Vector Limited (VCT) [Archive] - Page 3

k1w1

08-08-2006, 11:50 AM

funkyman Posted - 08/08/2006 : 10:32:32 AM
--------------------------------------------------------------------------------
Does anyone know whats behind the 10c jump in VCT today?
1 L A T E S T R E P L I E S (Newest First)
Bobby_Fischer Posted - 08/08/2006 : 10:56:09 AM
--------------------------------------------------------------------------------
Power prices may be raised
08 August 2006
By COLIN ESPINER

Power prices could rise as the Government turns up the heat on its energy and competition watchdogs.

The Government's move to seek greater investment in the national power grid could see the Commerce Commission allowing higher prices to take into account the cost of new infrastructure investment and new rules for grid operator Transpower, including pricing the cost of land bought for new lines.

The Government has issued tough new directives to Transpower and electricity regulators in the wake of a series of disruptions to supply.

Energy Minister David Parker and Commerce Minister Lianne Dalziel yesterday rebuked their respective authorities charged with ensuring Transpower upgrades New Zealand's ageing national grid.

Dalziel said the Commerce Commission would continue to protect consumers from excessive pricing, but "the long-term benefit to consumers of investment in infrastructure and related businesses" should be taken into account.

"Our view is that the investment in replacement, upgraded and new infrastructure and related businesses for the long-term benefit of consumers must be protected as well," she said.

The Government also announced plans to help fast-track the grid upgrade by giving Transpower the power to recover the "reasonable" costs of acquiring land corridors in advance of the approval for new pylons. At present, Transpower cannot recover its costs until its plans proceed.
Advertisement
Advertisement

Two policy statements – essentially Government directives – to the Electricity Commission and the Commerce Commission were effectively about "banging heads together" after a series of disagreements between the organisations and Transpower over how to ensure security of electricity supply, Parker said.

"We're emphasising to the regulators that the prime concern the Government has is that the lights don't go out. Security of supply is the paramount consideration," he said.

Auckland's power was cut for four hours this winter when two shackles holding up wires at the Otahuhu sub-station failed. Transpower has since agreed to a million-dollar upgrade and is considering whether a second supply line into Auckland is necessary.

Last month, Transpower declared a nationwide grid emergency, asking generators to crank up all available plant after a record surge of demand exceeded supply during a cold snap.

An emergency was declared in the upper South Island last October when a combination of cold weather, line work and computer problems pushed power demand to the limit, forcing Christchurch lines company Orion New Zealand to cut morning water heating.

Prime Minister Helen Clark said yesterday that the Government wanted greater security of supply.

"In the time I've been Prime Minister we've had two one-in-100-year dries, we've experienced a fault at Otahuhu which very much exposed the reliance on a single point of entry for power into Auckland, and only in recent weeks we experienced a national grid emergency," she said.

"That concerns us greatly as a government. Nothing is more important to a modern economy and society than the power being on."

The Government also wants more investment in electricity generation, but says that is unlikely to happen until investors can be sure the national grid can carry their product.

Parker denied he was criticising the Electricity Commission set up by the Government to help regulate the industry, but admitted it had "run into a bit of a snafu" on plans to upgrade lines from Waikato to Auckland.

"I don't blame the Electricity Commission for it but neither do I absolve either they or Transpower from respon

kura

08-08-2006, 11:57 AM

Gee, price now up 20 cents, about time our govt realised that you can't have a decent infrastructure, while you also put limits on return on investment. (See also TLS "fibre" decision in Aust)

limegreen

08-08-2006, 12:07 PM

Even up 20c it doesn't look like a screaming buy. If it holds onto that gain by the end of the day it will be through the tentative downtrend, but still short on the Stochastic and Moving Average.

http://img.photobucket.com/albums/v361/limegreenz/vct8aug06.gif

On the otherhand, it's the closest it's been to interesting in a while.

PS: Apologies for the playschool-ish scribble. Heh.[:0]

k1w1

08-08-2006, 04:35 PM

Hope your timelines got you into this one Macdunk because the much maligned fundamental investors, of which I am one, have been posting that this was a good buy.

In contravention of advice of many respected posters on this site I have been averaging down on the falling SP to the extent that VCTIZA is my largest holding and eventually, after todays rise of 22 cents, now amounting to nearly 30% of my NZ portfolio.

This is far too rich and dangerous a position for a flightless bird to find himself in. So today I sold the nice man from Ambro half of the VCTIZA I bought off him yesterday for .62c at a price of .83 cents thereby breaking yet another sound momentum trading rule about not selling in an uptrend.

So I hope you are following my buy and hold investing style of investing as well as I am able to comprehend your style!

kura

08-08-2006, 06:00 PM

Good luck to you Kiwi, I can understand you rebalancing your portfolio, I've held minimal VCT shares since IPO (being AECT beneficary, and last week thought "stuff it" I will buy more to make up to 10% of my portfolio (was previously waiting & watching, hopeing that price would come down close to 2.00 mark) Now regret not buying enough VCT to make up 20% of my portfolio (20% is my personal limit for any one stock)

Must admit that now govt is "starting to see the light" I'm more comfortable to buy more at current higher levels, but will just wait and watch another month or so before buying more.

duncan macgregor

08-08-2006, 07:38 PM

KIWI, GOOD ON YOU. We all deserve a bit of good fortune now and again. I pick the end of sept to buy in after the rigours of winter are over. Will probabely look at it then. Buy and hold requires a different method to a trading system for tax reasons. I was rather hoping the govt would see sense a little later in the day but good for some EH?. macdunk

Bobby_Fischer

09-08-2006, 02:49 PM

Commerce Commission to control Vector pricing. Wow, that was a short lived bit of euphoria.

whatsup

09-08-2006, 03:07 PM

WOW, just imagine what the Comm Comm will do to Auck Airport( On the abuse of a monopoly position situation).

kura

09-08-2006, 03:10 PM

Wow, there goes yesterdays gain !

Comm/Commision stated that announcement after taking full consideration of recent govt announcement, hate to think what would have happened if there wasn't the govt announcement on Monday.

Bobby_Fischer

09-08-2006, 03:18 PM

quote:Originally posted by whatsup

WOW, just imagine what the Comm Comm will do to Auck Airport( On the abuse of a monopoly position situation).

Heh, heh. This anno. has not gone unnoticed by holders of AIA. Being a member of the travelling public (and AIR holder), but not an AIA holder, bring it on, I say. Actually thought about buying VCT yesterday. Slow to react can be fortunate sometimes ... I guess Commerce Comm. are reminding everyone who the sheriff is, after apparent signs of weakness from the Govt. yesterday.

biker

09-08-2006, 03:53 PM

VCT
09/08/2006
COMCOM

REL: 1441 HRS Vector Limited

COMCOM: VCT: Intention to declare control of Vector Limited published

Intention to declare control of Vector Limited published

The Commerce Commission has published its intention to declare control of the
electricity distribution services supplied by Vector Limited.

The Commission has found that Vector is overcharging industrial and
commercial customers across its networks. Vector is also undercharging some
residential customers, particularly the Auckland residential consumers who
are the beneficiaries of Auckland Energy Consumer Trust, Vector's principal
shareholder. By being undercharged, beneficiaries of the Trust are receiving
an implicit dividend in addition to the normal shareholder dividend.

The Commission considers that the disparity between customer classes is
inefficient and can not be justified. The Commission also found that Vector
is earning excessive revenues overall.

Commerce Commission Chair Paula Rebstock says that the Commission's view is
that:
- Vector is overcharging some customers and undercharging others. The
company is making different rates of return from its 21 different customer
classes and these differences can not be justified. For example, during the
2006/2007 year, Vector will earn a 54.4% rate of return on investment from
one group of Northern business customers, while it earns only a 4.6% rate of
return from Auckland residential customers.
- Vector is earning excess revenues. The Commission's preliminary
estimate is that, during the next two years, Vector will earn between $13
million and $75 million in excess revenue per annum. To bring its returns to
a normal level, the Commission estimates Vector would need to reduce its
charges between 2% and 11% for each of the next two years. (Vector's
distribution charges comprise around 20 to 40% of the customer's power bill.)

Ms Rebstock says that the Commission has given full regard to the Government
Policy Statement issued on Monday.

"The Commission is committed to ensuring that there is effective investment
in New Zealand's basic infrastructure and our regulatory approach takes full
account of appropriate infrastructure investment incentives for lines
businesses," says Ms Rebstock.

"The Commission considers that Vector's actions are not consistent with the
purpose of Part 4A of the Commerce Act, nor with the objectives of the
Government Policy Statement.

"Vector is focussing on the short term interests of particular classes of
customers who are also beneficiaries of its major shareholder, the Auckland
Electricity Consumers Trust. Such customers receive a direct dividend and an
additional implicit dividend by being undercharged themselves.

"The Commission's view at this time is that a declaration of control would be
in the long-term interest of consumers.

"Overcharging and undercharging are both inefficient - that is, they are
harmful to the New Zealand economy," Ms Rebstock says.

"Vector is aware of the imbalances across its customer classes and has had
ample opportunity to improve the situation. Instead, during the time that
Vector has been aware of the imbalances, the situation has deteriorated
further for many groups of consumers.

"Vector is not making sufficient progress in redressing the overcharging of
some customers and reducing its excessive revenues, and as a result the
Commission has moved to this intention to declare control.

"These are very serious issues," says Ms Rebstock. "Vector is only able to
overcharge some customers and undercharge others by abusing its monopoly
power."

Ms Rebstock said that Vector was in discussions with the Commission about an
administrative settlement, which is an alternative to control. She said the
release of the Commission's paper will assist Vector to focus on the long
term interest of all its consumers, and will add transparency to the process
of removing overcharging.

Hopefully Airpor

kura

09-08-2006, 04:07 PM

Pity I'm going to take a double hit, once as a shareholder, and again as a consumer in the "undercharged" area (AECT)

As an aside, (as I operate through a company) if my company sold some of its trading shares to me, at below market value, then wouldn't the IRD want to tax my "additional implied dividend" ???

duncan macgregor

09-08-2006, 05:33 PM

I am starting to think that my TPW shares are not as safe as i anticipated. What will the crazy bastards meddle with next. AIA,TEL, CEN,TPW. Time for a rethink. Hope you sold heaps KIWI no one has a system that will forecast that. macdunk

Paddie

09-08-2006, 05:43 PM

Thankfully I got out of this share recently.

"The Commerce Commission has published its intention to declare control of the electricity distribution services supplied by Vector Limited".

Unbelievable, but not surprising with this government.

Paddie

Toddy

09-08-2006, 06:09 PM

Does this mean that the Labour Govt and the ComCom are going to have an all out battle on the direction that regulation is going to take in the NZ market place.

The Govt needs to clarify the situation and urgently.

PointyHat

09-08-2006, 06:15 PM

I thought this was a free market economy rather than a dictatorship!
:(There goes my pension investment hopes.
Why don't the govt just nationalise things if they want control rather than just interfering with the market forces? Rather that than allowing householders and investors to invest, and then (just before the first results come out) they take over control!!!
This has dumbfounded me, I really have lost incentive to take part in a game where the goal posts are moved by the referee. Bit like the Aussie league refs decisions on the Warriors!! A little one sided.
Perhaps the conflict re govt saying "invest in infrastructure" vs "you are charging too much" can be sorted by the VCT management(?)

redzone

09-08-2006, 06:17 PM

its a very muddy ...dont like the look of the whole out look for the NZX...government involvement into equity markets dont mix well....
Have stuck to export stocks SOE is looking good.

Bobby_Fischer

09-08-2006, 06:35 PM

I hope you guys were equally offended with Govt's treatment of TEL? The principles involved (property rights, etc) are exactly the same.

k1w1

09-08-2006, 06:38 PM

Macdunk although you kindly state no one could see this coming the better answer from a chartist would be that the market did in fact see this coming and that is why the share price was falling. There is no doubt that this announcement will damage the short and perhaps medium term share price for Vector. It does not necessarily threaten significant damage to the underlying business of VCT in my view.

From reading the Com.com release this is a notice of intention to declare control.

"Intention to declare control. Since the targeted thresholds regime was implemented in 2001, the Commission published its intention to declare control three times: of Unison Networks’ electricity distribution services in September 2005, of Transpower’s transmission services in December 2005, and now of Vector’s electricity distribution services. The Commission is now considering administrative settlement offers from both Unison and Transpower. If agreed, these administrative settlements would remove the need for control to be imposed. "

As opposed to an imposition of control:

"Control. If companies breach price or quality thresholds set for them, the Commission can consider imposing control on their electricity services. If the Commission makes a declaration of control it can then set rules—termed an "authorisation"—governing the prices, revenue and/or quality of those controlled services for up to five years. While the company may face penalties if it does not comply with those rules, the operation of the company will continue to be undertaken by its management and Board of Directors as normal. Control is not intended to compensate consumers for any past overcharging but to put in place constraints on the controlled business’s future performance.'

The significance is that it can be settled by way of an administrative settlement

"Administrative settlement. As an alternative to control being imposed, the company can reach an administrative settlement with the Commission. This usually involves the Commission and the company agreeing to pricing levels and quality measures for a period of up to five years. The result is that prices and quality are maintained at levels the Commission considers appropriate for the long term interests of consumers, without the need to impose control, which can be intrusive and costly."

In this case Com.com has formed the view that VCT makes excessive profits from electricity distribution to large commercial customers and to smaller companies and consumers outside the Auckland area. It estimates that during the next two years, Vector will earn between $13 million and $75 million in excess revenue per annum.

To put this figure into perspective in the 12 months ended June 2005 Vct earned $558 million from electricity distribution out of a total revenue of $871 million. In the 6 months to Dec 06 it earned $292 million out of revenue of $568 million.

So if revenue for last 18 months was $1429 million ( $850 million from electricity) then I estimate a 2 yr excess profit reduction of between $13-$75 million will reduce VCT revenue by less than 5 % in a worse case scenario.

However Com.com is stating that allowable revenue may be understated due to undercharging of Auckland consumers which I estimate as the largest segment of its customers. The Government statement yesterday has given the green light to increasing prices to them and Com.com may alibi Vector in fact increasing its charges to them by requiring it as part of an administrative settlement. So this may in fact increase revenue by more than the current excess profits figure it is wanting adjusted.

There is no doubt that this announcement is a kick in the ghoulies for Vector and myself. But I am hoping that if I just sit here quietly for a bit I will start feeling better soon.

Regards

K1w1

redzone

09-08-2006, 06:41 PM

Yes Telecom is no different....you watch overseas investors vote with their feet...this is a disgrace and will take the shine off many good NZ stocks...more wealth distruction...anyone for house rentals

redzone

09-08-2006, 06:44 PM

I wonder if the Cullen fund sold out yesterday

kura

09-08-2006, 06:47 PM

Vector issued a response about 6.0pm tonight, that is pretty critical of Commission, we could have an interesting bunfight on our hands.

redzone

09-08-2006, 06:53 PM

to late ..damage already done...board will probably get sacked...government boot boys will take over..asset destroyed ...government take over

Toddy

09-08-2006, 08:08 PM

This case maybe unique to Vector. Does anyone have any insight into how the other line networks around the country work. The ComCom has been chasing Vector for some time now and actually may have a few valid points.

"Vector is aware of the imbalances across its customer classes and has had ample opportunity to improve the situation. Instead, during the time that Vector has been aware of the imbalances, the situation has deteriorated further for many groups of consumers."

skinny

09-08-2006, 08:12 PM

Thank you Paula Rebstock for looking out for the welfare of ALL New Zealanders! Those bleating that the moves are anti-competitive need to consult a standard intermediate economics text book. As for trouncing property rights consider this: one of the economic reforms the 1984 Labour Government instituted was to abolish the import licensing regime. Those who lost their licenses (and license to print money) no doubt felt aggrieved, but no one would seriously argue against this move being profoundly beneficial to New Zealand. Certainly international investors viewed the move favourably. I view the telecom and vector decisions the same way; though do agree the Govt. is not being as clear as it should be over the rules of the game.

09-08-2006, 08:13 PM

quote:Originally posted by kuraAs an aside, (as I operate through a company) if my company sold some of its trading shares to me, at below market value, then wouldn't the IRD want to tax my "additional implied dividend" ???
Deemed transfer at market value between associated parties.

Well I am glad i stayed out (I thought restricting to ROAR was bad enough). Bad implications for the rest of the market. Overseas shareholders will start getting pissed of with geting the carpet pulled from under their feet.

Starting to think my infrastruction plan might need changing - AIA, TPW, IFT etc.

kura

09-08-2006, 08:22 PM

When you look at ComCom statement, you could think "fair enough" then when you look at VCT response you would think "most unfair"
Only problem is they both can't be right, either ComCom has got the wrong end of the stick, or VCT has been deliberatly feeding the market BS.
Time will tell as this saga plays out.

Toddy

09-08-2006, 08:40 PM

Kura

What I'm concerned about is the damage that can be done to other stocks while this plays out.
Maybe the govt should clarify the statement that they made yesterday regarding a free market to encourage energy investment.

Or, is it all too late. The market has already lost trust in the Labour Govt. But hey, the kiwi socialists loves them, they voted them back in.

k1w1

09-08-2006, 08:48 PM

Attached is the Vector response which seems to indicate that they are not going to take this lying down:

VCT
09/08/2006
GENERAL

REL: 1815 HRS Vector Limited

GENERAL: VCT: Vector response to Commerce Commission statement

"Vector is astonished at the Commerce Commission's action today and rejects many of the Commission's allegations, particularly the suggestion that Vector is earning excessive revenues," Vector CEO Mark Franklin said today.

"Vector's overall rate of return for its electricity lines business in the year ending 31 March 2007 is forecast to be 8.2 per cent. That figure is calculated using the Commission's own methodology set for the information disclosure regime for electricity lines businesses.

"Under the price path assigned to Vector by the Commission in 2004, Vector has to date recovered $8 million less than that allowed by the Commission's methodology," Mr Franklin said.

"We also dispute the Commission's claim that it has given full regard to the Government's Economic Policy Statement of 7 August. Had it done so we would have expected extensive discussions on this issue. There have been none. The Commission only had one full day after the Government issued the statement to take it into account. That is not adequate.

"The Government Statement clearly identifies that regulated rates of return should be commercially realistic and take full account of the long-term risks to consumers of under-investment in basic infrastructure," Mr Franklin said.

"I can state categorically that investment decisions Vector had put on the Board agenda after the Government's announcement are now in serious jeopardy because of the uncertainty created by the Commission's action. This includes investment to achieve first world infrastructure consistent with Government objectives, especially security of supply.

"The Commission is fully aware that Vector has for the last two years
undertaken a voluntary programme to address the legacy regional and customer differences and we have engaged in good faith with the Commission on this. The Commission has only in the last month indicated publicly that lines companies have until 2009 to correct these differentials. Vector was on track to achieve this target having started two years ago.

"We take issue with the selective way the Commission has presented the
information supplied to it by Vector without giving any cognisance to the teps it knows Vector has taken and is taking to deal with these matters," Mr Franklin said.

Initial point by point rebuttal of Commission claims:
o Vector is not advancing the interests of Auckland Energy Trust
Consumers at the expense of other customers. In fact the price differentials reflect in large part legacy issues arising from Vector's acquisition of United Networks Ltd and Auckland residential users have already sustained the biggest price increases in the rebalancing exercise to date with other regions seeing price decreases.

o Vector's prices: Vector's prices are within the price path threshold
set by the Commission in 2004. The price breaches the Commission has raised
with Vector are historic, relate to the 2003-04 year and were technical in nature. These involved a $76,000 price threshold breach on $477 million of revenue, being a difference in the forecast and actual recovery of Transpower transmission charges and quality threshold breaches caused by extreme
weather. There have been no further price breaches since.

These actions taken by the Commission are inconsistent with the recent
statements made by the Commission Chair regarding the treatment of minor reaches.

o Vector's revenues: The revenue rebalancing Vector is engaged on can
be achieved within the Commission's price path thresholds on a basis which is revenue neutral to Vector and the Commission has information from Vector showing this.

"We can only hope that the Commission takes the opportunity provided by the consultation required under Part 4A of the Commerce Act 1986 to rethink its position. The Commi

Halebop

09-08-2006, 09:13 PM

quote:Originally posted by duncan macgregor

...no one has a system that will forecast that.

Not true. Buffet said (now breaks his own rule!) avoid utilities. I generally prefer the same. Unlike some of the income / yield stalwarts at sharetrader, I see contested infrastructure as more stable than monopolies, albeit ingrained with the same flaw. Utilities are priced for stability (some sort of "income perfection" premium) and surprises are almost invariably on the downside and involve regulation.

StainlessSteelRat

09-08-2006, 11:54 PM

quote:Originally posted by k1w1

"The Commission is fully aware that Vector has for the last two years
undertaken a voluntary programme to address the legacy regional and customer differences and we have engaged in good faith with the Commission on this. The Commission has only in the last month indicated publicly that lines companies have until 2009 to correct these differentials. Vector was on track to achieve this target having started two years ago.

Now i'm going to have to dust off the prospectus. If this has been an ongoing affair as stated by both sides, there should be ample disclosure of it by VCT. If there isn't then surely a class action would be in order to gain redress?

Dazza

10-08-2006, 12:19 AM

screw nzl

im shipping out of these waters asap

have already got 75% of capital in aussie.

say goodbye to AIA/VCT

my last remainig blue chip

but this country is foul.

DOW.AU had a 30% drop in share price today due to a one off write down, that mite be a good place to park the funds.

piece of **** this country is, why was i born here/11

ps.

has anyone seen the pineapple lumps ad?

where god is giving out the 'stuff' to countries,
so..

south africa gets diamonds.
the nzl representative comes back, and asks the australian what he was able to pick up,

aussie guy goes:
oh nothing much but copper/gold/minerals etc.

then god, next round of bidding/votings, on display is ALLENS PINEALPPLE LUMPS...

kiwi representative, quickly puts his hands up.......

and yah we are given pineapple lumps.....

that ad sums up our country i reackon

duncan macgregor

10-08-2006, 09:28 AM

unlike most of you i think that this might end up a good buy [pun not intended]. I can see this sp downtrend to an unrealistic low for what it is, with the herd in full flight today. The herd will run to far in the next few days is my forecast. We have a well run company, making a decent profit,paying reasonable dividends, that runs an essential service. I think today we might see the govt pull its head in which is to late to stop the herd, who will over sell in the next couple of weeks. The lines must run at a profit that is gauranteed leaving the only problem being one lot charged to much and one to little which a blind man could work out.
It looks like i might join my mate KIWI at a lower price than i might have origionally thought. MACDUNK

Bobby_Fischer

10-08-2006, 09:53 AM

I think you're right Duncan - am watching for the right time to buy. The govt. has clearly signalled a change of heart, which the CC has not yet taken on board. Following the recent blackout in Auckland the political sensitivity over power supply security far exceeds any concerns over monopoly profits. Doubtless one of the PM's minders will soon be having a quiet word in Ms Rebstock's ear.

warthog

10-08-2006, 09:55 AM

The planets must be lining up or something because the warthog is with MacDunk on this one. Vector will join a number of undervalued companys on the NZX.

Trick is to know which ones ... and for that you need to talk to MacDunk's tea-lady ...

lambton

10-08-2006, 11:10 AM

quote:Originally posted by duncan macgregor

unlike most of you i think that this might end up a good buy [pun not intended]. I can see this sp downtrend to an unrealistic low for what it is, with the herd in full flight today. The herd will run to far in the next few days is my forecast. We have a well run company, making a decent profit,paying reasonable dividends, that runs an essential service. I think today we might see the govt pull its head in which is to late to stop the herd, who will over sell in the next couple of weeks. The lines must run at a profit that is gauranteed leaving the only problem being one lot charged to much and one to little which a blind man could work out.
It looks like i might join my mate KIWI at a lower price than i might have origionally thought. MACDUNK

Of course the Govt may use this as an opportunity to buy up and eventually control yet another privatised asset, so why would Ms Clark & Co care if the ar#e fulls out of the s/p. ha now thats wealth creation for you - from private to public.

k1w1

10-08-2006, 11:19 AM

Although I am not much enjoying the share price being bombed back into the stone ages by the market what is really reallly depressing me is the thought that Macdunk is going to be in this company at a lower average SP than me ![B)]

Do you think he is going to ever remind me about this [:I]

ananda77

10-08-2006, 11:32 AM

...so who are the customers in Wellington and on the North Shore who are overcharged

...here is your chance, speak up!!! Is it true or untrue???

...is the CC right in it's onslaught???...someone must be hurt out there

Kind Regards

ananda77

10-08-2006, 11:40 AM

quote:Originally posted by ananda77

...so who are the customers in Wellington and on the North Shore who are overcharged

...here is your chance, speak up!!! Is it true or untrue???

...is the CC right in it's onslaught???...someone must be hurt out there

Kind Regards

...myself, I felt overcharged by Telecom and was very, very content that finally someone cared and cut their greedy beaks

...free market policies -yes- but someone has to be there to ensure, they are carried out responsibly...

duncan macgregor

10-08-2006, 11:49 AM

What puzzles me is the statement that FRANKLIN made QUOTE SHARE CHAT.
He said that this puts in jeopardy the gas pipe line to the intended new power station on the Kaipara. The pipe line is already in place to within three miles of the site according to what i can work out.
KIWI no worries about me picking on anyone big enough to stand up and be counted. macdunk

Gryffyn

10-08-2006, 12:05 PM

Chances are the level of control won't be as serious as first thought once all the hand-wringing has been done. The company is still allowed to be profitable and if you think this is a good sector (I do) then the sp dive will provide good buying. As with TEL the problem is the uncertainity and volatility at the moment. The sp has only dropped back to a bit below the previous trend line.

Disc: on sideline now but considering a purchase

Winston001

10-08-2006, 01:55 PM

quote:Originally posted by Bobby_Fischer

I think you're right Duncan - am watching for the right time to buy. The govt. has clearly signalled a change of heart, which the CC has not yet taken on board. Following the recent blackout in Auckland the political sensitivity over power supply security far exceeds any concerns over monopoly profits. Doubtless one of the PM's minders will soon be having a quiet word in Ms Rebstock's ear.

Agreed. Have watched VCT for a while wondering if it like CEN (in the early days) would fall off. Looks like a good opportunity.

The government are in a bind. Nearly half the MPs come from the Auckland region and so it has a gerrymander on national politics. What is good for Auckland is good for the government. MPs hate people squealing about power prices - yet the lack of any power at all in blackouts tends to focus all parties minds on the essential issues. Cullen has indicated price increases are a reasonable consequence. Gives the big tick IMHO.

k1w1

10-08-2006, 03:40 PM

quote:Originally posted by duncan macgregor

KIWI no worries about me picking on anyone big enough to stand up and be counted. macdunk

Macdunk, I dish out plenty, so I expect to cop plenty. Feel free to fire away at your leisure.

K1w1

kura

10-08-2006, 04:07 PM

VC10/08/2006
GENERAL

REL: 1536 HRS Vector Limited

GENERAL: VCT: Vector sets the record straight

Twenty four hours after the Commerce Commission's announcement, there are a
number of misleading reports which need to be corrected so the New Zealand
public has an accurate understanding of where Vector stands, Vector CEO Mark
Franklin said today.

Vector is not deliberately cross-subsidising customer groups or favouring
Auckland residential customers.
"This is simply not the case. The reason the different pricing levels exist
is historic. We acquired electricity networks in different regions with
different pricing structures. At that time we identified the discrepancies
and moved quickly to address them and reset them to a level playing field for
all customers.

"We are shocked at the Commission's allegations of abuse of monopoly power
and absolutely deny them. This issue is not related to Vector's market
position. It is an historic issue which we are cognisant of and are already
in the process of fixing over a four year period."

Vector voluntarily initiated a programme to address historic return
differences two years ago.
"We are two years into a four year rebalancing programme. This was initiated
by Vector and we have fully informed the Commission on the programme and our
progress."

Mr Franklin said different pricing structures are common for infrastructure
companies as these are largely legacy issues and rebalancing is a process to
ensure equality across customer groups. However, the timing of this has to be
balanced against investment needs of different customers and geographical
locations.

Rebalancing is not a feature of the Commission's own threshold regime. This
matter has only recently been raised by the Commission at an energy
conference where the directive was for all lines companies to achieve
rebalancing by 2009. There has been no guidance or methodology by the
Commission or legislative requirement on how this should be achieved.

Vector is implementing rebalancing too slowly
Mr Franklin said the rebalancing was planned in 2004 for a four year period
to ensure a smooth transition path for all customers. "Some customers will
have price increases and we wanted to avoid the severe impact on them if this
had been implemented over too short a period."

Mr Franklin also explained that the Commission had previously advised Vector
that it was appropriate for Vector to complete the majority of the
rebalancing exercise by 2009.
Vector is not making unreasonable returns.
Vector's rate of return of 8.2% for FY07 is the result and outcome of
complying with the Commission's own regulatory regime. In complying with the
threshold regime set by the Commerce Commission, Vector has also recovered $8
million less than the amount allowable.

However we do not view 8.2% as a 'commercially realistic rate of return' for
our business especially for Vector to be able to invest in existing and
future assets for the benefit of consumers.

Vector has been engaged with the Commerce Commission on this issue and was
aiming for a constructive resolution
"We have been in dialogue with the Commission for months on this issue and
they were fully aware of our plans and commitment to rebalance. We have had
correspondence from the Commission acknowledging this. We do not understand
their extreme reaction. However, we will continue to work through the
Commission's process with the hope that we can reach a constructive
resolution."

This impacts Vector's ability to invest.
"Vector was encouraged by the Government's announcement on Monday which gave
us a strong signal that incentivising infrastructure investment was a top
priority. Together with the Board we had started to look at how we might
accelerate some investment plans given the confidence gained from the
Government's statements.

"As of yesterday all those plans are back on the shelf. This is not what this
country needs and we are extremely disappoi

Bobby_Fischer

10-08-2006, 04:08 PM

Fighting words indeed. Love that last sentence. Have bought some at 2.31.

kura

10-08-2006, 04:36 PM

quote:Originally posted by Bobby_Fischer

Fighting words indeed. Love that last sentence. Have bought some at 2.31.

Yep, you can't beat a good bunfight for a bit of entertainment !

Just a pity the entertainment has cost me about $1200 so far [B)] (going to a movie, whould have been a lot cheaper)

I was temped to get some more, but decided to just stick with what I've got for now, if things get ugly and VCT are on the loosing end, then sub 2.00 is a real possobility.

StainlessSteelRat

10-08-2006, 04:46 PM

The ComComm is barking up the wrong tree. If they want to investigate monopolistic pricing, they could look at local and central government charges. But they wouldn't bite the hand that feeds, eh?

redzone

10-08-2006, 04:55 PM

dead right rate

Sideshow Bob

10-08-2006, 07:13 PM

Any picks on their profit which is out in the next couple of days?

Gryffyn

10-08-2006, 07:40 PM

bet they'll want to make it look smaller :-)

Toddy

10-08-2006, 07:53 PM

That won't be that difficult to do. Just whack through a big provision for future payments back to Wellington customers.

Gryffyn

10-08-2006, 08:09 PM

Bring it on - I would love a power bill reduction/rebate.

beacon

10-08-2006, 08:53 PM

Well said SSR. Another fiasco all right!

kura

11-08-2006, 09:29 AM

Extract from NZ Herald article, why would anyone invest in infrastructure, if your max return can't be more than 7.35% (Rabobank, pays that much on their call account, and they are supposed to have a higher credit rating than NZ govt, see their website)

..................
Meanwhile investor outrage at the threat of control continued yesterday, especially the view that Vector should not be allowed to earn a return on its assets of more than 7.35 per cent.

zac

11-08-2006, 10:40 AM

Surely this depends on the value and revaluation of the assets. 7.35% may be plenty if assets are appreciating in value. (cf. AIA) Someone else may be able to explain how the lines network is valued.

duncan macgregor

11-08-2006, 10:55 AM

quote:Originally posted by zac

Surely this depends on the value and revaluation of the assets. 7.35% may be plenty if assets are appreciating in value. (cf. AIA) Someone else may be able to explain how the lines network is valued.

Assets such as land and buildings go up in value. Lines, poles, pipes, depreciate in value. I think 7,35pc is unrealistic for any business in this position. Farming for instance has about 4pc return on capital investment, but makes up with a higher than inflation capital gain. To borrow money for a farm, a house, or factory, its the capital gain that counts VCT have very little of that. macdunk

kura

11-08-2006, 12:45 PM

VCT have now released a copy of their lawyers letter to Commission, an interesting (and lenghty) read, I suspect the letter cost more than my entire VCT holding, and this is just the start of the stoush.

kura

11-08-2006, 05:34 PM

Gee now their credit rating has been downgraded
this is going from bad to worse.

VCT
11/08/2006
CREDIT

REL: 1545 HRS Vector Limited

CREDIT: VCT: Vector's credit rating impacted

The ramifications of the Commerce Commission's intention to declare control
on Vector's electricity network services have extended to Vector's credit
rating outlook.

Today, Moody's investment services affirmed Vector's Baa1 credit rating, but
has changed its outlook from stable to negative.

Vector Chief Executive Mark Franklin says the regulatory uncertainty arising
from the Commission's actions has implications for all utility companies and
the entire economy.

"I note in particular Moody's comment that 'regulatory stability is a key
rating driver for electricity distribution companies'."

"A company's credit rating has a direct influence on the cost of borrowing,
which can further undermine the economic viability of an investment," Mr
Franklin says.

For more information contact:

Philippa White
External Communications Manager
Ph 021 579 522
09 978 7638

Bobby_Fischer

11-08-2006, 05:39 PM

Kura, I can almost hear violins playing in the background to that one ... sniff ...

Dazza

14-08-2006, 10:25 AM

what time is the report coming out today?

ananda77

14-08-2006, 10:51 AM

...45.1m net profit

...dividend: 6cents/share

duncan macgregor

15-08-2006, 09:14 AM

It looks like a showdown with vector drawing the line on the floor will force the govt to step in to sort this squabble out. Vector might still be a buying opportunity coming up with the sp at rock bottom. I really think the govt will weasel out of the hard decision, and try to score a few points. The sp will drop to an alltime low today is my pick. I will be in like a flash, cheque book in hand, listening to what our great leader has to say on the matter.
macdunk

Placebo

15-08-2006, 09:35 AM

Vector are doing themselves no favours. Now their response is a shameful example of Corporate toy tossing -- "if we can't play by our rules we will have a hissy fit". They need to take a long hard look at their behaviour. At the moment they are simply underscoring their image as greedy profit gougers.

They need to pull their heads in and make some softly softly noises about working with the regulator rather than trying to butt heads with them. Trying to take on the Commerce Commission is a lose-lose!

Stupid

warthog

15-08-2006, 09:43 AM

quote:Originally posted by Placebo

Vector are doing themselves no favours. Now their response is a shameful example of Corporate toy tossing -- "if we can't play by our rules we will have a hissy fit". They need to take a long hard look at their behaviour. At the moment they are simply underscoring their image as greedy profit gougers.

They need to pull their heads in and make some softly softly noises about working with the regulator rather than trying to butt heads with them. Trying to take on the Commerce Commission is a lose-lose!

Stupid

Recently this hog was out picking up one of the little hogs and listening to National Radio en route, inparticular Richard Griffin (Bolger's ex-spin doctor) who was saying that Vector's PR was highly impressive and well-run, so draw your own conclusions regarding their current behaviour.

Richard Meade - on the same day or was it another? - observed (something to the effect of) that until the Government piped up re. Vector overcharging businesses, few if any businesses had complained about having to pay too much but following the announcement there was widespread bleating.

kura

15-08-2006, 10:55 AM

quote:Originally posted by duncan macgregor

It looks like a showdown with vector drawing the line on the floor will force the govt to step in to sort this squabble out. Vector might still be a buying opportunity coming up with the sp at rock bottom. I really think the govt will weasel out of the hard decision, and try to score a few points. The sp will drop to an alltime low today is my pick. I will be in like a flash, cheque book in hand, listening to what our great leader has to say on the matter.
macdunk

Should Comm/Comm "win" this squabble, I would expect share price to fall to round $1.60 this would be the time to "load up the truck" and wait for the next blackout, before the rules get changed again.

duncan macgregor

15-08-2006, 11:33 AM

The market predicts VCT will win why else would the sp rise. I predicted the sp would drop today but whoopee i got that one wrong didnt I?. macdunk

Placebo

15-08-2006, 01:29 PM

Well Dick Griffin may have been on track with those comments I don't know, however I would suggest that fighting in public with a government regulator would be frowned upon by most Public Affairs textbooks. It is a PR disaster and Vector needs to back off.

Incidentally, were you Auks aware that here in Welly, the mayor is on record as accusing Vector of price gouging Wellingtonians to subsidise Aucklanders?

zac

15-08-2006, 03:55 PM

Quote: 'Incidentally, were you Auks aware that here in Welly, the mayor is on record as accusing Vector of price gouging Wellingtonians to subsidise Aucklanders?'

How can that be? Vector has just been continuing the pricing policy of United Networks with gradual adjustment. And then Jafas will be subsidizing Wgton consumers. And anyway since when has any business had the same pricing policy for all customers. We seem to be going down the path of progressive price control to suit a socialist agenda. Is Air NZ now going to have to charge everyone the same per km rate regardless of the customer profile or the route?

wack

15-08-2006, 04:23 PM

OFFICE: VCT: Vector - Officer change 03:26pm
VCT
15/08/2006
OFFICE

REL: 1526 HRS Vector Limited

OFFICE: VCT: Vector - Officer change

Vector advises that Peter Brown, Group General Manager Organisational
Services has left the company effective 11 August 2006.
End CA:00135414 For:VCT Type:OFFICE Time:2006-08-15:15:26:22

beacon

16-08-2006, 11:17 AM

Vector will be under pressure. Waiting till the dust settles. Would it see $2?

k1w1

16-08-2006, 01:35 PM

Some commentary on the Vector situation from Infratil, in their latest email update. Although lengthy it is interesting as they are not not involved in energy distribution but know what they are talking about:

"... for Infratil's shareholders (and prospective shareholders) the main event of the last week was the conflict between Government's Policy Statement (GPS) on energy transmission, released on Monday, and the Commerce Commission's announcement of intended price controls on Vector, released on Wednesday. The infrastructure industry took heart from the GPS which sent a strong message that Government wants infrastructure investment. The Commission's response brought the industry back to ground. For infrastructure companies the cost of capital is crucial. Behaviour by a regulator that increases investor risk will add to the cost of capital, and ultimately to consumers' costs. While the Commission's conflict with Government will add a
risk premium, the decision to regulate is also based on some dubious algebra. The Commission's finding that Vector was over-earning was arrived at by deciding that anything better than a 7.35% per annum return on capital was a monopoly rent. [u]It would be very hard to find any expert in the arcane field of cost of capital who would agree with such a low benchmark. Somehow the Commission and its WACC adviser, Dr Martin Lally, managed to achieve this. </u>

Although Infratil's share price was swept along with the capital markets' dismay over the Commission's announcement it should be noted that Infratil sold out of energy distribution several years ago and has no direct exposure to this argument. Further, the proportion of Infratil's income that could ever be subject to this type of regulation is small. Nevertheless, all infrastructure investors support transparent, efficient and balanced economic regulation, and hopefully New Zealand's regulatory authorities will learn, and improve, from their errors.

NZ Government Policy Statement on Energy Transmission

The Government released a Government Policy Statement (GPS) on energy
transmission last week, which was (perhaps coincidentally) shortly followed by the Commerce Commission announcing intended price controls on Vector (after Transpower, New Zealand's largest energy distribution company). The GPS is an important indicator of Government policy objectives and will have long term ramifications. The Commerce Commission move shows that the Government's powers in this area are fettered, unless it resorts to legislation.

The upshot of all this is that New Zealand will plan to invest more in the grid and the Commission will have broader criteria to encourage and allow it to approve investments and that Transpower will be allowed to earn a return on those approved investments. Transmission investment should err on the side of over-capacity to ensure security (ie better to have back-up than a break-down). This is expected to mean a higher cost to users (the Government has effectively interpreted the electorate/users' mood and decided they would prefer to pay more for certainty).

In addition to indicating its preferences for transmission development, the Government also signaled that it hopes to see local energy companies investing in their networks. To this end it advised ComCom to make sure that its regulation of network pricing was not discouraging desirable investment. The general interpretation of the GPS was that Government had become concerned that the Commerce Commission and the Electricity Commission were more interested in controlling prices than in making sure that investment was undertaken for secure supplies and a for renewable generation future and that generally the Commerce Commission should be willing to "cut infrastructure companies some slack" as under-investment is a worse outcome for the Nation than a small level of excess profits - especially as "excess profits" tends to be a function of some fairly dense algebra where even experts admit to the need for a margin of error.

However, no sooner had Go

kura

16-08-2006, 04:18 PM

Quite a well written commentary by IFT, though I doubt if they would be all that impartial

16-08-2006, 08:07 PM

Sums it up quite well. The two annoucements contradict each other and the 7.XX% return on WACC is far to low (infratil wouldn't invest in something that low so why should anyone else - except a government).

ComCom were right about different pricing policies for Auck and Well but should have said they had (say) one year to even it out rather than the way they did it.

Flying Goat

16-08-2006, 09:00 PM

quote:Originally posted by zac

Quote: 'Incidentally, were you Auks aware that here in Welly, the mayor is on record as accusing Vector of price gouging Wellingtonians to subsidise Aucklanders?'

How can that be? Vector has just been continuing the pricing policy of United Networks with gradual adjustment. And then Jafas will be subsidizing Wgton consumers. And anyway since when has any business had the same pricing policy for all customers. We seem to be going down the path of progressive price control to suit a socialist agenda. Is Air NZ now going to have to charge everyone the same per km rate regardless of the customer profile or the route?

Yeah, and Auckland Mayor (Hubbard) had the audacity to accuse Vector of holding at ransom... yet him with his 60% rate rises to Auckland city residents, to fund the pulling out of perfectly good trees, to be replaced with flora that will not grow here... as well as sending the lazy-ass public servants (of local council) around the world with first class air tickets... oh how Auckland sees it made a big mistake letting voting its Mayor, although we weren't really spoiled for choice... apparently the tight-wad still opts for the free lunches in the council tea rooms.... oh dear what a sad state of affairs..

kura

16-08-2006, 09:25 PM

FG, my Mum lives in a central Akld property (scummy old house with a big section) her rates have just gone up from $2600 to $4500 Who is holding who to ransom ????

Yep, just mailed off an application for rates rebate (to internal affairs) but as max rebate is only $500 this is also a joke, given the criminal increase in rates.

Toddy

17-08-2006, 02:58 AM

Makes you ask the question - who is in charge. Is this what the public voted for during the last election. What is the Govts role in business and investment, especially when it comes to infrastructure. Vector should stand tall and make as much noise as possible. IFT is never scared to stand up, but where are the other NZ Companys. Should Telecom have another go now that there are more companys at the wrong end of these regulatory decisions. The other line companys should get involved now as they do not have the resourses to fight on their own.

Read on, its a great article.

NEW ZEALAND: YES, YES AND YES ... MINISTER
FRAN O'SULLIVAN
Cabinet ministers intent on securing a suitable return on state-controlled enterprises' infrastructure investments are rewriting the rules of the free market, with surprisingly little resistance from the business sector.

Communications Minister David Cunliffe set the ball rolling when he dealt to Telecom's broadband monopoly.

Finance Minister Michael Cullen is also in the frame, wanting colleague Pete Hodgson to give Air New Zealand approval to form a tawdry cartel with Qantas on the transtasman route.

Energy Minister David Parker is the latest one to signal a shift back to Government control over just which company gets to make major infrastructure investments in this country - and on what terms.

A raft of official papers posted under his name on the Ministry of Economic Development website signals a shift to
central planning in the energy sector.

Effectively, Parker is using the Transpower debacle - with the state-owned transmission company under repeated fire for failing to get certainty on upgrading the national grid to service Auckland's growing needs - as leverage for what looks like a ministerial intention to take charge of decision-making on major grid upgrade plans.

That's unless the Electricity Commission and Transpower don't manage to reach a suitable (to the Government) way through their impasse before Parker also makes good on another implicit threat: to shift grid planning from Transpower to another independent body.

Parker's Cabinet paper is a little doozy.

Ostensibly, it's all about ensuring this country's long-term supply of energy is underpinned by suitable transmission and lines infrastructure. But any hand-over-heart free-marketer should be concerned.

It is clear that Parker is also keen to ensure the Government's interest as prime shareholder in Transpower is assured.

That's why the Government wants the Commerce Commission to consider the need to guarantee a relevant return for infrastructure investments - not simply the targeted control regime, which sees the commission setting price/revenue thresholds for Transpower and lines companies such as Vector. It wants to limit these companies' ability to extract excessive profits, making sure they face strong incentives to improve efficiency and pass on lower prices to consumers.

Unfortunately for the Cabinet, there are two contradictory forces at play.

The Commerce Commission, under the robust leadership of Paula Rebstock, has taken a single-minded approach to the price-fixing cartels and monopolists that dominate New Zealand business.

Cartels operate across many sectors, masquerading as competitors in public but in fact co-operating to undermine
consumers' best interests.

Rebstock has several big private companies in her sights and has already ripped into Transpower and Vector for profiteering at consumers' expense.

But now she's basically being told her job is to ensure such companies get a decent return and to place less emphasis on consumer rights.

Parker says his section 26 statement is not a Government direction, but that is mere sophistry. Coupled with the clear intent disclosed elsewhere in his Cabinet paper to amend the Commerce Act once Commerce Minister Lianne Dalziel's review is finished, it can hardly be read as anything else.

But is this the way for the Government to behave?

The Cabinet cabal that will, ultimately, roll through t

StainlessSteelRat

18-08-2006, 08:23 AM

quote:Originally posted by Toddy
A principled approach would have been for the Government to effectively acquire the local loop itself, paying Telecom a handsome fee that would compensate its shareholders for the hit to the value of their investment.

I have no doubts that their intention is to "acquire" the local loop, but it's obvious they don't want to pay the asking price for it - and are intent on driving Telecom's sp down to a level that Cullen is more comfortable with. All aided by a quisling media, the likes of which we haven't seen since Muldoon was in power.

whatsup

22-08-2006, 10:59 AM

Q::: If VCT was to be quoted at $2.00 which of us would buy it and for what reason given the current uncertainity of its near term future.

ananda77

22-08-2006, 11:37 AM

...considering the uncertainties surrounding the current situation and the current yield of under 3%, do not think that even at 200, the yield would change to a level, I would want to hedge the share price risk (100%) to get a higher return than from other interest paying investments

...no, I wouldn't buy at 200...

Kind Regards

kura

22-08-2006, 02:44 PM

quote:Originally posted by whatsup

Q::: If VCT was to be quoted at $2.00 which of us would buy it and for what reason given the current uncertainity of its near term future.

I recall reading some analyst commenting that if worst comes to pass with this, their valuation model would reduce (approx) from 2.70 to 1.70 so there is still plenty more downside risk.

But for a long term contrarian holder, (assuming the worst does happen) they would be great buying at say 1.50, then just wait for the blackouts to become commonplace (like any other third world country) before the rules are again changed to allow for a reasonable return on investment.

beacon

22-08-2006, 06:46 PM

Nay

Dazza

22-08-2006, 07:51 PM

good eh, i sold at avg at 2.30

brought at 2.38

and its sinky.......

when i buy shares they fall
when i sell shares they fall.....

Enumerate

23-08-2006, 11:43 AM

I thought the annual VCT.NZX dividend was 12 cents.

At $2.00 per share - this is a 6% yield. (or about 5.5% at current price levels).

The commerce commission price control case is mainly about balancing recoveries (currently overcharging business, undercharging residential). I would have thought revenues at current levels would be reasonably secure (or at least reattainable given benefits of the NGC bed down).

So, what is all this talk of VCT.NZX at $1.70?

Looks pretty attractive to me at $2.14!

ananda77

23-08-2006, 02:46 PM

Enumerate is correct. 2.78% at current price accounts for 6cents/share...looks quite a bit better, but still not something to get exited about under the current circumstances...

Kind Regards

contrarianinvestor

23-08-2006, 09:02 PM

"Whenever a popular stock suffers a big drop in price, especially a stock that is widely held by pension funds and mutual funds, Wall Street has to make up a reason for the decline that gets the fund managers off the hook for owning it....The real reason these stocks declined is that they had gotten terrifically overpriced relative to current earnings" - Peter Lynch

This reminds me of Vector shares. I wonder how many casual investors actually made a proper valuation calculation before buying into these ridiculously overpriced shares. After a 35% downward price correction, the current price at P/S of 2.53 and P/E of 40 is still far too expensive for a highly geared, capital intensive company.

The same people who bought these overpriced Vector shares now tell me that stockmarket investing is risky. I agree - especially if you don't do your homework and buy overpriced Vector shares!

Snow Leopard

24-08-2006, 08:08 AM

Market Cap @ $2.19 = $2,190m NPAT = $45.1m P/E = 48.6.
That is one way to calculate P/E and I have had fun on this very thread using that calculation to wind up a few posters.
However a truer picture of Profit is the NPATA figure:
NPATA = $143.7m giving P/E = 15.2 which is usually considered reasonable for a utility company.

The IPO price of $2.38 was not a bargin but neither was it particularly overpriced.

Disc: none held

Halebop

24-08-2006, 09:27 AM

I didn't subscribe for the float for a number of reasons, mostly surrounding price (what price?) and regulatory risk (how smart was that binary risk analysis system?). However, at the time I priced them on forecast earnings at $2.39 (Might be a little off but from memory 14 cents EPS, 5% growth for 10 years, 3% termination growth, 10% discount rate). Anyone paying anywhere near that number was not factoring a margin of error and asking for the first whiff of bad news or inflation to hit them where it hurts.

Forgetting debates about asset values, regulation and any growth potential from NGC, this seems another case of Kiwi yield investors trading sense for cents. While some might like to blame VCT's poor performance on regulation, the shares were already at their money. Any bad news was going to harm them because there wasn't much upside left beyond the prospect of a speculative bubble or 1 to 2% inflation. Regulatory risk is a feature of monopoly assets in any market. A socialist government arguably increases that risk. Ironically, if any politicking was involved I suspect this particular instance was to "prove" that business can also be the beneficiary of regulation.

beacon

24-08-2006, 09:45 AM

Sane words, but apparently not the case in this instance. How long before we see $2?

Enumerate

24-08-2006, 10:03 AM

I find VCT.NZX attractive at current price levels.

As a lines company - they are kind of best described as specialist property company.

We are in a high inflation environment - courting an economic down turn. The property aspect of VCT.NZX and the utility nature of its income streams should be a good hedge against both risk factors.

The major concern, of course, it that regulatory risk will make the return on assets, given high inflation, uneconomic. We have seen a significant bid down of share price due to this factor.

Offsetting this is the potential for VCT.NZX to revalue assets and seek to depreciate these assets over a shorter time scale. (Ducts are 50 years! etc).

While the regulatory risk persists - there is reason for optimism. Investment is required to maintain infrastructure in view of growth - this is recognised by the government. Even the central planning politbureau (Comm Comm) will respond to the political imerative to invest in infrastructure.

Further share price weakness is probable (the regulatory issues could turn nasty). However, I bought some, recently; to hedge against inflation and economic down turn. I believe the market will value them as a fixed interest investment - their price will be driven by the "coupon rate" - 5.5% fully imputed makes me happy (equivalent to term bank deposits which do not offer the inflation hedge).

StainlessSteelRat

24-08-2006, 01:03 PM

Well, i'm prepared to go out on a limb and say they are an absolute bargain at the current price. Time will tell.

rmbbrave

29-08-2006, 10:33 AM

National's former president out to win control of Vector

Tuesday August 29, 2006
By Bernard Orsman

Former National Party president John Collinge has broken away from the party's de facto Auckland local government wing and launched a new ticket to contest the trust that owns most of power lines company Vector.

The election in October for the Auckland Energy Consumer Trust is now a battle between the traditional foes - the centre-right Citizens & Ratepayers Now and centre-left Powerlynk tickets - plus Mr Collinge's new ticket, Just Power, and five independent candidates.

The trust has a history of bitter infighting and shifting political allegiances since its inception in 1993.

Since the last election in 2003, Mr Collinge has left C&R Now, which won four of the five trust seats, and opposed the sale of 24.9 per cent of Vector shares in a $593 million public float.

In the past month, Vector has been accused by the Commerce Commission of favouring the interests of the 292,000 trust beneficiaries in Auckland by overcharging former UnitedNetworks customers in North Shore and Wellington, and Auckland businesses. The commission has threatened price control.

The commission's action has brought an admission from trust chairman Warren Kyd that the trust backed Vector steadily increasing the average Auckland household power bill by $165 a year to even out the charges.

This will eat into the annual dividend that trust beneficiaries get by way of a power credit. The credit was $180 last year and is expected to be $310 this year.

Mr Collinge yesterday said the aim of Just Power was to focus on security of supply for consumers at fair prices and remove politics from the trust. He accused C&R Now and Powerlynk of being "political tyros not versed and steeped in energy matters".

Just Power opposed further privatisation of Vector, speculative investments and the appointment of trustees as directors on the Vector board, he said.

The trust appointed Powerlynk member Shale Chambers and C&R Now member Karen Sherry to the board last month. Mr Collinge has sat on the board in the past.

C&R Now president John Slater, who is also a former National Party president, said it was a democracy and Mr Collinge could do what he pleased.

C&R Now sources said Mr Collinge had been asked to resign after a history of creating bad blood within the organisation. Former C&R Now secretary Maurice Chatfield had also left and joined Just Power.

Mr Collinge said he was not asked to resign, and it was "entirely my decision" to leave after five years on the ticket.

Mr Slater said C&R Now would release its policy for the election in the next couple of days but said it was "unlikely" C&R Now would support further privatisation of Vector.

Mr Chambers, who opposed the partial privatisation, said Powerlynk would ensure that Vector stayed in community ownership.

He said it was all very well to cite high company growth and promise increased dividends from Vector's growth strategy but it had a resulted in higher power bills than any benefits received. "It's voodoo economics and Aucklanders know it," said Mr Chambers.

THE AUCKLAND ENERGY CONSUMER TRUST

* The trust was formed in 1993 and owns 75.1 per cent of the shares in the power lines company Vector on behalf of 292,000 consumers in Auckland City, Manukau and part of Papakura.

* The trust receives an annual divided from Vector, which it distributes to consumers as a credit on their power bill. This year's dividend is expected to be about $310 ($180 last year).

* Only consumers in Auckland City, Manukau and part of Papakura receive a power credit and a vote at trust elections.

* The trust holds a postal election every three years for five trustees.

* Voting papers go out on October 11 and must be in the hands of the returning officer by 5pm on October 27.

Who's standing?

* Citizens & Ratepayers Now (centre-right ticket with National and Act Party connections).

* Just Power (breakaway ticket led by former C&R Now and N

peat

13-09-2006, 04:01 PM

Not sure which thread to post in but :

Electricity Commission chairman removed from office !!

http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10401129

Labour really getting involved now!

Mr_Market

13-09-2006, 04:42 PM

quote:Originally posted by peat

Not sure which thread to post in but :

Electricity Commission chairman removed from office !!

http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10401129

Labour really getting involved now!

"He said he had been promised the Electricity Commission would be independent of the Government's wishes."

Hmm, A promise from the Labour govt. He should have got it in writing.[:0]

rmbbrave

11-11-2006, 12:19 PM

More customers and colder weather boost Vector's profits

Saturday November 11, 2006
By Richard Inder

Winter chills and a growing customer base boosted energy distributor Vector's first-quarter earnings.

After-tax profits rose from $36.4 million to $41.4 million, while sales rose from $339.3 million to $391.3 million as people used more electricity and gas to keep warm.

The rise in the earnings was also flattered by last year's relatively warmer winter.

Chairman Michael Stiassny said the company had gained customers across its electricity and gas business.

The winter and the customer additions more than offset the increase in costs arising from additional gas purchases to supply increased demand and the extra costs linked to regulation and its expanded management systems.

Stiassny said: "This is a very pleasing start to the new financial year and we will continue to look for opportunities to improve our performance."

Vector's recent commitment to buy 105 petajoules of Maui gas to 2014 under a right of first refusal process is just one such opportunity.

Vectors shares rose 6c to $2.65.

"It was a good result," said Tower Asser Management New Zealand equities manager Wayne Stechman. Meanwhile, the company was hopeful it would settle its dispute with the Commerce Commission and that the proposed deal would lead to a removal of the current regulatory hurdles.

Vector won a significant reprieve from harsh regulation last month when the commission backed away from claims that the company was earning an unreasonable return on its investments.

Instead the commission formalised arrangements requiring Vector to remove subsidies enjoyed by its Auckland domestic customers at the expense of others, particularly those in Wellington.

Vector has previously said progress made with the commission, coupled with recent initiatives by the Government to incentivise infrastructure investment, was encouraging.

http://www.nzherald.co.nz/section/story.cfm?c_id=3&objectid=10410271

TheBossMan

11-11-2006, 02:56 PM

Watch the share price soar if & when Vector decides to sell off some its non-core assets...

Is 50% holdings in TreeScape worth retaining or is it better to cut it loose?

disc: hold some

Animeart

11-11-2006, 03:03 PM

Too little too late. I've already sold out and moved on. What a waste of time and money investing in the IPO. The decision to build the World Cup stadium at the waterfront only highlighted Vector's bad luck in paying to have its name on the newly completed stadium. Which will forever be overshadowed by its bigger brother at the waterfront.

biker

13-12-2006, 11:36 AM

Michael Stiassny strikes again.[}:)][}:)]
Who would you believe out of this lot. The Directors or Chairman Stiassny.

VCT
13/12/2006
DIRECTOR

REL: 1112 HRS Vector Limited

DIRECTOR: VCT: Gibbs, Goulter, Muir resign from board of Vector Limited

Media release and statement to The New Zealand Stock Exchange.

Messrs Tony Gibbs, John Goulter and Greg Muir, today advise that they have
with immediate effect resigned from the board of Vector Ltd.

They regret this action but advise they have ongoing concerns with the
governance of the company and the leadership of the chairman.

Tony Gibbs 021 991 327

John Goulter 021 612 442

Greg Muir 021 652 818

kura

13-12-2006, 02:02 PM

This is interesting news, sure is a great candidate for a "inside story"

Market aint impressed !

I know Chairman Stiassny has had a lot of bad press before, and I just put it down to the nature of his unpleasant profession before, but with the calibre of directors resigning, it has to be a real big concern.

On a frivolous note, there are a few ex PRCC directors who may be looking for a new job !

Placebo

13-12-2006, 02:23 PM

Buying opportunity ahead!!:D

airedale

13-12-2006, 04:13 PM

Tony Gibbs, John Goulter, Greg Muir....plenty of combined mana there.I wonder if they could be persuaded to take up the three vacancies at NZOG.:)

Bling_Bling

14-12-2006, 08:09 AM

quote:Originally posted by Placebo

Buying opportunity ahead!!:D

I tend to agree. :D Long term play.

duncan macgregor

14-12-2006, 09:26 AM

quote:Originally posted by Placebo

Buying opportunity ahead!!:D
I would think you are on to it. I will be waiting on the sp coming out of a downtrend early next year then buy in. macdunk

rmbbrave

14-12-2006, 12:35 PM

Vector shares take a hit after directors walk

Thursday December 14, 2006
Richard Inder

Three of Vector's independent directors delivered an ultimatum to the Auckland power lines company's chairman Michael Stiassny - it's you or us.

Stiassny held his ground, so Tony Gibbs, Greg Muir and John Goulter - three of New Zealand's most respected businessmen - walked yesterday and publicly declared their lack of confidence in Stiassny, also one of the country's most experienced and well-regarded commercial minds.

A highly unusual statement to the stock exchange said: "[The independent directors] regret this action, but advise they have ongoing concerns with the governance of the company and the chairman."

Amid investor disbelief at such a remarkable falling-out, Vector's shares plunged. At one point more than $200 million was wiped from its sharemarket value. However, the shares recovered, ending the day down 8 cents at $2.45.

Few investors would comment publicly, but they agreed the departures indicated serious problems.

The Business Herald understands the blow-up follows long-simmering tensions in the boardroom.

Well-placed sources say the three were concerned Stiassny was too closely linked to Vector's 75.1 per cent shareholder the Auckland Energy Consumer Trust, which administers shares on behalf of power users in Auckland, Manukau and Papakura.

They are also said to believe Stiassny acted outside strategies agreed by management and the board.

The most recent example is said to have followed the Commerce Commission's threat this year to impose price controls. The commission alleged Vector had been abusing its monopoly and overcharging some customers. Vector and the commission eventually reached a draft settlement. But the directors were dismayed to find that during negotiations Stiassny and the trust met commission chair Paula Rebstock to resolve the dilemma.

Sources say Gibbs, Goulter and Muir believed this arrangement went outside the agreed strategy.

In another case they were disappointed that Goulter was replaced as chairman of the risk and assurance committee by trust representative Karen Sherry. This committee oversees the firm's relationship with the Commerce Commission.

They also argued Stiassny's management style was too confrontational.

The directors are cagey but Muir told the Business Herald: "His aggressive style led to people not being as successful and effective as they could have been. His leadership is inconsistent with the values held by the independent directors."

Muir said he was unhappy about relationships with the trust and trustees. "We have concerns over the behaviour of some of the trustees and their relationship with the board, we have concerns about skill-set gaps on the board, [there's] very little electricity experience, very little gas experience, or accounting experience," Muir said. "John, Tony and I have sought to work with Michael on his leadership of our board and today was the culmination of us being unsuccessful."

Gibbs, a long-time and close associate of Stiassny, was disappointed the relationship had broken down. "It is the most unhappy board I have been on in 20 years. I am disappointed a long-term relationship has come to this, but I could not put up with this nonsense any longer."

Stiassny was unapologetic about the relationship with the trust.

"They own a fair stake of this company and there is a lot at stake. As chairman I think it is my responsibility to manage the shareholder relationships. I have done that."

He said it was the prerogative of the chairman and the trust to engage with the commission. That relationship with the regulator had improved thanks to his, the trust's and the rest of the firm's efforts.

"I can categorically say ... that no decision or outcome has been reached that was not dealt with appropriately inside the governance chain vis a vis management and the board. Was there dialogue on numerous levels? Yes there was, that is what happens."

Stiassny added: "I am a very black a

wsheridan

14-12-2006, 03:46 PM

It says a lot about Stiassny that he would regard going and talking with the Commerce Commission without telling the chief executive or three of his directors as an "appropriate" level of governance. He didn't even tell the chief executive after he'd seen Rebstock and struck a deal.

This is absolute meddling in the operational level of the company and is entirely inappropriate. He's such an arrogant prick though that he'll regard the resignations as a victory.

There are so many skeletons in this guys closet that he should have been an undertaker...... hold on, he's a liquidator so he is.... a corporate undertaker [}:)]

Steve

19-01-2007, 07:08 AM

Unwinding the AECT could be a smart move given the current problems.

Councils make fresh bid for Vector (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10419836)
Documents released to the Business Herald under the Official Information Act show Auckland, Manukau and Papakura councils, led by Auckland, are set to lobby the Government for a law change to unwind the Auckland Energy Consumer Trust, which owns 75.1 per cent of Vector. They would divvy the booty among themselves and 290,000 power consumers in their area.
...
The documents confirm the councils have been trying to wind up the "dysfunctional" trust and get their hands on its $1.6 billion of Vector assets.

Bling_Bling

19-01-2007, 09:38 AM

Vector is a cheap stock at this level. Maybe time for some corporate activity?

Steve

20-01-2007, 03:37 PM

Not if the AECT can help it!

Hands off Vector, trust tells councils (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10419996)
Public control of Auckland-based Vector is in the best interest of all the energy distributor's stakeholders, says the Auckland Energy Consumer Trust.

Trust deputy chairman Michael Buczkowski, responding to a bid led by the Auckland City Council to grab the 75 per cent of Vector's shares vested in the trust, said an NZ Institute of Economic Research report had set the debate to rest last year.

"The trust ownership option is the superior option for all," he said.

The report, published in September, analysed all potential objections to the trust, which manages Vector's assets largely for the benefit of 290,000 power users in the old Auckland Electric Power Board's catchment.

These included concerns about the corporate governance of Vector, trust and Vector minority shareholder conflicts of interest and the political nature of the trust.

The report also considered alternative ownership structures including handing over management to professional trustees or to the regional councils and creating a special purpose infrastructure investment body.

Bling_Bling

22-01-2007, 10:49 AM

quote:Originally posted by Steve

Not if the AECT can help it!

That's why the AECT must GO out the door ! Bunch of useless buggers. No wonder VCT has been under performing.

Steve

04-02-2007, 12:15 PM

I wonder if MS will ultimately survive this mess?

Vector snubbed as board inquiry begins (http://www.stuff.co.nz/3950767a13.html)
Power company Vector, seeking new directors after a spectacular boardroom bust-up in December, has been rebuffed by two of its chosen candidates.

The Sunday Star-Times understands the individuals had been invited to join the Vector board, but were worried the roles were a poisoned chalice.

mrbunnynz

09-02-2007, 09:45 AM

The half year results released today appeared on the nzx site, but the full text was hidden for the first 20 min after they were released. Same thing on the asb site. Anyone know the reason for this, and how you go about getting announcements as soon as they come out?

Steve

09-02-2007, 11:05 AM

quote:Originally posted by mrbunnynz

The half year results released today appeared on the nzx site, but the full text was hidden for the first 20 min after they were released. Same thing on the asb site. Anyone know the reason for this, and how you go about getting announcements as soon as they come out?

I think that you have to pay NZX for the privlige of participating in an equally informed market...[:p]

Captain Ramjet

14-02-2007, 10:39 PM

Seems to have entered into a sweet new uptrend up through previous resistance of around 2.60 but not on particularly high volume. What do other techies think?

Sideshow Bob

13-03-2007, 11:39 PM

Continued it's good run, up to $2.89 - anyone know what's going on??

Captain Ramjet

15-03-2007, 03:19 AM

not sure about any news but from a technical perspective there was a resistance level of about 2.80 that had been in place since April / May 2006 that was tested a number of times in Feb and has now been broken with a much larger then average volume. We should see 2.80 becoming a new support level and (barring any more govt intervention) a continuation of the existing uptrend

BRICKS

12-07-2007, 01:38 PM

WHERE are all the holders of this stock 3 GPG people out now the CEO gone Vector is off its highs $2,65 somethings into Wind Power has a captive market good div`s what else do you want where are sensible answers, PLEASE.. [8D]

duncan macgregor

12-07-2007, 02:17 PM

quote:Originally posted by BRICKS

WHERE are all the holders of this stock 3 GPG people out now the CEO gone Vector is off its highs $2,65 somethings into Wind Power has a captive market good div`s what else do you want where are sensible answers, PLEASE.. [8D]
Will do my best to be sensible bricks. VCT is on a confirmed downtrend at the moment. Michael SHASSNY is one reason, he has pissed to many good people off with his arrogance, that he is in danger of becoming a one man band. The time to buy VCT is after winter, not during or before, after you know what weather damage did to the bottom line. I would have bought in dec, but decided to move all investments to the ASX. Its a good company run by an arrogant man, it will come right with a few changes. Macdunk

k1w1

17-09-2007, 11:43 AM

Is the VCT Chart sitting at the same crossroads as Liz pointed out for SKL ?

Phaedrus

17-09-2007, 12:52 PM

These VCT "Buy" signals are much more in sync than those of SKL, K1w1. The situation looks good except for one thing - all this is on quite low volume. Unless that kicks in, the breakout will run out of steam.
http://h1.ripway.com/Phaedrus/VCT917.gif

k1w1

17-09-2007, 02:13 PM

Thanks Phaedrus - I have noticed that my purchase of a share is often followed by a stampede for the doors by existing holders.

duncan macgregor

17-09-2007, 02:30 PM

If i was investing in NZ which i am not, this would be a buy for me right now. Winter is over, which is a bad time for lines companies with the odd unexpected scare for the unwary. I would only hold it until next winter, when i think the expected uptrend will go sideways.
It has given a buy signal [to me at least], its fundametaly sound, showing a TA buy signal what more could you want, other than a bit more volume which is the curse of so many NZX companies. I wouldnt dare bring my money back from Australia its already 6% up in exchange rate this year so far, which for me would be 12% on profits made if you work it out. Macdunk

kura

01-10-2007, 04:30 PM

If you take out the goodwill amortisation, (non cash) you will find the fundamentals look a lot better.

Dr_Who

01-10-2007, 04:53 PM

Gonna buy some VCT this week. Looks like a buy at these levels. Cant go wrong with a company that has a monopoly position in the sector. The graph looks good also.

BRICKS

01-10-2007, 06:49 PM

Since the chart draw VCT has packed it in to $2.45 and could go to $2.40, as WHO said a good buy by monopoly and size and BRICKS likes it but will keep his money in AUSTRALIA..

duncan macgregor

02-10-2007, 08:21 AM

Since the chart draw VCT has packed it in to $2.45 and could go to $2.40, as WHO said a good buy by monopoly and size and BRICKS likes it but will keep his money in AUSTRALIA.. GOOD GAWD I AM IN FULL AGREEMENT WITH THE BRICK. Even although a please explain with your numbers might enlighten. Macdunk

Dr_Who

02-10-2007, 09:40 AM

Since the chart draw VCT has packed it in to $2.45 and could go to $2.40, as WHO said a good buy by monopoly and size and BRICKS likes it but will keep his money in AUSTRALIA..

You mean you have all your cash in Aussie? WOW! I only have 20% of my portfolio in Aussie long term quality stocks/cash. Still have abit of cash in NZ to play with.

Dr_Who

04-10-2007, 10:40 AM

VCT
04/10/2007
COMCOM

REL: 0957 HRS Vector Limited

COMCOM: VCT: Further price reductions proposal for Gas dist businesses

Commerce Commission proposes further price reductions for controlled gas
distribution businesses

In its Draft Authorisation released today, the Commerce Commission is
proposing to authorise prices for the supply of Powerco Limited and Vector
Limited's gas distribution services which would represent reductions of 42%
and 15%, respectively, if implemented.

These are further to preliminary price reductions of 9% and 9.5 %,
respectively, under a Provisional Authorisation issued in 2005.

The Commission is now seeking submissions on its Authorisation for supply of
the controlled gas distribution services of Powerco and Vector.

"The Commission takes the approach that consumers should expect prices and
quality from monopoly businesses commensurate with what prices and quality
would result if the market were competitive," said Commerce Commission Chair
Paula Rebstock.

"Our preliminary view is that, despite the impact of the average price
reductions under the Provisional Authorisation, Powerco and Vector are still
making significant excess returns in respect of the supply of the controlled
services. These excess returns should be limited further", Ms Rebstock said.

"The Commission expects gas retailers to pass on the full effect of any price
reductions in the Final Authorisations to consumers, and we will be
monitoring this to ensure it happens in a timely manner."

"The Commission is mindful of the need to preserve incentives for the two
businesses to invest in their gas networks and has therefore decided, for the
purpose of the draft decisions, to use a post-tax Weighted Average Cost of
Capital of 9.1% to 9.3% in calculating the return on capital for Powerco and
Vector. This allowance is higher than comparable allowances currently
proposed by regulators in Australia and the UK", Ms Rebstock said.

"The process of determining what is fair and reasonable pricing has been
hampered by the poor provision of information by the companies, particularly
in the case of Powerco, said Ms Rebstock. "Additional supporting information
from the companies may result in significant changes to the final figures".

The key findings in the Draft Decisions Paper, subject to consultation, are:

- Powerco's and Vector's controlled gas pipeline businesses,
which accounted for 17% of Powerco's and 6% of Vector's total revenue in
2006, are continuing to make significant excess returns, despite the impact
of the average price reductions of 9% and 9.5% for Powerco and Vector
respectively under the Provisional Authorisation.

- Further initial average price reductions for Powerco's and
Vector's controlled gas distribution services of 42% for Powerco and 15% for
Vector are necessary to limit excess returns. These price changes would take
effect upon implementation of the Authorisation, which the Commission
anticipates to be 1 April 2008.

- For each pricing year thereafter (commencing 1 October
2008), Powerco and Vector could change their prices, on average, by CPI-2%.
This price path will have effect until 2012, at which time the terms of the
Authorisation will be reset for a further four years to 2016.

- The controlled services make up a significant portion of
the delivered price for gas, on average approximately 40%. It is therefore
expected that the proposed average price reductions would result in average
reductions to the delivered gas price for consumers of the controlled
services of up to 17% for Powerco and 6% for Vector.

- Excess returns that have been made while the Provisional
Authorisation has been in effect will be recovered over two regulatory
periods ending June 2016. This will minimise future price shocks to
consumers.

- The Commission notes that the proposed initial price
reduction for Powerco is significantly higher than it is for Vector. A key
reason for this difference is the overall lack of supporting information
provided by Powerco (as compared to Vector) for its proposed operating
expenditure and capital expenditure allowances.

- The Commission has allowed both companies to revalue their
assets. This has resulted in substantial revaluation gains which must be
treated as income for the purpose of setting prices. Failure to treat
revaluation gains as income would, in effect, disguise high returns as
apparently low returns, therefore resulting in unwarranted windfall profits
to the companies.

Submissions on the Commission's draft decisions for the Authorisations are
invited from all interested parties. The Commission is also releasing a copy
of the model on which it has based its draft decisions. Submissions on the
model are also welcomed.

Submissions are due by 12pm, 12 November 2007.

A conference on the Draft Decisions Paper is planned for the week commencing
3 December 2007. The purpose of the conference is to enable the Commission
to test those written submissions and to further the Commission's
understanding of key issues so that it can make its Final Decisions for the
Authorisations. The submissions, conference and cross-submissions following
the conference will inform the Commission's decisions. The Commission
anticipates that its Final Decisions will be presented in February 2008 and
that the Authorisations will be implemented by 1 April 2008.

The document's full title is: Authorisation for the Control of Supply of
Natural Gas Distribution Services by Powerco and Vector Limited - Draft
Decisions Paper

The public version of the Commission's Draft Decisions Paper and the model
can be found on the Commission's website www.comcom.govt.nz under Regulatory
Control Enquiries/Regulated Gas Control.

Vector proposes outline undertaking

Section 72 of the Commerce Act enables parties to offer undertakings for
consideration as an alternative to making authorisations under section 70 of
the Act. Recently, the outline of an offer of an undertaking was received
from Vector Limited which suggested a price increase of 15% in the first year
followed by increases of CPI +7% in subsequent years. In order for the
Commission to consider whether to accept an undertaking, instead of making a
final authorisation under section 70 of the Act, the Commission would require
the full terms of the proposed undertaking, provided with supporting
information, relevant assumptions, and reasoning. The Commission has
responded to Vector to this effect. The companies need to provide any
documents and undertakings in a timely manner in light of the Commission's
timeline for the Final Authorisations.

Consideration of an undertaking by the Commission would be as part of a
transparent consultative process. Vector Limited's correspondence dated 14
September 2007 and subsequent correspondence on this matter can be found
along with the Draft Decisions Paper on the website. The Commission's website
will be further updated on such matters and process over time.

Background

On 30 April 2003, the Minister of Energy requested the Commerce Commission to
report on whether goods and services supplied in markets directly related to
gas transmission and distribution systems should be subject to control and
hence whether an Order in Council under section 53 of the Commerce Act should
be made in relation to gas pipeline services.

On 27 July 2005 the Minister of Energy announced the decision to impose
control over the gas distribution services of Powerco and Vector. Control was
implemented by way of an Order in Council (the Control Order), and took
effect on 25 August 2005.

Section 55 of the Act requires the Commission to authorise the supply of the
controlled goods and services. The Commission has issued a Provisional
Authorisation which took effect from 25 August 2005 reducing average prices
by 9% for Powerco and 9.5% for Vector.

The terms of the Provisional Authorisation will remain in effect until such
time as a further provisional authorisation under section 71 or the
Authorisation under section 70 of the Act is determined (or an acceptance of
an undertaking).

The Commission is currently determining a final authorisation (the
Authorisation) for the controlled services pursuant to section 70 of the Act.
Section 70(1) of the Act enables the Commission to make an authorisation in
respect of all or any component of prices, revenues, or quality standards
that apply in respect of the controlled services using whatever approach it
considers appropriate.

Media contact: Allanah Kalafatelis

Communications Manager

Phone work (04) 924 3708, mob 0212 254
417

Felicity Connell, Senior Communications
Adviser

Phone work (04) 924 3709, mobile 0212
254 454

beacon

05-10-2007, 10:01 AM

Took this long to fall below IPO price! Still very pricey in my book.

Dr_Who

05-10-2007, 03:27 PM

I think it is good buying at these levels. Gonna buy some more shares. :)

k1w1

06-10-2007, 12:13 PM

I think this statement from the Commerce Commission is intriguing:

The Commission is mindful of the need to preserve incentives for the two
businesses to invest in their gas networks and has therefore decided, for the
purpose of the draft decisions, to use a post-tax Weighted Average Cost of
Capital of 9.1% to 9.3% in calculating the return on capital for Powerco and
Vector. This allowance is higher than comparable allowances currently
proposed by regulators in Australia and the UK", Ms Rebstock said.

In other monopoly supply cases hasn't the Commission used a post tax Weighted Average Cost of Capital of 6 % ?

If so, it appears to have increased the WACC by 50%. The gas lines involved are only a small amount of Vector's revenues and the revenue decrease is not material. But if the allowable WACC has increased by 50% then that will have a material positive affect on the monopoly prices that Vector can charge on its electricity supply network - a large part of its revenue.

Is there anyone with more technical knowledge than me that can identify:

- present allowable COM.COM WACC for Vector electricity network.
- whether, as I assume, the same WACC as is allowed for gas distribution would be allowed for electricity network.
- effect on Vector revenues if it could get a 9.1-9.3% return on its capital.

k1w1

10-10-2007, 12:11 PM

This is the significance of WACC to Com.com

'The goal is to ensure that lines businesses are limited in their ability to earn profits in excess of their Weighted Average Cost of Capital (WACC). That is the businesses should not earn greater than normal profits in the long term.

Gas Supply Lines

The previous WACC allowed by Commerce Commission for the gaslines was 7.9% with Vector arguing for 9.6%. ( see Com.com website) However in its latest announcement ComCom used an allowable WACC figure of 9.1-9.3% which is a 16% higher allowable profit than its earlier figure and way closer to their 9.6% figure. So that must be a gain for Vector who described it in their latest release as a step in the right direction.

Electricity Supply Lines

The Commission’s existing WACC estimate for electricity lines businesses was 7.35%. This was based on a three year risk free rate of 6.3% as at April 2005, a market risk premium of 7%, an asset beta of 0.4, and an assumed “efficient” leverage of 0.4.42.

This caused the big stink with Vector last year when the information provided by Vector estimated an overall return of 9.6% (based upon a tax payable calculation). A rate of return target of 9.6% was described at the time as " well in excess of the Commission’s most recently published range for the WACC."

ComCom has now increased its allowable WACC for gas supply lines ( small part of VCT business) from 7.35% to 9.1-9.3%. If it increases its allowable WACC on electricity lines businesses (big part of VCT business)from 7.35% to the same 9.1-9.3% range then this will be a positive for Vct profits.

This may explain why VCT response was muted and in some parts welcoming ( eg " a step in the right direction"). These nuances were lost on the market who dropped the SP on what may prove to be a positive for VCT.

DISC: Hold VCT and VCTIZA

Dr_Who

10-10-2007, 01:40 PM

I agree with you Kiwi, thats why I bought some last week. :)

disc: VCT shareholder

k1w1

10-10-2007, 01:57 PM

The acceptable WACC for 2009 will be revisited by the Commerce Commission in 2009. The increased WACC that it has accepted for gas supply lines is a positive indicator that they have revised upwards their calculations of WACC which bodes well for the future returns that VCT will be allowed on its electricity supply lines.

Dr_Who

15-10-2007, 01:58 PM

Good time to buy VCT last week. :)

I was thinking, why did the trust bother listing VCT in the first place? Since listing VCT board has been a mess and have not added any value to the business, so why list it? Better to keep it private.

Arbitrage

19-10-2007, 05:14 PM

Did anyone go to the AGM?
Any news, gossip?
More importantly what was the food like?

Zephyrus

25-10-2007, 10:06 AM

Looks like Vector will sell their Wellington Electricity network. Why?
Vector is cutting staff. Why?

Is their debt too high? They borrowed a lot from overseas to fund the pruchases of United Networks & NGC. With the possibility of a credit crunch in global markets, will the cost of refinancing their debt put them in troubled waters?

Don't know the answers but something to think about.

Btw, Duncan Mcgregor, while winter is a trying time for lines companies (due to the weather), Vector does earn the bulk of it's revenue during that time. Even though they don't sell the power, a large proportion of their revenue is based upon how much power is consumed, and winter is when everyone switches their heaters on.

Dr_Who

25-10-2007, 11:27 AM

Maybe they are selling to reduce competition and to cash up? VCT is worth more broken up compare to current SP listed? Only an assumption I am making.

Dr_Who

03-11-2007, 07:11 AM

Why is this clown still the chairman for VCT?

Brian Gaynor: Some facts and a warm welcome are a real thrill

The entrance to the Vector meeting, which was held at the Ellerslie Convention Centre, had more security guards than a rock concert. There were guards at the front door, at the bottom and top of the lift and at the entrance to the meeting room.

It was probably the most stringently controlled New Zealand shareholders meeting in the past 30 plus years.

Michael Stiassny made it clear that he was responsible for the tight security. He said he had banned cameras because "I don't want a circus and if I want a circus I will pay for one".

He added: "There won't be a camera at a Vector meeting while I am chairman".

But the issue seemed to go beyond this as a number of individuals with no cameras were stopped at the front door.

Stiassny's address, and that of acting chief executive Simon Mackenzie, placed a great deal of emphasis on improving customer focus and service. This objective was difficult to reconcile with the treatment of shareholders at the entrance to the meeting.

The other feature of the formal addresses was that they were unnecessarily long and repetitive. They were full of generalities, had little factual information and gave no specific information on trading for the first three months of the year.

Vector has serious governance issues as reflected by the annual meeting and the departure of three prominent directors, the chief executive and chief financial officer in the past 12 months. The latter two have yet to be replaced.

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10473787&pnum=2

*Disclosure: shareholder of VCT

Arbitrage

03-11-2007, 02:19 PM

Interesting that in a time of energy prices continuing to increase that the Vector shareprice is now down to around $2.30. Surely this must reflect the performance of the Chairperson, Directors and Executives. We all know that having existing assets in the energy industry is a licence to print money. How come they can't even get this right? What makes the chairs directive even more concerning is the fact that the major shareholder are the long suffering residents of Auckland City. Vector is really no different from other state or regionally owned enterprises in virtually a monopoly situation and therefore should be open and accountable.
Perhaps we need to remind the board and executives about this or if they can't meet these requirements, ask them to step down.

Arbitrage

03-11-2007, 05:07 PM

i am not sure what the relationship between a poorly performing company and cheaper electricity is.

As Vector is effectively a publicly owned enterprise, the doors at the AGM should have been open to anyone who wanted to come in, even if they carried cameras. The company (ie its representatives) seems to be a PR disaster.

I think the answer could be a new company logo. There is a spare triangle here they could use...

By the way, nothing is cheaper in Auckland.

Dr_Who

04-11-2007, 10:27 AM

I think the answer could be a new company logo. There is a spare triangle here they could use...

By the way, nothing is cheaper in Auckland.

A new logo and chairman! Why keep this company listed when they run it like their own private firm???

BRICKS

10-11-2007, 12:07 PM

whatsup

11-11-2007, 08:30 PM

Vector, Sadly wont turn around until Stazzi quits the company ,but it will be good buying at $1.50 or there abouts.

Dr_Who

12-11-2007, 11:57 AM

The sad thing is the average person (public) have no idea how the Trust is managing VCT. It is a total shocker. Should sack the lot of them. Replace them with a dynamic management team that can add value to VCT. :mad:

kura

12-11-2007, 05:51 PM

Vector seems to have No bottom at the moment @Low $2.18 yesterday could end $2 in the week to come but there will be a bottom price just got to pick it a big company on a small nzx well on the WATCH LIST..

Gee Bricks looks like $2.20 was the bottom, (for now) Hmm so much for my buy order at $2.10 !

AMR

12-11-2007, 06:06 PM

A nice rally in a bad market today, abeit on very small volumes. If there are other CFD traders out there this might be a good opportunity for a short sell.

Dr_Who

13-11-2007, 08:56 AM

Suicidal to short this stock.

k1w1

30-11-2007, 06:33 PM

Any one know why the price shot up today ?

kura

30-11-2007, 06:56 PM

Any one know why the price shot up today ?
I was about to ask the same question

p2r

01-12-2007, 02:26 AM

I heard someone on the radio say something about funds have been selling - rebalancing portfolios but now it is 1 Nov it is differant. Same for the two fisher & paykell stocks.

Note big volume.

Dr_Who

01-12-2007, 05:20 PM

My broker tells me it is just indexing which finished end of Nov. :)

macduffy

01-12-2007, 06:15 PM

Any one know why the price shot up today ?

Because someone thinks it's got too cheap?
Hope they're right!

Disc: Hold VCT but wish I didn't.

AMR

01-12-2007, 07:12 PM

Also a large rally in RYM and FPH, all three stocks have very heavy market depth on the buy side and a number of undisclosed limit orders. Does anyone trade these movements?

k1w1

02-12-2007, 06:47 AM

My broker tells me it is just indexing which finished end of Nov. :)

At the risk of appearing stupid could someone explain what "just indexing" is and how often brokers do it. Especially why having sold at the end of November they appear to all be buying again at the start of December.

duncan macgregor

02-12-2007, 07:18 AM

At the risk of appearing stupid could someone explain what "just indexing" is and how often brokers do it. Especially why having sold at the end of November they appear to all be buying again at the start of December. KIWI my old mate its what is called cooking the books. Make it all look better than it really is. Its also an opportunity to make money with a little bit of study to know what will happen before the event. Macdunk

Dr_Who

02-12-2007, 10:34 AM

At the risk of appearing stupid could someone explain what "just indexing" is and how often brokers do it. Especially why having sold at the end of November they appear to all be buying again at the start of December.

Why do you think I never invest my money with the funds? They all seem to follow eachother like a pack of sheep. One buy the others follow. Just buy with the funds sell and you are sure to make money. The NZ market has no liquidity, so everytime the brokers get a decent order the stock moves up/down 10%.

Dr_Who

05-12-2007, 03:55 PM

Last chance to get some VCT at these levels. :)

disc: VCT shareholder

AMR

05-12-2007, 04:23 PM

Yes, a nice double bottom appears to be forming. A close above $2.38 would complete the double bottom. Not sure I'll buy in this economic climate though.

AMR

06-12-2007, 06:14 PM

The double bottom completed today, giving a buy signal - however it was on very poor volume.Will need to think long and hard about this...

duncan macgregor

06-12-2007, 07:38 PM

It might mean nothing but today was a TA buy signal in my book. I always like to say in advance of the event. Today was the day for this stock the downtrend is now over. Macdunk
DISCL used to have these lines years ago in the other company.

E C K Witty

06-12-2007, 08:16 PM

used to have these lines years ago

Still using the same lines eh Macdunk?

Possibly the fact this coming Monday is a potentially significant date for the company may have something to do with the recent shareprice activity.

AMR

06-12-2007, 09:28 PM

Still using the same lines eh Macdunk?

Possibly the fact this coming Monday is a potentially significant date for the company may have something to do with the recent shareprice activity.

I searched their website's financial calender and couldn't find anything. There's only a "Capital bond reset". Mind telling us what's important on Monday?

beacon

07-12-2007, 07:51 AM

Deadline for bids on Wellington asset sale

Dr_Who

07-12-2007, 10:22 AM

AMR

07-12-2007, 01:47 PM

hmmm... wonder what they are going to do with all that cash after selling the Welly assets? :) shareholders will just sit back and enjoy all the cash flowing into their pockets. :D

AMR, I told you to buy blow $2.30.

Better to buy at 2.40 on the way up than 2.40 on the way down! :D

I used to have a very similar investment style to what you are use, but something that looks cheap ...might be cheaper later.

Dr_Who

07-12-2007, 02:58 PM

You are not another one of those McDunk fans that looks at the graphs TA, BA, BS, FART Tax or whatever and comes with next weeks lotto results. :D

Financially dependant

03-02-2008, 01:37 PM

I have had Vector on my watch list for a while, the sp tracking down for quite some time yet fundamentally a very good buy. Is the reason for the down trend just the conflict with Vector and the Ministry? Setting prices?
Or are investors just waiting for the bottoming out of the share price and looking for buy in indicators?

I would appreciate any comments as I am still learning!

OldRider

03-02-2008, 02:10 PM

I think there is some concern over the shareholding - a politically motivated major shareholder who might decide or do anything in their own interest, with all the rest just a minority along for the ride.

Hopefully, but I wouldn't hold my breath, sometime in the future the major holder will be reduced to a 30%, to less then 50% holding, at that stage others that presently avoid but watch, would become interested. In my opinion this would become a win win story for almost all except ther politically motivated. Nonetheless, probably a secure investment that will at least keep up with inflation , and with the trusts need for cash to hand out, a sure dividend payer.

Steve

03-02-2008, 04:38 PM

VCT is also a share that I am following. Even included it in my picks!

I expect that the shareprice will recover later in the year once all the uncertainty disappears,

whirly

03-02-2008, 07:07 PM

Yeah its one of my picks and on my watchlist too but still trending downwards - I'll look at it on its way back up. Hopefully still under 2.20

Dr_Who

03-02-2008, 08:02 PM

I am also waiting for it to bottom and I will pick up some more VCT shares.

It doesnt make sense for these jokers to list VCT and still run it like their own private firm. Would like to see these jokers get the boot out of the door and replace with a team that can add value.

Steve

03-02-2008, 08:40 PM

It doesnt make sense for these jokers to list VCT and still run it like their own private firm. Would like to see these jokers get the boot out of the door and replace with a team that can add value.

I recall that is why the well-respected independent Directors resigned en-masse...

Financially dependant

03-02-2008, 09:58 PM

Thanks for the input.

It makes rereading Vector and Trust's web sites make more sense.

I will continue to watch for an up trend or if sp continues to slide wait to the yield becomes too good!

Dr_Who

04-02-2008, 08:58 AM

I recall that is why the well-respected independent Directors resigned en-masse...

The current board of jokers are destroying a quality NZ asset. If this was a private firm, the board of jokers would have their bottoms booted long time ago. Maybe the media should investigate and do a report of the clowning around that goes on.

Dr_Who

04-02-2008, 02:39 PM

Can anyone remember the IPO price for VCT and what year it was listed? Thanks.

Deev8

04-02-2008, 05:45 PM

Can anyone remember the IPO price for VCT and what year it was listed? Thanks.Vector was listed on 15th August 2005, and I think that the price was $2.38.

http://ichart.europe.yahoo.com/c/5y/v/vct.nz

Bilo

04-02-2008, 06:46 PM

Vector was listed on 15th August 2005, and I think that the price was $2.38.

http://ichart.europe.yahoo.com/c/5y/v/vct.nz

Nice graph Deev!

I sold at 3.20 and it must have been a lucky day. Back in again now (not anywhere near the same volume) despite the Chairman, the government, the Trust, and management ructions caused by the former.

For those who observe trading patterns (re forex thread) this looks like a huge Butterfly forming.

New CEO, Chairman to resign, Labour loses election, Trust sells more shares at $3.50 will just about complete the picture.:)

Dr_Who

04-02-2008, 07:21 PM

Thanks Deev8. :)

I will add more VCT shares to my portfolio when it bottoms out.

Bilo, what do you mean Trust sells more shares at $3.50???

Bilo

05-02-2008, 10:45 AM

Thanks Deev8. :)

I will add more VCT shares to my portfolio when it bottoms out.

Bilo, what do you mean Trust sells more shares at $3.50???

Sorry Doc
Possibly a poor attempt at sarcasm/joke. AECT the Auckland Energy Consumer Trust a highly politicised body who are trustees of 75% of VCT for Aucklander's. Look them up - Vector's potential is almost unlimited - hence the Labour government's zeal to suppress any capitalistic tendency. The debate has always been about a suitable capital structure and governance structure for VCT's licence to print money.

They were always highly leveraged because they were presented opportunities to make more profits and grow but the Trust refused to sell shares to reduce debt. VCT is capable of generating buckets of cash. With the right capital structure this company would support a very much higher price than $2.08. It will come but it will take much longer than it should have. Selling some of VCT's Wellington interests is another way.

AMR

05-02-2008, 11:03 AM

Ouch...an all time low. Let's hope the $2 provides some resistance.

Disc : Don't hold, but relatives do!

Dr_Who

05-02-2008, 11:12 AM

Sorry Doc
Possibly a poor attempt at sarcasm/joke. AECT the Auckland Energy Consumer Trust a highly politicised body who are trustees of 75% of VCT for Aucklander's. Look them up - Vector's potential is almost unlimited - hence the Labour government's zeal to suppress any capitalistic tendency. The debate has always been about a suitable capital structure and governance structure for VCT's licence to print money.

They were always highly leveraged because they were presented opportunities to make more profits and grow but the Trust refused to sell shares to reduce debt. VCT is capable of generating buckets of cash. With the right capital structure this company would support a very much higher price than $2.08. It will come but it will take much longer than it should have. Selling some of VCT's Wellington interests is another way.

I agree with you. So, when do you think is a good time to accummulate some more VCT shares?

Steve

05-02-2008, 06:29 PM

I agree with you. So, when do you think is a good time to accummulate some more VCT shares?

Now may be good while it is down, or you may want to wait until it turns back up over its MA?

VCT is on my watch-list also.

duncan macgregor

05-02-2008, 06:44 PM

Now may be good while it is down, or you may want to wait until it turns back up over its MA?

VCT is on my watch-list also. Its 14c below its buy signal today. I have it on my watch list, might buy a few myself when it crosses my moving average buy signal. Regardless of what happens the business must keep running even in a crash. macdunk

Grimy

05-02-2008, 09:03 PM

I've been watching also for a while. Decided to pick up a few today. Should move the SP down a bit!!

Steve

05-02-2008, 09:15 PM

I've been watching also for a while. Decided to pick up a few today. Should move the SP down a bit!!

My purchases always seem to sink the share price too! ;)

kura

05-02-2008, 10:49 PM

Yep, I also picked up a few today, sure , it may not have bottomed yet, but I just figured that it wouldn't drop below $2

In any case, it will give me an interest in their forthcoming profit announcement.

Bilo

07-02-2008, 10:55 AM

I agree with you. So, when do you think is a good time to accummulate some more VCT shares?

Doc
I see not one person has been keen to attempt to address your question:
When would be a good time to accumulate VCT?

This is not an easy question to answer in a market where company fundamentals have been ditched in favour of slavish following of indices, shorting of good companies with the knowledge that institutional investors aren’t buying, selling a few on the basis of buying back more for less once smaller or geared investors have been squeezed out – all part of the grab bag of “legitimate” manipulation tools used by big traders.

This market, where the dog’s tail wags it’s head, could discount the share price of a company with cash in the bank greater than their capitalisation. Based on a World recession scenario then this is no time to be in shares, not even VCT. It just weighs on those of us who try to make our savings work for NZ (unlike the Cullen Fund).
But on the fundamental side (for those with cash and time on their side):
A glance at VCT’s results last year indicate:
· Cash flows of $358M – or ~$1M per day
· EBITDA $610M
· Dividends set at 81pc of net profits
· Fantastic businesses, electricity lines, gas and gas reticulation, telecommunications
· Constrained by government intervention on unrealistic rates of return – (hopefully the government will stop meddling before the likes of VCT and Transpower stop investing and electricity and gas services become unreliable
· Two dividends in the next ~8months (~18cps gross last year)
The problem is that there will be better opportunities to make a dollar in this depressed market – possibly none with the long term financial security of VCT. In a balanced NZX portfolio VCT would be there despite the problems that I referred to above. PE guessed to be less than 20 but capable of being reduced rapidly on divestments and with cash flows/deferred investment.

But to answer your question:
· Phaedrus would keep his hand in his pocket
· McD likes excitement and VCT is definitely not that
· Bilo says when you think a stock is cheap, it can always go lower – and just has!..I think $3.50 will look cheap when it comes...

duncan macgregor

07-02-2008, 11:29 AM

Doc
I see not one person has been keen to attempt to address your question:
When would be a good time to accumulate VCT?
You are wrong my friend Macdunk is not scared to tell you when to buy a good business opportunity like this. The market will tell you when to buy all in good time when the time comes. When the share price moves above the thirty day moving average and not before. Look it up all will be revealed at a later date. Macdunk

tsb

08-02-2008, 07:58 PM

Well at $2.03 I couldnt resist buying a few more. Its a bit sad though that after 2.5 years it has managed to shed so much value.
'Praps the chairman will get voted out at long last.

Steve

08-02-2008, 08:12 PM

Well at $2.03 I couldnt resist buying a few more. Its a bit sad though that after 2.5 years it has managed to shed so much value.
'Praps the chairman will get voted out at long last.

Only if the majority shareholder decides to get rid of him, which is unlikely as he represents their interests...

tim23

08-02-2008, 10:06 PM

Duncan - you say its a good busines I agree so if you buy @ $2.05 or $2.20 does it really matter in long term?

tsb

09-02-2008, 10:37 AM

Errr - it matters if you bought @ $2.20 and it dropped to $2.02!

BDLBOM

10-02-2008, 10:14 PM

I see that Michael Stiassny has been copping a bit of flack for boardroom strife and loss of shareholder value and I wonder how fair this is.
I think if Gibbs, Muir and Goulter had been sincere in doing what was right as independent directors then they would have worked to put things right rather than departing in the manner they did.
I mean to say, what a dumb move to issue such an ultimatum, you go or we go. Stiassny had to turn it down. I would have too. There has to be more to that story.
With regard to shareholder value and falling share price, I think we should be pointing at the commerce commission and their irrational and erratic conduct which was highlighted by the brilliant open letter put together by Chen Palmer in response to comcom declaring intent to take control. Google search will bring up that letter.
The commentators at the time were unanimous that Rebstock had blundered and would not be reappointed. (Strangely enough she was. Could she be one of Helen's anti business cronies?)
The power companies are being exhorted to put more into infrasrtucture investment which would be irresponsible in the current regulatory environment.
I do not know Michael Stiassny personally and what his faults are. Top business people do not get there by being nice guys, but it seems to me that he is being targetted when we should really be looking at Rebstock and her lot.

BDLBOM

11-02-2008, 10:39 AM

I agree. Change the Govt. But Trust board doesn't just need to be changed the trust need to be wound up.

tsb

11-02-2008, 07:34 PM

Arbitrage

11-02-2008, 09:07 PM

It amazes me how a monopoly organisation covering the part of the country with the greatest population and delivering an essential product can't crank out great returns for its shareholders. Sure there are a few regulatory issues but come on, the business environment is still weighed heavily in the company's favour.

Are there any investigative journalists out there willing to have a look at this? There are a lot of shareholders who would buy your magazine if you did something....

Year of the Tiger

11-02-2008, 09:36 PM

Are there any investigative journalists out there willing to have a look at this? There are a lot of shareholders who would buy your magazine if you did something....

I think they would rather try and dish the dirt on the Politicians being duped into talking about a few home truths.. (aka John Tamaheri in a restaurant in Ponsonby) rather than investigating something that really spills the dirt on an issue where so many NZers have got money at stake. :(.

I always think about my dear old Scottish Grandad who said when I was very very young.... "Where there's muck, there's money"

YOTT

Discl: I bought in at the IPO, and a few more shortly after.... I read many of the adverse reports about Mr Michael Stiassny and thought, what am I doing here. When the slide started, I departed. And pleased I did.

BDLBOM

11-02-2008, 10:54 PM

Well we'll know on the 14th whether a poor half year result contributed to the current low share price - or if it is brimming with confidence and added value etc the price should firm up! As it has not firm yet I'm not holding my breath.

Being such a highly regulated company should mean stable revenue.
If the dividend is maintained at the previous 6.5c then that won't be such a bad yield. In which case I don't mind holding VCT as a long termer for the dividends so I am not too affected by the ups and downs in the share price and maybe as time passes the desired changes (of Govt., Comcom and termination of the trust) will happen.

moimoi

11-02-2008, 11:17 PM

and in a supposed global environment of risk aversion VCT sinks badly...this is supposedly a stock which should be sought after....infrastructure, strong cashflows,recession proof product, semi monopolistic.....i'm in the Gibbs, Muir and Goulter camp....the governance is screwed!!! the company is plainly not being operated in the interests of shareholders...now if only it had a power station in the electorate of Mt Albert we would be sweet :-(

beacon

12-02-2008, 08:42 AM

Position opened

etnom

14-02-2008, 05:46 AM

Vector does seem to be working on adding value.

http://www.stuff.co.nz//4399750a13.html

Disc: Hold VCT Shares

Deev8

14-02-2008, 09:54 AM

The result if is out.
Around $90 M half yr profit and 6.5 cents div.NPAT is down 18% on the first half of last year, but that's around the result that had been forecast. The interim dividend is the same as last year.

tsb

14-02-2008, 12:42 PM

A bit suprised to see the sp drop to $1.99 - has to be a steal at these levels

Steve

14-02-2008, 06:37 PM

At least the shareprice closed the day back above $2.

BDLBOM

15-02-2008, 07:56 AM

It is a steal at these levels, picked up more shares for my portfolio. :)

You have to love the newspaper headlines.. "Vector Profit Drops 18%" ... and the mum and dads panic... LOL

Bought more too and would buy even more if I had the readies. Amazing to see the sheep panic without looking behind negative comments.

beacon

15-02-2008, 08:17 AM

Position closed

tsb

25-02-2008, 05:12 PM

Well ok just few more at 1.94. About 3 weeks from the record date and hopefully some progress on the wellington lines sale.
I was wondering how the auckland loop would be funded - I would have thought that a rights issue was not possible - perhaps the debt level wont be reduced as much as previously expected!

Bilo

25-02-2008, 10:12 PM

PE is approaching single figures which has to be fantastically oversold for this stock. Where is the money Dr Cullen? You took it from all those individuals who wanted to invest in Vector, and sent it overseas...

Steve

25-02-2008, 10:52 PM

VCT's broken through the $2 support level, dont know how low it will go. Will keep and eye out and pick up more when it bottoms out. Div is looking better as the price goes lower.

Definately on my watchlist now. It's just down to the timing...

BDLBOM

26-02-2008, 04:49 PM

Definately on my watchlist now. It's just down to the timing...

Down to $1.88. What do the sellers know that we don't?

tsb

26-02-2008, 06:17 PM

fear???????? - has to be 10 charaters long

Bilo

26-02-2008, 09:27 PM

I also want to know the answer. But then this is not a very liquid stock with the Trust - run by a bunch of village idiots - holding approx 80%. A company with a monopoly in a electricity market that destroys shareholders value??? So how does that work???? Sack the freaking board on the Trust and VCT!!!

Unfortunately asking the company or the NZX is most unlikely to provide the answer. If you look at the share price graph particularly since April 07 there has been a concerted and deliberate sell down. It is similar to the type of behaviour that is attracting attention in OZ. Manipulation of share prices. There are lots of reasons that this might be happening to Vector. You named a couple but there will be others, including putting pressure on the Vector board to accept a low price for Wellington assets.

It may be some foreign owner trying to extract his money with the NZD high but....

The governance structure is a problem, the government interference has been a problem, and the chairman is a problem but no-one has ever doubted his financial ability. So is there possibly someone trying to put pressure on the Trust and the Board by borrowing some institution's shares and shorting the market.

It is not share price manipulation - it is just the market - that is what they say. On the ASX it is very refined - computers fire rubbish orders at the market - it isn't people with vested interests - willing buyers and sellers.:rolleyes:

AMR

26-02-2008, 11:02 PM

Someone accumulating lately? It's not one of you lot is it? A short term divergence. A bullish sign but unfortunately some of these divergences last quite a while before any price action results.
http://img530.imageshack.us/img530/6853/vcteu4.png

BDLBOM

27-02-2008, 10:39 AM

Unfortunately asking the company or the NZX is most unlikely to provide the answer. If you look at the share price graph particularly since April 07 there has been a concerted and deliberate sell down. It is similar to the type of behaviour that is attracting attention in OZ. Manipulation of share prices. There are lots of reasons that this might be happening to Vector. You named a couple but there will be others, including putting pressure on the Vector board to accept a low price for Wellington assets.

It may be some foreign owner trying to extract his money with the NZD high but....

The governance structure is a problem, the government interference has been a problem, and the chairman is a problem but no-one has ever doubted his financial ability. So is there possibly someone trying to put pressure on the Trust and the Board by borrowing some institution's shares and shorting the market.

It is not share price manipulation - it is just the market - that is what they say. On the ASX it is very refined - computers fire rubbish orders at the market - it isn't people with vested interests - willing buyers and sellers.:rolleyes:

I agree with the comment about the chairman, and the fact that he got the better of Gibbs & Co. tells me he is a very strong charcter. Hopefully strong enough to deal with any outfit trying to beat him down on the price of the Wellington network.

POSSUM THE CAT

27-02-2008, 12:24 PM

BDLBOM He might have won the war with Gibbs & Co but lost the war for the shareholders 30% drop in share price to satisfy his victory. Gibbs & Co have better things to do with their time until Vector decide on changes mean time share price suffers badly

Steve

29-02-2008, 08:40 PM

While we wait, the sp continues its fall. :mad:

And the trigger finger gets closer to hitting the buy order... :)

BRICKS

01-03-2008, 10:48 AM

AS you watch the little red line head south after yet another price drop and you shake your head and mutter "Whats going on" , What Bricks likes is all this Blue cable laying now 500 kilometer's that's the go and they have customers for it as well, @ $186 & cum Div 6 cents how many people are sitting waiting to POUNCE..

Financially dependant

01-03-2008, 11:24 AM

Vector is on my watch list

Deev8

03-03-2008, 04:33 PM

Surely at $1.85 and looking to go lower, the chairman and some of the board members must look handing in their resignation!We can't really hold company directors to account for the share price. That's under the contol of fickle investors.

Directors are responsible for the company's financial performance however, and they did recently report an 18% decline in net profit after tax. But if an 18% decline was a resignation matter a lot of New Zealand companies would be looking for new chairmen and directors at the moment!

BDLBOM

03-03-2008, 08:53 PM

We can't really hold company directors to account for the share price. That's under the contol of fickle investors.

Directors are responsible for the company's financial performance however, and they did recently report an 18% decline in net profit after tax. But if an 18% decline was a resignation matter a lot of New Zealand companies would be looking for new chairmen and directors at the moment!

Agreed DEEV8, it has to be poor company performance for directors to go. The 18%decline was due not only to higher interest costs but largely to accelerated depn. on metering assets which are soon to be replaced with "smart metering" devices. The board aside, the company itself is performing well and is managed by some very competent people.

Dr_Who

25-03-2008, 09:17 AM

I am voting in favour of the councils to wind up the Trust. Time for trust to go. and go fast!! Please someone with any commercial competance come and run Vector and add value to the company.

$4000 payout in Vector bid

5:00AM Sunday March 23, 2008
By Jared Savage (http://www.nzherald.co.nz/author/index.cfm?a_id=304)

Energy consumers could receive a $4000 windfall as Auckland authorities launch another bid to wrest control of power line company Vector.

Three Auckland councils have urged a Royal Commission of Inquiry to recommend a law change to wind up the Auckland Energy Consumer Trust, which owns 75.1 per cent of Vector.

http://www.nzherald.co.nz/category/story.cfm?c_id=37&objectid=10499658

Steve

25-03-2008, 09:47 AM

This has been tried before and failed, although from memory the payout figure was lower...

BDLBOM

27-03-2008, 10:03 AM

[QUOTE=Dr_Who;191129]I am voting in favour of the councils to wind up the Trust. Time for trust to go. and go fast!! Please someone with any commercial competance come and run Vector and add value to the company.

Agreed, The trust has yet to get it through their heads that the councils are not about to give up. Every time the councils get knocked back just serves to teach them how to approach it the next time round. It has to happen.
I suspect that current directors (excl. trust appointed ones) would love to see it happen too.

Steve

27-03-2008, 06:58 PM

I suspect that current directors (excl. trust appointed ones) would love to see it happen too.

That's because the trust appointed directors would find themselves out of a job...

Dr_Who

28-03-2008, 09:01 AM

That's because the trust appointed directors would find themselves out of a job...

They dont deserve to be in that job. A company in a monopoly position that cannot add value and grow!! They have had it too easy for too long. Time for them to go and go quickly to ease the pain of the shareholders. The sooner the trust is disbanded the better it is for the shareholders. Either wind up the trust or the trust privatise VCT. No point having VCT listed when it is run like a private company.

BDLBOM

28-03-2008, 10:33 AM

That's because the trust appointed directors would find themselves out of a job...

The trustees will never agree. They have a very lucrative little earner clipping the ticket before the dividends get distributed.
It is incredible to think that they have another 65 years of playing santa claus, distributing the dividends and drawing nice salaries for doing so.
This will be why the councils have called for a royal commision of inquiry to recommend a law change to enable the trust to be wound up.
Whether they are successful or not probably depends on which polititions are listening and have the power to act.

biker

29-03-2008, 10:30 AM

As the share price continues it's downward trend the greater the likelihood of some changes surely? It is almost getting to the 'please explain to the NZX' stage.

Disc. Converting some warrants to shares on Monday. (I know Phaedrus,.... I know)

beacon

29-03-2008, 03:32 PM

Div Yield over 11% now, defensive stock, not much free float, and yield on some warrants over 33%. ...

Dr_Who

29-03-2008, 06:30 PM

I am gonna buy more shares at these levels. Surely a great yield for a blue chip stock with a monopoly and potential capital upside.

Time for the Trust to get the BOOT! Go the councils, you have the shareholders and the public's support on this one.

Grimy

29-03-2008, 06:51 PM

I am gonna buy more shares at these levels. Surely a great yield for a blue chip stock with a monopoly and potential capital upside.

That's what I said (and did) at $2.09, and then $1.82.
I'm trying to stop myself buying more at present, 'cause if I do, they'll drop again, and I'll have to buy more............
Sitting on my hands to stop myself buying several different shares at present.

Steve

29-03-2008, 09:46 PM

That's what I said (and did) at $2.09, and then $1.82.
I'm trying to stop myself buying more at present, 'cause if I do, they'll drop again, and I'll have to buy more............
Sitting on my hands to stop myself buying several different shares at present.

It sounds like those dirty words AVERAGING DOWN, doesn't it Grimy?! ;)

AMR

29-03-2008, 09:47 PM

Grimy

29-03-2008, 10:02 PM

It sounds like those dirty words AVERAGING DOWN, doesn't it Grimy?! ;)

Um......yeah. Or topping up at a favourable price!
Must remember, don't buy in a falling market........but they're sooooooo cheap!

Steve

30-03-2008, 08:51 AM

Um......yeah. Or topping up at a favourable price!
Must remember, don't buy in a falling market........but they're sooooooo cheap!

Agree that they are cheap - that's why I am just waiting for a signal to enter... :)

duncan macgregor

30-03-2008, 08:54 AM

Phaedrus

30-03-2008, 11:25 AM

Duncan, use of a 30 day moving average is inappropriate for this downtrend and for this stock. For example, it would have given a "Buy" signal back in July - a complete bum steer at a time when no other indicators were being triggered. The very best moving average that I can find for VCT is a 50 day Weighted moving average, as plotted below in blue. You can see that even this gives signals inferior to other indicators such as trendline breaks etc. Moreover, if we backtest it with historical data we find that using it to trade VCT since 2005 would have resulted in a net loss. A 30 day moving average gives an even bigger loss.

The chart below shows 6 assorted indicators with their buy signals marked by green arrows and their sell signals marked by red arrows. You can see that these show excellent correlation, and that none are anywhere near triggering a buy signal for VCT right now. This is hardly surprising since this stock has just made a new all-time low.

Spare a thought for the poor souls that have been buying VCT all the way down - while successfully reducing their mean purchase price, they have been throwing good money after bad.

http://h1.ripway.com/Phaedrus/VCT330.gif

Dr_Who

30-03-2008, 05:40 PM

I have to eat my words. Me and McD both called for buy signals when the price was at around 2.30 :mad::mad:. And I remember Dr Who berating the two of us for not buying at 220. :o:o:o all round.

Happily VCT is a nice trending stock with little volatility so it should be fairly easy to find a TA entry point.

I am happy with averaging down on VCT as I am a long term investor and see VCT as a blue chip stock. With all blue chips, the fundamentals will come to play in the long term. I am very happy to buy more if the price goes down and collect the nice dividend, which is better than putting money in the bank.

I do like Phaedurs's graphs, but I dont agree with his wording of throwing money after bad. I believe I am throwing good money after a good stock at bargain prices. VCT has a average valuation of around $2.80 even after factoring into account CC intervention and price control. At these prices, I have a feeling it is only the funds that are selling down for indexing which is due April, an opportunity to accummulate more shares. You will always make money when you do the opposite of the funds.

The Doc will continue to buy this stock below $2.

Disclosure: Have plenty of VCT in the portfolio

Phaedrus

30-03-2008, 08:44 PM

I am a long term investor and see VCT as a blue chip stock. With all blue chips, the fundamentals will come to play in the long term.
Fair enough Doc, I can accept that - but then you go on to say....

"I am very happy to buy more if the price goes down".
Doc, every time you have bought more VCT, the price has dropped. Every entry you have made has resulted in another losing position and added to your losses. Every position you have taken is underwater. Surely you can see that you would be better off financially if you had never added to your original losing entry?

"and collect the nice dividend....."
Doc, the dividend is a poisoned chalice. You have been seduced by a shiny trinket, a mere bauble. While you have been collecting a "nice" 7.5% pa dividend, you have been making a "nasty" capital loss in excess of 40% per annum. What's appealing about that?

"......which is better than putting money in the bank"
Well, no it's not, actually. With your money in the bank, your capital is not being eroded at greater than 40% pa!

"I dont agree with the wording "throwing good money after bad".
Too strong for you? Try this then. Having bought into VCT too soon, instead of accepting that you had acted prematurely, you compounded your original mistake by repeating it - again and again. You carried on buying into a well established downtrend that still hasn't ended.

"I believe I am throwing good money after a good stock at bargain prices"
OK, but surely you can see that the longer you delay your entry, the better the bargain price?

"VCT has a average valuation of around $2.80....."
Interesting, but purely academic. The market values it at much less than that. Valuations are tricky things - and surprisingly subjective. I remember when Snoopy was repeatedly buying TEL at around $6.06 - because that was below his "valuation" of $6.30. RBD was considered "fundamentally very cheap" at $1.65 in 2005!

"You will always make money when you do the opposite of the funds"
That's not my experience.

"The Doc will continue to buy this stock below $2"
Attaboy! Never, ever admit to making a mistake.

"Disclosure: Have plenty of VCT in the portfolio"
More's the pity! My guess is that it is one of your biggest losers over the last year. Right?

Bilo

30-03-2008, 11:49 PM

The one obvious negative with VCT has been re-establishing loans in this world wide cash grab. The company claims to have been successful at ensuring that there will be no major problem and still the share price retreats. The cash outflow from interest is a major expense when related to the bottom line of this otherwise very profitable enterprise.

I wonder how much the ABN AMRO warrants VCTIZA roll over on 31st March 2008 (TOMORROW at 4:30pm) is affecting the share price. Why coincide with the end of the tax year? There are four million warrants on issue and I assume holders have been watching their paper losses mount over the last 11months as the share price has plummeted from $2.90 to $1.80. With the crash merchants winding up the housing pressure over the weekend perhaps these people will be scared into selling up and salvaging what cash they can.

Does someone know enough about these warrant products to know what effect the market adaptation to the warrant roll-over could have on the head share price?
What will VCTIZA holders do/have they been doing/leading up to the roll over tomorrow?
What has ABN AMRO been doing to ensure they make a killing/don’t lose on the deals?
How has the reduction in volume traded and dropping from the NZX10 affected price?
Is the drop in share price just a combination of all these negative factors?

It wouldn’t surprise me if someone has been shorting the guts out of the heads to ensure a killing on the warrants. It seems to me that where you put money up for a share or warrant that you do not hold in your name some bright spark has probably lent it to some other deviant to short and try to screw you (the client of the prick who took money off you for the share) into releasing it for half what you bought it for – sounds typical Australian – real underarm and at the root of the shenanigans that ASX customers are crying so fowl about at the moment.
I researched some of the prospectus info and postings around the time these ABN AMRO warrants were set up. It is almost impossible to work out how related parties would react faced with the current circumstances – the prospectus was far from clear. This Geoff Brown at the NZX was cock-a-hoop that the “pure vanilla” NZ share market was at an end. Well we may not like Geoff Brown’s legacy when we discover how these instruments are used in a down market and wish for a return to the old “pure vanilla”.

I wonder if NZX staff, like Geoff Brown, should be allowed to invest/trade in NZX instruments when they regulate whether to permit them at all.

Will April 1 see a change of fortune for the pure vanilla VCT share holders – time will tell. Certainly in a world where shorting didn’t exist, index manipulation, derivative products and leverage didn’t exist, the world was much easier to understand. Fundamentals don’t matter a jot when the instruments and motives are muddied like this – so I guess TA is all we have – until Wellington electricity is sold.