annual average yield is

6.5% / (1-0.28) = 9.0%

This is a really good return. Yet if you had just looked at the chart, you might convince yourself you had lost money. This kind of thing is why when it comes to income investments, I would never recommend using a chart.

SNOOPY

Snoopy

24-06-2015, 02:51 PM

Hi Hoop, I don't follow CEN but I notice there you said there was a recent 50 cent divi.As the SP gets closer to $5, a 10% divi looks attractive.

The special dividend was a result of accumulating tax credits for several years. The ex-dividend date has now past. So the 10% dividend yield, based on the special dividend alone will not be there in future years.

SNOOPY

Snoopy

24-06-2015, 03:00 PM

We all tend to get very excited when we hear special dividend, I guess its a behavioural thing rather than a financial thing. After 40 years in and out of the stockmarket game I get very wary as to why a special dividend gets announced..I treat special dividends as an exercise in robbing Peter to pay Peter (not Paul:))) and if we swap the wording "giving a special dividend" to reducing shareholder assets to give to shareholders the excitement somewhat lost...eh?

You can think of a 'special dividend' as equivalent to a return of capital if you like.

I'm not sure of the imputation but 19% rings a bell, therefore high income earners being taxed more than 19% will lose a small part of their CEN asset to the taxman, definitely no excitement now.

The company tax rate is 28%. So a person on a 30% tax rate will have 2% of the dividend deducted at withholding tax (30% - 28% = 2%). Tax has already been paid on the special dividend money when Contact first earned it. This is why the imputation credit exists. If no tax had been paid there would be no imputation credit.

The net result is that 30% taxpayers lose an extra 2% of that 'dividend capital' (if you want to think of the special dividend as capital) when that dividend is paid. Not a huge deal.

OK... there are times when a special divy is beneficial to the shareholder...Off the top of my head a few scenarios spring to mind:-
1....Defence mechanism to make a company less financially attractive to a possible hostile takeovers
2....The NZ imputation "use it or lose it" clause when a controling shareholder is planning to sell down or out.. (The market thinks this is CEN's reason..unofficially denied;) )
3....Company Management with a reputation of cash burn and capital destruction and shareholders view their liquid shareholder assets would be better ultilised by them rather than left to Management to waste.
4....Company can't find opportunities to expand within their markets (common thread) [CEN reason which the market doesn't totally believe, thereby creating a question mark to Management ability].
5....Growing companies paying out to maintain their gearing ratio sweetspot...Not sure if this CEN announcement of new finance debt packages yesterday after a shareholder payout is a good idea as I perceive CEN is signaling future low growth..My opinion, which could be wrong, is low growth companies within a low inflationary environment should "make Hay while the sun shines" (reduce debt)...maybe Snoopy or Winner could apply their expert opinions here.
6...probably some other scenarios...

As Hoop says there are many reasons why a special dividend might be paid. If Origin were a seller they would not admit it publically. To do so could affect the share price and the ultimate sale price Origin might get. So Hoops reason (2) is my preferred explanation as to why the special dividend was paid.

If CEN management truly can't find alternative investments, then paying the special dividend was the reponsible thing to do. (Hoop's reason 4) I would not agree that this implies Contact's managment has questionable ability though.

Utility type companies can carry a higher level of debt than others because of the greater certainty of cashflows. As to whether Contact are paying the special dividend to be 'capital efficient' (Hoop's reason 5) I am not sure. But on one thing I do agree with Hoop. I do like to see a company keep their overall debt levels low.

SNOOPY

sb9

24-06-2015, 03:03 PM

Good posts Snoopy...

workingdad

24-06-2015, 03:40 PM

Workingdad, buying shares in CEN is not a get rich quick strategy, and I think you know that. Since you are looking at staying in for several years, I feel it is worth looking a little further back that Hoop's one year chart.

I have been a CEN shareholder from the beginning, which is over 15 years now. I have never sold a CEN share. However my 'median holding time' is only four years. That indicates I have been buying more in recent times than earlier years. I am invested in Contact primarily for the dividend stream. The dividend stream is left out of most charts. If the company's profit steam is not growing in the medium term, then you should not expect the share price to rise in the medium term. Given the non growth outlook for all the gentailers since the GFC, this premise applies to Contact Energy.

Back on 30th June 2011, the share price was $5.36.

As I write this the share price on 24-06-2015 is $5.15. Superficially this is showing a loss over four years of 21cps. Not a great result. However, in the intervening time the following fully imputed dividends have been declared, and paid:

12, 11, 12, 11, 14, 11, 15, 11, 50

That adds up to $1.47. (1)

The first three of those dividends were paid to me when the dividend reinvestment plan (DRP) was running. I took those as shares rather than cash. So did many others. As a result of the DRP the total number of shares on issue increased from 695.068m to 733.308m, an increase of 5.5%. My own number of shares went up by 7% over that time because of the DRP. So I had an extra 'gain' of shares over and above the average gain of:

7% - 5.5% = 1.5%

This is extra value attributed to me in excess of the average punter. With a CEN share price today of $5.15, in dollar terms this 'extra value' is

0.015 x $5.15 = 7.7c (2)

This means my total income gain over four years is (1) + (2):

147 + 7.7 = 154.7c

Removing my capital loss over the period of 21c, my gain reduces to 133.7. Divide by 4 to get a per year gain per share over the four year median holding period of 33.4cps.

Based on a share price of $5.15 today, this represents a net yield of:

33.4 / 515 = 6.5%

Using a 28% company tax rate, the gross annual average yield is

6.5% / (1-0.28) = 9.0%

This is a really good return. Yet if you had just looked at the chart, you might convince yourself you had lost money. This kind of thing is why when it comes to income investments, I would never recommend using a chart.

SNOOPY

Thank you Snoopy, its a great way to look at it also. I dont think theres a lot of get rich quick in trading without risk and experiance, breaking even while learning the trade would be adequate, for me I am up at present 12% over the 2 years (certainly been up more at one stage and this 12% is as low as its been in the last 6 months or so), theres been some moments of sheer ecstasy and of course some days where the only thing to help was some bonded jim beam :cool:

Had you sold CEN when it was $6.50 before going ex divy you could add another 85c per share to that too but assuming you are keeping them for the long term divy also. As you say not a growth company but its boring old electricity.....

I am not sure what a lot of others do but I like to buy and hold some like the CEN and have a play with some others but not throwing a lot of $ around while I get a feel for it all.

The forum has been a great source of learning and I sat back and read and watched quietly for a while, even now I am all to aware of my limitations and the goal is to avoid looking like a fool. The death or glory comment may come back to haunt me ;)

workingdad

26-06-2015, 12:52 PM

I am questioning my sanity..... looking at buying more :scared:

couta1

26-06-2015, 01:06 PM

I am questioning my sanity..... looking at buying more :scared:
Be greedy where others are fearful, go on you know you want to, dont worry about looking like a fool if your an honest fool(Ive been there many times) Plenty of fools as members and guests reading these forums with too much pride to fess up yet would be quick to criticise others for making the same dumb mistakes:cool:

RTM

26-06-2015, 01:13 PM

I'm with you WorkingDad. Topping up with a few as well. Fingers crossed !
If that makes you feel any better.

I am questioning my sanity..... looking at buying more :scared:

workingdad

26-06-2015, 01:18 PM

It does rather strangely - misery loves company haha or it will be a bottle of the finest if we are right :p

theace

26-06-2015, 01:42 PM

I took a small punt as well!

workingdad

26-06-2015, 02:00 PM

Be greedy where others are fearful, go on you know you want to, dont worry about looking like a fool if your an honest fool(Ive been there many times) Plenty of fools as members and guests reading these forums with too much pride to fess up yet would be quick to criticise others for making the same dumb mistakes:cool:

No issue with putting it out there and it wont be long before we know if it is indeed a fool's error, I havent jumped in again yet, not a lot of activity so I think it may come down a bit more prior to the 1st. Bought more last week which isnt exactly paying off and that was a mistake with the current pricing - if only the crystal ball worked a bit better.

I agree, there are a few that are happy enough to let others know of the wins but not so forthcoming on the losses - easy for me though, I am as green as they come so breaking even is an accomplishment for now.

couta1

26-06-2015, 02:07 PM

Workingdad even when your not green breaking even can still be an great accomplishment:eek2:

sb9

26-06-2015, 02:08 PM

Yeah, bit more pain before gain me thinks, sit tight and hang in there.

RTM

26-06-2015, 02:24 PM

Workingdad even when your not green breaking even can still be an great accomplishment:eek2:

That's for sure Couta. I've also found it very difficult to time the exact bottom. Within 1-2 % is good going for me.
Got mine @ 501. I get some more if they reach around 450 ! Good luck to us all.

sb9

19-07-2015, 02:03 PM

Seems to be strengthening back up, wonder if if its something around Tiwai...mean if they're in negotiations re the power supply.

tim23

19-07-2015, 07:50 PM

They just got stupidly cheap.

sb9

19-07-2015, 09:29 PM

Good for those who got in sub $5 mark.

macduffy

20-07-2015, 08:22 AM

FWIW, today's AFR has a headline to the effect that "the future of Origin's majority stake in Contact Energy may become clearer this week".

Article behind the paywall, of course!

IAK

20-07-2015, 03:04 PM

Doesn't look like much is going to happen until Tiwai is sorted. So much for Origin being "committed" to Contact.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11483975

bull....

20-07-2015, 03:24 PM

afr article says origin may sell 50% of there stake at circa $4.50

sb9

20-07-2015, 03:33 PM

Harvey Specter

20-07-2015, 03:55 PM

Well, this is another extract from same article,

"The Australian newspaper reported that there had been talk in the market about the entire stake being sold at $4.50 per Contact share - well below the $5.20 price the stock opened at today.
That would value the stake at around $1.75 billion, compared its market value of roughly $2 billion.

But The Australian also reported that sources close to Macquarie had scotched rumours of the block sale taking place at such a heavy discount."

So its all speculation at the moment.Well somebody knows something (not that they are acting on it) but with speculation out in the market, makes it very easy to disguise insider trading. A please explain should really be issued (not sure on what technical basis) especially given the huge difference in price being speculated.

sb9

20-07-2015, 03:59 PM

More info from NBR this arvo:

Some milestones to go before Contact in play, sources say
Reports from Australia that Contact Energy’s [NZX: CEN (https://nzx.com/markets/NZSX/securities/cen)] 53% shareholder Origin is close to deciding on a sale of the stake may be premature, New Zealand sources say.
Potential investors were being sounded out in Australia and Hong Kong by investment bank Macquarie Capital, The Australian said, while the Australian Financial Review said the format of a transaction had been “nutted out” over the weekend.
New Sydney firm Luminis Partners, created in February by former Caliburn & Greenhill partners Ron Malek, Simon Mordant and Jamie Garis, is reportedly advising Origin on what to do. Mr Garis told NBR he could not comment on client matters.
However, with an August 3 deadline for a decision on the Tiwai Point aluminium smelter and Contact not due to report its annual results until August 17, potential investors may be unlikely to commit just yet.
“It’s a tricky time to put a stake out to the market,” said one market source. Origin had shown itself a patient investor in Contact over the years and was unlikely to rush into a sale while conditions were uncertain.
A sale price of $4.50 a share, as speculated by the AFR, would be “very disappointing” for Origin, he said.
Contact shares were trading near $5.10 today.
Another source said while it would make sense to test overseas investor interest since the New Zealand market would struggle to absorb such a large shareholding, at low prices a sale might not fulfil Origin’s needs.
The Australian company is committed to retaining an investment grade credit rating, downgraded to BBB minus by Standard & Poor’s on April 22. The rating relies on Origin’s ratio of debt to operating earnings and, with Contact contributing to the earnings side of the equation, a sale makes sense only if it can move the debt side of the dial enough to offset the loss of earnings.
“There will be quite a bit of gamesmanship going on,” he said, referring to investment banks making a play for particular deal structures.
It is understood that New Zealand institutions have yet to be contacted about their interest in Contact but they are likely to be keen.
Origin fuelled speculation about a selldown of Contact in a May presentation describing asset sales as among its options to improve balance sheet flexibility.
A special dividend payment by Contact in June, which used up imputation credits that could be lost in a change of control, was also seen as a pointer.
Origin told media last month that Contact “continues to form a key part of our Australasian energy markets business.”

bull....

20-07-2015, 04:22 PM

4.50 probably a good price for them considering contact is losing plenty of customers at the moment dreadful mth for them last mth in fact

I was at a infratil presentation recently and the dude say he didn't see much synergies between infratil and contact merging

Crackity

20-07-2015, 04:24 PM

"The Australian newspaper reported that there had been talk in the market about the entire stake being sold at $4.50 per Contact share - well below the $5.20 price the stock opened at today.
That would value the stake at around $1.75 billion, compared its market value of roughly $2 billion.
.
So its all speculation at the moment.

i heard ( so possibly unreliable....) that the $4.50 was Australian dollars....

Harvey Specter

20-07-2015, 04:42 PM

i heard ( so possibly unreliable....) that the $4.50 was Australian dollars....WOuld make more sense - just above $5 Which is similar to other big block transactions recently (ie. just below market).

percy

20-07-2015, 05:43 PM

I went to an IFT presentation a week ago.Tim Brown was the presenter.Yes if the price was right IFT would buy it.Not a lot of buyers about.The NZ power companies with the Govt holdings are not buyers.No there would be no fit with Trust Power.

Joshuatree

22-07-2015, 09:31 PM

Good hot point Percy. IFT Merger with Trustpower mentioned

Origin selldown to make Contact with Infratil | afr.com (https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&ved=0CCIQFjABOApqFQoTCNzX-py27sYCFcEkpgodcKYKjA&url=http%3A%2F%2Fwww.afr.com%2Fstreet-talk%2Forigin-selldown-to-make-contact-with-infratil-20150717-giezj9&ei=KmKvVdyaBcHJmAXwzKrgCA&usg=AFQjCNHICUtMrS8CcjSk_wT96ctB9S8E7A&sig2=fpB00GcQfyW5rVk3txWthQ&bvm=bv.98197061,d.dGY)

Crackity

22-07-2015, 10:39 PM

Joshuatree

22-07-2015, 11:43 PM

Contact /Infratil /Trustpower why not. No NZ Govt holding any Contact.

percy

23-07-2015, 07:32 AM

Joshuatree

23-07-2015, 08:12 AM

Harvey Specter

23-07-2015, 08:19 AM

Maybe a IFT / NZ Superannuation Fund joint deal? They will no doubt be looking at it - both would look at any large NZ infrastructure play. The questions is whether the price is right and future growth potential. TPW is looking overseas (Oz windfarms) for growth so I dont see why they would be interested in CEN given limited NZ growth options.

percy

23-07-2015, 08:45 AM

Its CEN not CNE and Contact is not owned by the NZ Govt ok. Good. Where there is smoke there is fire. A good chance and alogical one of a linkage between the 3, classic Infratil move imo. I was hoping some Contact come to me re $4.50 but could be wishful there.

Sorry have corrected my post.Trouble is I own neither CEN or IFT.
Tim Brown said they had thought CEN was too dear for them, and had never thought it would come on the market at anywhere near what they would be prepared to pay.
I think they have been very busy "doing the numbers."

Snoopy

31-07-2015, 04:23 PM

I managed to buy a small parcel today at $5.50 to add to my holding. That was based on the gut feeling that investors wouldn't let it slip below $5.50, a feeling that has so far proved correct. Average price paid overall is now $4.81, with a steady stream of decent dividends to add to my return over the years. My original holding was bought at float time (1998)! I have added to that since both through buying more and the dividend reinvestment scheme as funds permitted. Have never sold any. Owning CEN shares today isn't a get rich quick scheme. But it has proved a great core portfolio investment.

SNOOPY

PS Share price closed the day at $5.68! I sure nailed the timing on this purchase today.

Since I wrote the above post, Contact has paid a special dividend of 50c per share. So my equivalent purchase price for that last parcel of shares is now $5. As I write this, the share price is $4.90, so even cheaper!

When purchasing shares I always like to stack up any potential purchase with any alternative that is out there. Genesis Energy is also an electricity gentailer that, like Contact, has natural gas interests. So how do the two stack up?

Dividends are all fully imputed.

Contact EnergyGenesis Energy

Share Price$4.90$1.41+31c(Kupe)

Projected eps (FY2015)26.2c6.4c+2.6c(Kupe)

Projected dps (FY2015)11c+15c=26c8c+8c=16c

Gentailer PE18.722.0

Earnings Yield Gentailer (FY2015)7.4% (gross)6.3% (gross)

Share Price for 6% yield (fair value)$6.04$1.48+$0.31

Discount from fair value19%4%

My Investment ResponseBuyHold

This table is behind the reason that I added to my CEN holding today. Most of the extra discount is I believe rated to the uncertainty surrounding Origin's controlling stake. But what a wonderful opportunity that gives for we value investors to top up!

SNOOPY

Joshuatree

31-07-2015, 06:56 PM

Cheers Snoopy. Re the overhang from Origin I'm awaiting what i hope is abetter op when /if their CEN shares hit the market at a discount.

Snoopy

31-07-2015, 07:08 PM

Cheers Snoopy. Re the overhang from Origin I'm awaiting what i hope is abetter op when /if their CEN shares hit the market at a discount.

As are many others Joshuatree. I will also buy more should that happen. I am sure that if those Origin shares are placed, then they will be placed at a discount for the institutions that take those shares on. That is known.

But how big will that discount be? And will we 'small investors' see the share price slide back so that we can pick up CEN shares on market at a similar price to the big institutions? All that is unknown.

In the meantime, the opportunity that presented itself on the market today was too good to miss IMO.

SNOOPY

Joshuatree

31-07-2015, 07:46 PM

Yes especially if the tiwai announcement is positive on monday; prudent.

Xerof

31-07-2015, 08:19 PM

Origin must be really desparate to sell a controlling stake at a discount, but good luck to Infratil if they pull this one off. I'm hearing the midnight oil is burning brightly

PSE

31-07-2015, 09:26 PM

PSE

31-07-2015, 10:12 PM

Reading through securities analysis at the moment trying to improve my game hope I don't sound too arrogant. Back when it was written everything was cheaper but a PE of 20 is used as the upper limit/danger zone.
Not one year's earnings but rather an average of historical earnings restated for skulduggery with some assurance the future is not poor/industry is not in decline but has some growth prospects.
Speculating on the Tiwai outcome is not the sort of thing I get into. The analysts are confident it will remain open so chances are a small profit to be made at risk of a loss.

Snoopy

01-08-2015, 12:36 PM

Snoop CEN is cheaper than it has been for a long time so on that basis relatively more attractive.
I think a value investor would look at the earnings since listing and take a critical approach to future developments to have an idea of prospective earnings power.

PSE, my comparative table was not meant to be taken as representative of the total work I have put into researching Contact Energy! My study period was from 2008 to date. Why? Because this represents the post GFC era where we now find ourselves. Before that time general growth in the economy was consummate with aannual increses in power consumption. In NZ at least, that link is now broken and the demand for power in the forseeable future is more static.

My 'normalised' eps figures for other years are like this:

Yeareps

200842.9c

200927.0c

201025.3c

201122.4c

201224.6c

201327.5c

201427.1c

The new dividend policy is to pay out 100% of earnings as dividends. So my projected FY2015 earnings/dividend of 26.2cps, are well within the bounds of post GFC normal.

From an investment perspective, I now consider investing in energy companies in NZ from a 'steady state' perspective. If I can make the case for 'steady state' investment and the real result is some growth in the future (I am thinking perhaps a growth rate of half the GDP growth rate going forwards) then I will do better than I am predicting. A 'steady state' model, I see as slightly conservative which is where one 'safety factor' is built into this investment.

In particular should depreciation on hydro actually be reported as profit?

If you don't believe a hydro dam should be depreciated at all (I have some sympathy with that view), or maybe depreciated over 900 years, not 90, then Contact are currently understating their profits. This introduces another 'factor of safety' into my investment equation.

If the PE is 19 I find it hard to get excited, I would be looking for more along the lines of 4-7.

As you said PSE value is relative. The money that I am investing in Contact is currently earning 3% on call. So even though you might see CEN as 'expensive' in Ben Graham terms, I am still more than doubling my income on that capital. I would suggest that certain classes of assets (utilities) should be allowed to have higher PE ratios in an investment plan. That is because of the certainty of cashflows that many utility type investments have. Even so, I never meant to suggest that buying CEN at $4.90 was a get rich quick scheme!

SNOOPY

Snoopy

01-08-2015, 01:09 PM

Reading through securities analysis at the moment trying to improve my game hope I don't sound too arrogant. Back when it was written everything was cheaper but a PE of 20 is used as the upper limit/danger zone.

I agree that IF deposit interest rates go back up to 5.5 to 6.0%, THEN this will reduce the relative attractiveness of utiliity type investments. It is a risk factor.

Not one year's earnings but rather an average of historical earnings restated for skulduggery with some assurance the future is not poor/industry is not in decline but has some growth prospects.

Ye. This is why I have read all of the annual reports from 2008 to date very carefully. I took out the 'skullduggery' by calculating each yaers annual profit myself. The method was:

1/ Take EBITDAF.
2/ Remove one off profit items.
3/ Remove Depreciation and Amortization
4/ Take off annual interest charge.
5/ Calculate tax payable at 28% (2008 30%)
6/ Calculate NPAT (normalised estimate).

Speculating on the Tiwai outcome is not the sort of thing I get into. The analysts are confident it will remain open so chances are a small profit to be made at risk of a loss.

My valuation assumes Tiwai remains open. I will be punished if I get this wrong. But the small value discount I will get if this uncertainty is removed will probably boost my returns a bit.

SNOOPY

PSE

01-08-2015, 01:29 PM

I agree with 90% of what you say there Snoopy.
With respect to interest rates, if investors lower their required return due to low interest rates - isn't this just a wayof justifying the bubble and the bust?
I think yeah probably 90 years they are overstating depreciation and they shouldn't do it. It should be included in the PE as most investors aren't aware of the distinction.
If the PE is 15 it is more interesting and as you say stable.
There is not a right or wrong answer but your returns will be driven by the purchase price as you know. So the harder you are prepared to look the better the chances of finding a bargain.
Can't object too much about it I am just much more comfortable in the doom and gloom.

PSE

01-08-2015, 02:02 PM

I am still not sure the right policy.
Presently I am leaning toward the idea of assuming a long term risk free return of 5%, regardless of present interest rate for the purpose of valuing a company.
Notwithstanding the open bank resolution making term deposits high risk.
In this case a PE of 20 for a stable company like a gentailer is fine, for the risk of loss in the business you are compensated with electricity prices which will rise with inflation even if the company doesn't invest and pays out it's profit.
Overall there aren't many investments at good prices and in this scenario there are worse places than having a little cash. The next crash will come sure as night follows day and when it does there will be hundreds of bargains.

PSE

01-08-2015, 02:03 PM

PSE

01-08-2015, 02:06 PM

Maybe then an estimated PE for a stable slow growing company should be 15 for purchase and 25 to sell.
This would have had you selling out at $9 or $10 a few years ago before buying back in.

PSE

01-08-2015, 02:41 PM

Snoopy

01-08-2015, 03:33 PM

2014 report says they have 5b of plant and equipment but doesn't break down Clyde vs Te Mihi or TCC.
Gives a range of depreciation and then says they adjust the values appropriately from time to time.
Say the hydro is 3b and will last 200 years instead of 100. That's 15m per annum annual profit.
That is rubbish disclosure though. They should say what the assets are how much they are valued how much depreciated and on what basis are values adjusted.

I did some background work on the book vs replacement value of the Contact generation assets back in 2013 PSE. See my post 622 on this thread. This was when the Green/Labour power policy, should they come to power, was going to require generators to price power based on original cost of assets, plus an inflation allowance for wearing parts (the turbines)

I see that some generation assets were only depleted at 1% PA in AR2014. The dams? That means a 100 year life.

You are correct in that Contact don't break down individual values of different power stations. But they did tell us how much the new Te Mihi geothermal power station cost. So you can 'work backwards' from there and make some educated guesses to see if those book values for generation assets are fair. In short for Contact Energy, I decided the book values of the generation assets were fair at the time.

SNOOPY

Snoopy

01-08-2015, 03:41 PM

I agree with 90% of what you say there Snoopy.
With respect to interest rates, if investors lower their required return due to low interest rates - isn't this just a way of justifying the bubble and the bust?

Good point. I guess the key is not to lower the yield you will accept (in my case I have chosen 6%) too much. You have to keep in mind that at some point interest rates will go up again. However, I do think they are unlikely to hit 7% or 8% in this business cycle or the next one. Deposit interest rates might hit 6%. But I think we are talking three or more years away at the earlies, and not in a hurryt. So there is time to reevaluate your position in the gentailers

SNOOPY

horus1

01-08-2015, 04:28 PM

technology is affecting alternative sources of supply and reducing prices fast. the revenue stream is not secure in the medium term and that is important not the cost side.

PSE

02-08-2015, 05:30 PM

I did some background work on the book vs replacement value of the Contact generation assets back in 2013 PSE. See my post 622 on this thread. This was when the Green/Labour power policy, should they come to power, was going to require generators to price power based on original cost of assets, plus an inflation allowance for wearing parts (the turbines)

I see that some generation assets were only depleted at 1% PA in AR2014. The dams? That means a 100 year life.

You are correct in that Contact don't break down individual values of different power stations. But they did tell us how much the new Te Mihi geothermal power station cost. So you can 'work backwards' from there and make some educated guesses to see if those book values for generation assets are fair. In short for Contact Energy, I decided the book values of the generation assets were fair at the time.

SNOOPY

Presumably the dams are at 1% and good you did the breakdown to find the asset value but you shouldn't have to, the 5b is probably fine I just don't like the 'trust me' arrogant attitude. This attitude is not unique to CEN it is endemic.
You can work out a cost per MW and look at the stations owned, it would cost far more than 5b to replace the assets that's for sure. If Clyde cost $2b in 1990.
Horus, so what does the islanded NZ grid do in winter when there is no power from the sun?
Hopefully your wishful thinking will keep you warm but for my part I will rely on the electricity grid.

Jantar

03-08-2015, 09:11 AM

Contact to supply a portion of Tiwai's demand.

https://www.nzx.com/companies/CEN/announcements/267828

Well 80 MW is not much, but it is locked in for a long time.

Snoopy

03-08-2015, 09:31 AM

Technology is affecting alternative sources of supply and reducing prices fast. the revenue stream is not secure in the medium term and that is important not the cost side.

Horus, if more localized power generation is the way to go in the future, like roofloads of solar panels, then what is to stop Contact 'renting' roofspace in Mangere, and opening up the "David Lange Memorial Power Station", a joint initiative with Pacifica people. Contact owns the panels and gets (most) of the benefit.

As I see it the main 'threat' from distributed generation and battery storage is actually to the lines companies, not the gentailers.

SNOOPY

horus1

03-08-2015, 09:39 AM

The threat is that anyone can and will do it, Some will leave the grid with solar plus batteries and this will hurt the generators and transmission more than distribution. As well loads are declining due to efficiency .

xafalcon

03-08-2015, 09:47 AM

Horus, if more localized power generation is the way to go in the future, like roofloads of solar panels, then what is to stop Contact 'renting' roofspace in Mangere, and opening up the "David Lange Memorial Power Station", a joint initiative with Pacifica people. Contact owns the panels and gets (most) of the benefit.

As I see it the main 'threat' from distributed generation and battery storage is actually to the lines companies, not the gentailers.

SNOOPY

Adequate economically feasible battery storage is 5-10+ years away.

Battery capital cost will be high, limiting uptake in the early years.

Lengthy captial pay-back period will deter many

So IMO lines companies have little to worry about in the foreseeable future.

Retailers will be the most effected parties as grid-tied systems accelerate their proliferation on roof-tops. Displacing daytime domestic energy sales at $0.29/unit, and replacing with commercial sales at lower levels.

Many grid-tied converts will also fall into "low-user" category and receive lower pricing for their electricity supply. A double-bonus

Snoopy

03-08-2015, 09:56 AM

The threat is that anyone can and will do it,

Yes, but you are assuming that 'anyone' can be better asset managers than the likes of Contact. Solar panels still have to be paid for. They have to be kept clean. They have to be checked to see if they are maintaining an adequate generation performance. I am sure that someone like you could do all of these things. But could the average person do it? That is an entirely different question!

Some will leave the grid with solar plus batteries and this will hurt the generators and transmission more than distribution.

Huh? If more power is generated 'on the spot', then the ultimate result of that is much less reliance on the distrbution grid, surely?

As well loads are declining due to efficiency.

I think loads are also declining due to the hollowing out of heavy manufacturing. Once this trend stops I believe that power consumption will rise annually again, albeit not as fast as GDP , like it did before, due to the efficiency gains you allude to.

SNOOPY

sb9

04-08-2015, 08:53 AM

Here it is, Trading halt...

https://nzx.com/companies/CEN/announcements/267888

sb9

04-08-2015, 08:58 AM

Looks like they're placed at $4.65per share....

https://nzx.com/companies/OCF/announcements/267889

Joshuatree

04-08-2015, 08:58 AM

Alrighty, Game on:D:scared::t_up: Hopefully i can get my mitts on some of these and why not there are heaps to unload if Infratil etc are not involved..

trader_jackson

04-08-2015, 08:59 AM

How do we get in at that price? seems pretty cheap... (thoughts?)

Joshuatree

04-08-2015, 09:06 AM

I have an account with my broker(CRAIGS:)) so will register int. You prob need to do the same;today, but we need more details first of how its going to happen.

Joshuatree

04-08-2015, 09:07 AM

Thanks sb9 ; onto it!.

sb9

04-08-2015, 09:09 AM

More from Contact and also trading update for FY to be announced soon.

https://nzx.com/companies/CEN/announcements/267893

trader_jackson

04-08-2015, 09:12 AM

Big day for contact that is for sure...

Joshuatree

04-08-2015, 09:16 AM

Looking good
"Origin’s shareholding in Contact is expected to be sold to a broad range of Australian, New Zealand and international equity market institutional investors and New Zealand retail investors."

sb9

04-08-2015, 09:17 AM

Yep, I think its a good price for big block of Origin's stake.

sb9

04-08-2015, 09:37 AM

Investor presentation docs...

Couple of key points of interest:

- Dividends distributable is increased to 100% of earnings from 80% previously.
- ASX listing in 4 to 6 weeks time.

https://nzx.com/companies/CEN/announcements/267895

sammiesmiles

04-08-2015, 09:42 AM

hopefully IFT can initial the acquisition

Crackity

04-08-2015, 10:33 AM

Yep, I think its a good price for big block of Origin's stake.

Anywhere around the $4.65 mark I think is a good buy. That's my 2c worth

NZSilver

04-08-2015, 01:15 PM

Too right Crackity, im going to try and get a few! great div play and now tiwai is all sorted.

rotweiller

04-08-2015, 01:46 PM

Too right Crackity, im going to try and get a few! great div play and now tiwai is all sorted.

NZ Herald reporting total shareholding sold to Maquarie Capital for 1.8 billion.
Where does that leave we holders ???

Jantar

04-08-2015, 01:49 PM

NZ Herald reporting total shareholding sold to Maquarie Capital for 1.8 billion.
Where does that leave we holders ???
Reading the market notices it appears that Maquarie are the brokers and underwriters, not the buyers.

Joshuatree

04-08-2015, 01:51 PM

Any thoughts from your side of the Gentailer fence Jantar?

Harvey Specter

04-08-2015, 02:28 PM

So for those that dont get in at the placement, what will it open at (I assume on the 6th)? Best guesses?

Will people we happy with a 1% instant gain so sell for less than $4.70?

Jantar

04-08-2015, 02:31 PM

Any thoughts from your side of the Gentailer fence Jantar?
I am not allowed to comment other than :t_up:

Crackity

04-08-2015, 02:32 PM

So for those that dont get in at the placement, what will it open at (I assume on the 6th)? Best guesses?

Will people we happy with a 1% instant gain so sell for less than $4.70?

I pick $4.81 - anyone else? Have set up a separate thread for guesses....

Snoopy

04-08-2015, 02:57 PM

Projected eps (FY2015): 26.2c

Time to update my FY2015 earnings forecast, given today's news release from Contact.

1/ Take EBITDAF.

$525m

2/ Remove one off profit items.

$0m (nothing material declared)

3/ Remove Depreciation and Amortization

2x $101m = $202m (twice half year figure)

4/ Take off annual interest charge.

$77m (assume same as FY2014)

5/ Calculate tax payable at 28%

$69m

6/ Calculate NPAT (normalised estimate).

=$177m

From this the foreacst earnings per share are:

$177m / 733m = 24.1cps

An 11c interim dividend has already been paid. So it looks like the final dividend will be 13cps, down 2cps on last year.

SNOOPY

Snoopy

04-08-2015, 03:28 PM

6/ Calculate NPAT (normalised estimate).

=$177m

From this the forecast earnings per share are:

$177m / 733m = 24.1cps

An 11c interim dividend has already been paid. So it looks like the final dividend will be 13cps, down 2cps on last year.

Yeareps

200842.9c

200927.0c

201025.3c

201122.4c

201224.6c

201327.5c

201427.1c

New dividend policy is to pay out 'eps' as 'dps'. Looking at the results from 2008 to date it looks like 2008 is an outlier. Further investigation leads me to believe that this particuarly good year was made possible due to limited capacity on the Cook Strait cable. This cable has now been enhanced and the infrastructure conditions that supported the 2008 result look unlikely to be repeated. So I will drop the 2008 result out of my alternative future scenarios for forecasting purposes.

Average eps (last 6 years): 25.7cps (NPAT)

=> Gross eps = 25.7/0.72= 35.6c

Valuation of CEN based on steady state earnings and an acceptable gross dividend payment rate of 6%

35.6/ 0.06 = $5.94

That is a bit lower than I had before, due to my adjusting earnings downwards for FY2014. It is still well above the $4.65 placement price of today though!

SNOOPY

IAK

04-08-2015, 04:30 PM

Rod Oram's thoughts on Tiwai and Origin selling Contact Energy.

http://www.radionz.co.nz/national/programmes/ninetonoon/audio/201765077/business-commentator-rod-oram

PSE

04-08-2015, 05:41 PM

New dividend policy is to pay out 'eps' as 'dps'. Looking at the results from 2008 to date it looks like 2008 is an outlier. Further investigation leads me to believe that this particuarly good year was made possible due to limited capacity on the Cook Strait cable. This cable has now been enhanced and the infrastructure conditions that supported the 2008 result look unlikely to be repeated. So I will drop the 2008 result out of my alternative future scenarios for forecasting purposes.

Average eps (last 7 years): 25.4cps (NPAT)

=> Gross eps = 25.4/0.72= 35.3c

Valuation of CEN based on steady state earnings and an acceptacle gross dividend payment rate of 6%

35.3/ 0.06 = $5.88

That is a bit lower than I had before, due to my adjusting earnings downwards for FY2014 and FY2015 coming in below my forecast. It is still well above the $4.65 placement price of today though!

SNOOPY

Like your work snoop.
I would suggest 2008 is an outlier because of the dry year, HVDC upgrade as you mention. At that time New Plymouth power station was running. It has been replaced by peakers but Otahuhu may not be running in a future dry year.
It is I think appropriate to include outliers in your averages as a dry year is something that happens now and then. CEN's portfolio changes and changes to installed generation of other retailers. means maybe not as profitable for CEN.
Losing ORG as majority owner is positive as they have used CEN to test their failed ideas notably SAP.

PSE

04-08-2015, 06:15 PM

Snoopy

04-08-2015, 06:44 PM

Like your work snoop.
I would suggest 2008 is an outlier because of the dry year, HVDC upgrade as you mention. At that time New Plymouth power station was running. It has been replaced by peakers but Otahuhu may not be running in a future dry year.
It is I think appropriate to include outliers in your averages as a dry year is something that happens now and then.

One more thing about FY2008 PSE. That was the last year of cheap Maui gas and those 1990s take or pay prices. Cheap Maui gas isn't coming back!

SNOOPY

noodles

04-08-2015, 06:45 PM

New dividend policy is to pay out 'eps' as 'dps'. Looking at the results from 2008 to date it looks like 2008 is an outlier. Further investigation leads me to believe that this particuarly good year was made possible due to limited capacity on the Cook Strait cable. This cable has now been enhanced and the infrastructure conditions that supported the 2008 result look unlikely to be repeated. So I will drop the 2008 result out of my alternative future scenarios for forecasting purposes.

Average eps (last 7 years): 25.4cps (NPAT)

=> Gross eps = 25.4/0.72= 35.3c

Valuation of CEN based on steady state earnings and an acceptacle gross dividend payment rate of 6%

35.3/ 0.06 = $5.88

That is a bit lower than I had before, due to my adjusting earnings downwards for FY2014 and FY2015 coming in below my forecast. It is still well above the $4.65 placement price of today though!

SNOOPY
Snoopy. The dividend policy is as follows:
-Contact has recently concluded that it can support increased distributions to shareholders and as aresult has revised its distribution policy to target an average ordinary dividend equivalent toapproximately 100% of Underlying Earnings after Tax1 (previously 80%)
-In the event that free cash flow exceeds ordinary dividends Contact willmake additional distributions.

Free cash flow for FY15 is estimated as $363m
Underlying Earnings after Tax expected to be approximately $161m

So free cash flows is more than double Underlying earnings. Thus you would conclude that dividends will be a lot more than 100% of NPAT

BlackPeter

04-08-2015, 06:49 PM

CEN values SAP at 265 million with a 15 year lifetime, I don't really see how the change to SAP will increase earnings.
At the stations it is just a hinderance because no-one knows where the spares are anymore.

Any story worthwhile telling re CEN and SAP?

In general ... a well configured ERP system won't increase sales, but it can free up lots of resources (to do better things than e.g. counting spares on shelves) and save lots of money ... just by helping the company to be better organised. No waste, no duplicate orders, supplies never running out again - the system can order in real time. It can safe plenty of time, effort and frustration.

On the other hand - a suboptimal installed and configured ERP system can cost a lot of additional money, it is typically not just a multi person decades implementation project, but anything you misconfigured - you pay for that through the nose and throughout the lifetime of the system.

Not sure what your (or CEN's?) frustration is with their ERP system ... but I can't imagine it is SAP's fault. SAP is worldwide market leader in these systems. Given your statements it sounds like there are problems ... maybe some CIO who wanted to save a handful of dollars for the consultant?

Companies like 3M, 7-eleven, BASF, BP, Siemens, Daimler Benz, Lufthansa (to name just a few) use SAP ERP systems with lots of success. Can't really imagine that minnows like CEN would add that many additional challenges ;) - maybe they are too small?

Snoopy

04-08-2015, 06:50 PM

CEN values SAP at 265 million with a 15 year lifetime, I don't really see how the change to SAP will increase earnings.
At the stations it is just a hinderance because no-one knows where the spares are anymore.

SAP is the new IT management platform for Contact. But I think as well as being used for in house asset management, it is also used as part of the customer retail system. I think the aim was to replace a whole lot of disparate legacy systems with one. Perhaps the earnings increase will come from that side of the implementation?

SNOOPY

Snoopy

04-08-2015, 06:54 PM

Snoopy. The dividend policy is as follows:
-Contact has recently concluded that it can support increased distributions to shareholders and as a result has revised its distribution policy to target an average ordinary dividend equivalent to approximately 100% of Underlying Earnings after Tax1 (previously 80%)
-In the event that free cash flow exceeds ordinary dividends Contact will make additional distributions.

Free cash flow for FY15 is estimated as $363m
Underlying Earnings after Tax expected to be approximately $161m

So free cash flows is more than double Underlying earnings. Thus you would conclude that dividends will be a lot more than 100% of NPAT

You could be right Noodles. But if you are paying out free cash flows to your shareholders over and above fully imputed dividends, aren't you just giving shareholders what is in effect their own capital back, except with a tax bill attached? I read the bit you had emboldened as a suggestion that share buybacks might be on the cards in the future.

SNOOPY

PSE

04-08-2015, 07:09 PM

SAP is the new IT management platform for Contact. But I think as well as being used for in house asset management, it is also used as part of the customer retail system. I think the aim was to replace a whole lot of disparate legacy systems with one. Perhaps the earnings increase will come from that side of the implementation?

SNOOPY

What is certain is that 265million was spent on SAP so it is recorded as this on the books.
It is not really useful but a hinderance to the people on site (1/4 of the company), I know for a fact its not going to get better for these people at least.
Retail is much bigger and potentially more useful there have been issues there as well.
http://www.zdnet.com/article/contact-energy-takes-a-hit-after-sap-rollout/
Any potential benefits would come from the retail side but I am not as confident as Dennis Barnes about seeing a reduction in costs sufficient to cover the expenditure.
This is because the implementation was botched, the business plan was not thought through but rather rolled out to see if it would work by the majority shareholder.

PSE

04-08-2015, 07:13 PM

I am not against replacing old IT platforms, but my experience working in CEN at the time SAP was rolled out means I know it will not benefit the generation side and leads me to suspect the retail side may also have ongoing issues.
That's right blackpete it may be great for all those businesses but CEN is too small and simple, it is absolutely the implementation I take issue with.
Not the right tool for the job and not the right people getting it done.
If Siemens spends 265m on SAP I can see that the price is small relative to the size of the business and their scale makes the costs smaller relative to the benefits. CEN is only a $3.6 billion dollar company and in this context the expenditure is high.

noodles

04-08-2015, 07:13 PM

You could be right Noodles. But if you are paying out free cash flows to your shareholders over and above fully imputed dividends, aren't you just giving shareholders what is in effect their own capital back, except with a tax bill attached? I read the bit you had emboldened as a suggestion that share buybacks might be on the cards in the future.

SNOOPY
Well I think they used up all their imputation credits in the recent special dividend. So yes, either a buy back or partial imputation. They were not explicit.

Snoopy

04-08-2015, 07:22 PM

Well I think they used up all their imputation credits in the recent special dividend. So yes, either a buy back or partial imputation. They were not explicit.

A buy back would with 'excess cashflows' would be more tax efficient for shareholders. A non-imputed extra dividend would look better in the business page where company yields are quoted daily. The problem is giving shareholders their own capital back, taxing it and calling it an extra dividend is not a long term sustainable policy. Unless that is Contact start revaluing their dams upwards again every few years, like MRP does. If they did that, then new capital could indeed materialize out of thin air.

Origin had a policy of not revaluing the generation assets every few years. I actually prefer this because the alternative is the following rather dishonest pricing loop logic.

1/ Revalue assets to market.
2/ Note that after revaluation your return on assets in not acceptable.
3/ Put up prices to get an acceptable return on assets.
4/ Price increases now increase underlying value of assets
5/ Go back to step 1

Certain political parties in this country believe extra regulations on the gentailers are needed to overcome such circular logic. Best not to annoy them I think.

SNOOPY

tim23

04-08-2015, 08:42 PM

$4.88 my guess to open.

Joshuatree

04-08-2015, 08:47 PM

Omega

04-08-2015, 08:57 PM

Well I think they used up all their imputation credits in the recent special dividend. So yes, either a buy back or partial imputation. They were not explicit.

FY2014 Annual report states $226m of IC's available and even after the special dividend there would still be a significant surplus of IC's (circa $60m-$70m) but a fair chunk of that is likely to be lost with the shareholders change unless they've been able to mitigate it with timing of tax payments and ICA date of 31 March being different to CEN's balance date .

sb9

04-08-2015, 09:21 PM

Good points noodles and snoopy.

I think it's positive that Origin are out of this. Asx listing should be good for the stock as well along with 100% dividend payout policy.

In the short term the so might dampen and depending what they announce at FY results time, it should be back to mid $5 at least.

Just look at the recent block sale of NZR by Chevron to Z, the sale was at $2.32 I think and price didn't go below $2.52 or around that mark for a while.

So, in my opinion for such chunk of stake, they've to sell at a discount to find suitable buyers. This might depress sp in the short term, but will recover eventually once bargain hunters pile in.

Joshuatree

04-08-2015, 09:58 PM

[

Just look at the recent block sale of NZR by Chevron to Z, the sale was at $2.32 I think and price didn't go below $2.52 or around that mark for a while.
in.[/QUOTE]

Small correction sb9 .The sale of NZR was to us through Craigs in my case anyway @ $2.32 plus commission. Z just bought the Caltex operations and hopefully the regulators will give it the nod. but i get your drift though. Can aussies claim franking credits on CEN like we can imp credits?

sb9

04-08-2015, 10:14 PM

Just imagine when the sale is completed tomorrow, NZX turnover for the day reads like $1.8 billion+all other normal turnover, that's some impressive number!!!

Hectorplains

04-08-2015, 10:34 PM

I guess no one has received a firm allocation or scale back confirmation today.Will hopefully need to find some cash ;take a few profits.Mel recovered from strongly from re 8-9c down to only 3c by days end.

Got an email from my broker 9.30 tonight. "Unfortunately demand in the Contact Energy book build was very high and I received only a fraction (less than 10%) of want I asked for."

sb9

04-08-2015, 10:37 PM

Thanks for posting that Hectorplains, on the back of that I revise my open price to $5 tomorrow.

Joshuatree

04-08-2015, 10:49 PM

BLAST.POW,BIFF. Heres hoping I'm higher up the food chain:lol::cursing::lol:

Joshuatree

05-08-2015, 08:11 AM

Origin sell-down boon for Kiwis (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11491976)

But not if one gets only 10% of ones order.

Crackity

05-08-2015, 08:33 AM

Origin sell-down boon for Kiwis (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11491976)

But not if one gets only 10% of ones order.

If you were a Macquarrie director and you saw that level of demand how many would you allocate to the house account? - this is a rhetorical question BTW!

dingoNZ

05-08-2015, 08:38 AM

If you were a Macquarrie director and you saw that level of demand how many would you allocate to the house account? - this is a rhetorical question BTW!

Cause they legally can't if participating in an underwritten offer, unless demand isn't there. Theta's the only way they own them

NZSilver

05-08-2015, 09:26 AM

I got zero :(

Stranger_Danger

05-08-2015, 09:28 AM

I got 14%. Not ideal.

bull....

05-08-2015, 09:43 AM

Got an email from my broker 9.30 tonight. "Unfortunately demand in the Contact Energy book build was very high and I received only a fraction (less than 10%) of want I asked for."

I believe you are correct massive scaling - oh well be plenty of other gentailers being brought back today??

Joshuatree

05-08-2015, 09:45 AM

I don't know how they operate but they take their cut as do the brokers ; up to 1% commission .I guess a big% has gone to Instos aussie and nz. Be int to see where the price settles in a week or so. Snoopys buy pre selldown may prove to be the right tactic.

Sideshow Bob

05-08-2015, 10:28 AM

I was only in for a few thousand. But my guy only got a portion of what they wanted, and then I got none of that. ;)

I would have have looked forward to being after selling out in the low $8's in 2007. :cool:

Harvey Specter

05-08-2015, 10:40 AM

Up to 5.10. Suprising there are no profit takers driving price down - must have been massively oversubscribed.

Harvey Specter

05-08-2015, 10:40 AM

Up to 5.10. Suprising there are no profit takers driving price down - must have been massively oversubscribed.

Snoopy

05-08-2015, 11:50 AM

Be int to see where the price settles in a week or so. Snoopys buy pre selldown may prove to be the right tactic.

You might be giving me credit for something I don't deserve there Joshuatree. I am surprised at the extent of allocation scaling that has gone on, just like everyone else. My tactic was not to time my CEN purchases. It was to purchase at different times to spread the risk. The fact that I have come out better than most purchasing CEN shares this month is because of this hedging policy. It was not becasue I got my timing right - I will still end up with less shares than I wanted :-( .

SNOOPY

Balance

06-08-2015, 10:29 AM

Contact index weighting increased to 100% - index funds are going to have to buy stock to maintain weighting.

sb9

06-08-2015, 10:31 AM

Ahhh..no wonder there was strong buying this morning.

Thanks for that Balance, how do we find out about these changes (excuse my ignorance) ?

Balance

06-08-2015, 10:35 AM

Ahhh..no wonder there was strong buying this morning.

Thanks for that Balance, how do we find out about these changes (excuse my ignorance) ?

Via a fund manager or broker who subscribes to the indexing services.

Almost all fund managers do.

Not sure about brokers.

sb9

06-08-2015, 10:36 AM

Via a fund manager or broker who subscribes to the indexing services.

Almost all fund managers do.

Not sure about brokers.

Sweet, thanks for the info.

Harvey Specter

06-08-2015, 10:39 AM

Contact index weighting increased to 100% - index funds are going to have to buy stock to maintain weighting.That wont be effective yet will it. Normally there is a review done on a periodic basis.

Balance

06-08-2015, 10:41 AM

That wont be effective yet will it. Normally there is a review done on a periodic basis.

Next week. Already announced overnight.

Joshuatree

06-08-2015, 10:43 AM

Craigs note out today.CEN and MEL pick of the bunch t/p $6.68 and $2.84

Balance

06-08-2015, 10:51 AM

Craigs note out today.CEN and MEL pick of the bunch t/p $6.68 and $2.84

Received similar update note from my broker.

Origin Energy was forced to sell at 'sale' price as Origin is grappling with A$12 billion of debt.

100% dividend payout policy could see a 8% to 10% gross yield stock?

Xerof

06-08-2015, 11:10 AM

Good to have you back Balance - you just haven't been yourself lately :D

that information is very much appreciated, thanks

couta1

06-08-2015, 07:28 PM

Awful lot of willing sellers with over 22 million shares going through?

xafalcon

06-08-2015, 07:53 PM

All electricity companies had very high turnover today

Joshuatree

06-08-2015, 07:55 PM

Awful lot of willing sellers with over 22 million shares going through?

Some great profits over a very short period being taken by big players with no risk, doesn't happen very often . Holding my little pile tight.

Jantar

06-08-2015, 08:09 PM

And many of us who weren't permitted to buy in the electricity sector this week. :(

Joshuatree

06-08-2015, 08:25 PM

Thats tough Jantar (thanks for the emoticon btw:).Hoping it drops back to $5 or lower for us but no sign of the momentum dropping yet., very strong.

bull....

07-08-2015, 10:08 AM

when its cheap at 4.65 guess any retail people who got a few scraps were lucky

xafalcon

07-08-2015, 10:36 AM

when its cheap at 4.65 guess any retail people who got a few scraps were lucky

You hit the nail on the head. Luck certainly appears to have played a part in final allocations. In my situation I was my sharebrokers only client who committed to a firm order. So I received his entire allocation. Still 25% short of the quantity I committed to, but a lot better than many others did.

Balance

07-08-2015, 10:58 AM

100% weighting FTSE index confirmed for next week. MSCI, NZX and ASX indices expected within next 2 weeks.

Not expecting any sp weakness in a hurry but who knows after the index reweighting?

see weed

11-08-2015, 10:44 PM

76c dividend and 14.6% yld Looks good to me, or did that 76c div. include the special 50c div. earlier this year?

macduffy

12-08-2015, 08:40 AM

76c dividend and 14.6% yld Looks good to me, or did that 76c div. include the special 50c div. earlier this year?

Without checking, yes. As a holder of CEN I've only received the one big windfall - 50cps - in the last year or two. And very nice it was, too!

:)

sb9

12-08-2015, 10:38 AM

76c dividend and 14.6% yld Looks good to me, or did that 76c div. include the special 50c div. earlier this year?

Sorry see weed bit slow this morning, can you shed some light on your numbers pls.

see weed

12-08-2015, 11:44 AM

Sorry see weed bit slow this morning, can you shed some light on your numbers pls.
ASB Securities CEN page this morning. Dividend cps= 76c. Dividend yield (net)= 14.7%.

sb9

12-08-2015, 12:04 PM

Thanks for that see weed.

Its actually FY15E of 78c divvy, of which they've paid 11c (interim), 50c (special), so their estimate for FY is 17c, not bad isn't it?

Snoopy

12-08-2015, 12:29 PM

Thanks for that see weed.

Its actually FY15E of 78c divvy, of which they've paid 11c (interim), 50c (special), so their estimate for FY is 17c, not bad isn't it?

Yes, but remember that 50c special dividend was made to clear out the imputation credits that had accumulated over many years. It will not be repeated in the future. Therefore the dividend yield for new investors buying into CEN today is nowhere near 14%!

Also see my post 935 on revised earnings after the recent profit downgrade. I am expecting a final dividend of 13cps, not 17cps. If it is 17cps, it won't be fully imputed, that for sure.

SNOOPY

sb9

12-08-2015, 01:00 PM

see weed

12-08-2015, 01:15 PM

Yes, but remember that 50c special dividend was made to clear out the imputation credits that had accumulated over many years. It will not be repeated in the future. Therefore the dividend yield for new investors buying into CEN today is nowhere near 14%!

Also see my post 935 on revised earnings after the recent profit downgrade. I am expecting a final dividend of 13cps, not 17cps. If it is 17cps, it won't be fully imputed, that for sure.

SNOOPY

Thank you.

Snoopy

12-08-2015, 02:57 PM

Agree Snoopy on the special divvy part, it won't be repeated.

However, beg to differ on the final divvy for this FY. My guestimate is that it'll be at least 15c, based on the assumption that they've now adopted 100% distributable profits as dividends from their recent update, up from 80% previously.

From my post 935. eps for FY2015 is estimated at 24.1c. 11c already paid out as the interim divvie, leaves 13c left for the final divvie. This is based on dps for the year equal to eps for the year. The imputation credit account was cleaned out during the year by the special dividend. I am sure the CEN balance sheet could handle a final dividend of 15c. But without 15c worth of imputation credits to tag onto it, such a dividend wouldn't be fully imputed.

SNOOPY

sb9

12-08-2015, 03:09 PM

Fair enough Snoopy.

Harvey Specter

12-08-2015, 03:27 PM

But without 15c worth of imputation credits to tag onto it, such a dividend wouldn't be fully imputed.That's never stopped anyone. ICA only has to be in a credit at 31 March. They will just forecast that position and also consider prepaying tax based on a forecast of future years too. If they plan on changing their imputation policy they should really announce the change as it is a material factor.

sb9

14-08-2015, 10:16 AM

Contact index weighting increased to 100% - index funds are going to have to buy stock to maintain weighting.

Balance, do you know if any more index changes are taking place, heard there are some changes expected today to index weighting.

xafalcon

17-08-2015, 08:55 AM

https://nzx.com/companies/CEN/announcements/268472

15cps, non-imputed, share buy-back first half F16, profit way down, not good

Harvey Specter

17-08-2015, 09:44 AM

https://nzx.com/companies/CEN/announcements/268472

15cps, non-imputed, share buy-back first half F16, profit way down, not goodUnimputed dividend is planed to be a one off and profits were expected to fall (by that much??). Free cash flow is up which is what this share is all about now isn't it?

horus1

17-08-2015, 10:37 AM

watch the retail competition and margins. Flick electric has cut 20-30% of my bill and read what Phil Pryke said this morning

Snoopy

17-08-2015, 10:47 AM

Time to update my FY2015 earnings forecast, given today's news release from Contact.

1/ Take EBITDAF.

$525m

2/ Remove one off profit items.

$0m (nothing material declared)

3/ Remove Depreciation and Amortization

2x $101m = $202m (twice half year figure)

4/ Take off annual interest charge.

$77m (assume same as FY2014)

5/ Calculate tax payable at 28%

$69m

6/ Calculate NPAT (normalised estimate).

=$177m

From this the foreacst earnings per share are:

$177m / 733m = 24.1cps

An 11c interim dividend has already been paid. So it looks like the final dividend will be 13cps, down 2cps on last year.

1/ Take EBITDAF.

$525m (Check)

2/ Remove one off profit items.

$0m (nothing material declared- Check)

3/ Remove Depreciation and Amortization

$204m (+$2m on twice half year figure prediction)

4/ Take off annual interest charge.

$98m (+$21m FY2014)

Explanation: No interest being capitalised ($37 million in FY14) following the commissioning of major projects. This is offset partially by lower interest costs on debt due to lower average interest rates as a result of debt refinancing completed over the past 2 years

5/ Calculate tax payable at 28%

$62m (lower ,reflecting higher business costs than anticipated)

6/ Calculate NPAT (normalised estimate).

=$161m ($16m lower than anticipated)

From this the foreacst earnings per share are:

$161m / 733m = 22.0cps

Fully imputed dividend of 11cps already paid.
Actual dividend 15cps, with no imputation credits at all! Not impressed. Contact are just giving me 15c of my own capital back , but with a tax bill. They should have canned the final dividend IMO. The long term income investors shouldn't complain. We have just received a 50c fully imputed bonus dividend after all!

SNOOPY

huxley

17-08-2015, 11:03 AM

What do people make of the Otahuhu closure?

Snoopy

17-08-2015, 11:04 AM

https://nzx.com/companies/CEN/announcements/268472

15cps, non-imputed, share buy-back first half F16, profit way down, not good

The Otahuhu B gas station out of Auckland is to close with immediate effect! (OK six weeks notice).

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"I'd like to acknowledge the work our team at Otahuhu have done in recent years to adapt the operation of the station to better meet the changing needs of the market while we've considered the future of the plant. Our decision to close is no reflection on the team's professionalism, which has seen the safe operation of the site through a three-year period of uncertainty. We have rewarded our team's commitment and supported them through this time and will continue to do so during the closure process, including redeployment opportunities where suitable roles are available," said Mr Barnes.

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I really didn't expect that! Big redundancy bill coming up for shareholders? On the convesrse side, suddenly all of those geothermal stations, not just Te Mihi that Contact owns, are looking more valuable?

SNOOPY