Who's in for the Meridian float?

[Major von Tempsky]

Wisely, acting on Buffett's general advice to stay clear of floats (a device for existing shareholders to screw new ones), I stayed out of MRP.

But if National leverage Meridian enough with only having to put down a deposit, I might be persuaded to have a flutter....

[Banksie]

Meridian is appealing cos they hold my power bill so if I buy in I will be screwing myself for more profit ;).

[Jay]

Just switched to them as well - not because of the impending float but next 3 month $50 toward bill, rates a little lower than current provider but with a slightly less discount but rates locked in for 18 months.

Will wait and see what they offer in the IpO

[sharer]

Wisely, acting on Buffett's general advice to stay clear of floats (a device for existing shareholders to screw new ones), I stayed out of MRP.
But if National leverage Meridian enough with only having to put down a deposit, I might be persuaded to have a flutter....

Me too. As a mainlander i feel we should buy lots & try to keep the asset benefits here.
I'm guessing likely to be 2 or more tranches, ipo div yield near 5.5+%, launch ?sept/oct.
Be interesting to scan the ipo bumpf. Starting to save up some $$ in case it looks good
(even tho, i'm still opposed to state asset sales).

[POSSUM THE CAT]

They would need to price them under 50cents to make it worth while

[Grimy]

I'll be looking at it. Have some money ready to go if I want to jump in.

[tobo]

But if they use the same process to set the price as MRP, the public will again have to sign up on the basis on not knowing the price, and then having to accept whatever price is set.

I think many retail investors that were lured out of hiding will not come back a second time for another whack on the backside, so it may be mostly up to the institutions.

[iceman]

A novel way of pumping up the customer numbers prior to the IPO. Quite enlightening !

http://www.stuff.co.nz/oddstuff/8988229/Meridian-finally-sees-the-light

[False Profit]

Let's hope the loyalty bonus goes some way to making up the loss in price since flotation to Mum and Dad investors. Only 2 years to wait ho hum...

[RTM]

Nope....did my bit for the country with MRP.

[CJ]

Nope....did my bit for the country with MRP.Even if the bribe/incentive for this one is bigger?

[RTM]

Firstly, I'd have trouble figuring out how big it needed to be to make it attractive. Secondly, I've got a reasonable parcel of both TPW and MRP. So like the NZX....it will become very very easy to become overweighted in power companies.
But of course....everyone has a price !

[Joshuatree]

Im hearing instalment receipts with full div on the partly paid.

[POSSUM THE CAT]

Joshuatree Im hearing instalment receipts with full div on the partly paid. Getting closer to what is needed. Give every tax payer 1 share for every dollar in !% of their tax payment. IE if they pay $1000.00 in tax they get 10 shares and if they still have them in 3 years time they get a bonus payment of A dollar for every 10 shares they hold. In other words J key might as well forget all about Floating Meridian. Mercury part of MRP offering 2year contract at current prices so evidently expecting a price decrease in near future.

[Grimy]

Mercury part of MRP offering 2year contract at current prices so evidently expecting a price decrease in near future.
Mercury have been offering fixed price contracts for a few years now. Hasn't stopped the non-contract prices from rising.

[Jay]

In general when have prices for you and me consumer gone down, Not that I can remember

[janner]

Still Ho Hum CJ.. Not buying..

[janner]

I want ... VALUE !!..

[POSSUM THE CAT]

Grimy all previous offers I have received from Mercury have Included a price increase at the start of the contract. This one is at existing prices.

[chad321]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10909874

Are Mighty River Power losing out on this?

[CJ]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10909874

Are Mighty River Power losing out on this?


The New Zealand government will chip in $30 million to secure the medium-term future of the smelter and provide greater certainty for the electricity market.I call BS!

It is to secure the SHORT-term future of the smelter to get the IPO away and to buy the next election. And Im a National supporter - what will Labour/greens supporters say. Or will they be hushed by the fact it is keeping the jobs there.

[robbo24]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10909874

Are Mighty River Power losing out on this?

No, if the smelter goes demand for electricity drops. If demand drops prices drop. If prices drop MRP loses out. Therefore, MRP do not lose out.

[RTM]

I just feel sick. The open corruption to support asset sales. I am also a national party supporter......but only in because there is not a viable alternative. This is wrong on so many levels. Arggghhh !

[robbo24]

It's no more corrupt than working for families or any other targeted government expenditure.

The retention of GDP most probably justifies the 8m per year.

I hope you've been training your shoulders and biceps all you placard waving communists.

[bmrm]

Maybe he should give a cheque to Diligent to ensure the incredibly important software programmers in earthquake torn Christchurch stay there.

Well put, I loath how some industries are arbitrarily protected like this.

[CJ]

Well put, I loath how some industries are arbitrarily protected like this.I'm sure those Railway workers would have liked a $30m subsidy so they didn't have to drop to 4 day weeks.

ON a wider national level, if the smelter did close, energy costs should fall (or at least not rise) and our % of energy from renewables would increase as some gas plants would close. HOwever, we have saved 200 odd (?) jobs in bluff.

[POSSUM THE CAT]

Typical National Govt. Stupidity. Think about the industries that could be attracted by cheaper power all over NZ. Also the increased consumer spending in most areas of the economy with the money freed up by cheaper power accounts.

[blackcap]

Im slightly confused. I thought that National was all for free markets (less interference is better) yet this to me smacks of interventionism. They will spin it that they saved 200 odd jobs etc, but ultimately any form of subsidy or similar will cost the country in the long term. Or so the economic theory would suggest. But it seems a bit hypocritical of National to be going down this road.

[Joshuatree]

Nothing to stop Rio flogging the smelter off soon , now?

[Major von Tempsky]

Originally Posted by POSSUM THE CAT View Post

"Typical National Govt. Stupidity. Think about the industries that could be attracted by cheaper power all over NZ. Also the increased consumer spending in most areas of the economy with the money freed up by cheaper power accounts."

Now I've seen everything, a possum, or is it a cat, chasing it's tail.
What National has done is exactly what Labour would have done except they would have paid a subsidy of $50 million plus.

There aren't a whole bunch of international industries wandering around looking for new cheap electricity, they can get that in Iceland, Quebec & & cheaper than our cost of production.
If Labour had done it PTC would have been quickly groveling all over the place agreeing with every word that had been said. Its spelt HYPOCRISY.

[POSSUM THE CAT]

MVT judging others by yourself as usual. As i have posted before I have never voted labour in my life As they have never had a decent candidate in the electorate I resided in. I vote for the best candidate not the party. At one time I had a reasonable opinion of Paula Bennet in the early stages she had enough sense to listen. But that sense did not last long.In my opinion the grandeur of politics went to her head.

[winner69]

Govt $30m now adds more than $30m to what they get in IPO ..... quick payback for 'keeping' jobs

Stupid research on One News last night said only 3% of NZers likely to buy Meridan shares

The 3% pay $30m

That's fair - the 3% effectively paying the $30m to keep the jobs

[Balance]

Govt $30m now adds more than $30m to what they get in IPO ..... quick payback for 'keeping' jobs

Stupid research on One News last night said only 3% of NZers likely to buy Meridan shares

The 3% pay $30m

That's fair - the 3% effectively paying the $30m to keep the jobs

$30m to save 800 jobs make sense to me.

800 jobs at $60,000 (say salary a year) = $48m a year

Multiplier effect = $96m a year

Time NZ joins the real world where jobs and people matter.

Screw the free market ideology.

[Balance]

Bal me ol' mate ... Your logic is flawed as it assumes the 800 people wouldn't get new jobs.

If the plant is uneconomic ... close it. It's that simple.

The deal allows for a few more years of adjustment to new economic realities - Southland is not Auckland - it needs the smelter as there are another 20,000 - 30,000 jobs directly and indirectly linked to the servicing of the smelter.

[Balance]

Back to Meridian.

This obviously is a good thing for Meridian, because the announcement provides certainty over earnings that would have otherwise punished Meridian's share price.

Do we feel better about Meridian as an investment, and who is going to go for an allocation?

Big yawn, me thinkth, STC.

An index play, basically post listing.

MRP gave an excellent insight into the IPO process run by Treasury - be afraid, be very afraid!

[biker]

I would like to know how much the Government added to the MRP IPO price when it was presented to them for approval.

[robbo24]

I would like to know how much the Government added to the MRP IPO price when it was presented to them for approval.

http://www.stuff.co.nz/business/industries/9020341/Rio-ditches-plans-to-sell-smelter

Tiwai Point aluminium smelter's majority owner Rio Tinto has ditched plans to sell off the plant, after posting a US$1.7 billion (NZ$2.12b) profit within hours of picking up a NZ$30 million dollar subsidy from New Zealand taxpayers.

Oh ho ho ho... A bit of a different outcome from the business analyst I read this morning having a cry that they would fast track the sale of the smelter now...

[winner69]

Hadn't thought of it that way. I guess its logical in a mercenary sense (excluding the public policy nonsense it is).

A tax on wealthy NZers to fund metallurgy jobs in the south island.

The 30m prob isn't much more than the fat cats get for doing the ipo

All relative eh

Good on the 3% for funding jobs and making the fat cats fatter

[RTM]

"MIGHTY RIVER MRP.NZX 1 Down 0.4% 229 "

Balance...completely agree. I will have no interest in Meridian.
Done my bit (been burnt ) with MRP. See above. And this is in spite of the boys trying to pump up the price by sponsoring Rio Tinto with our money.

Can't see this encouraging people to believe the governments spin on Meridian..whatever that might be.

[mcdongle]

Anyone know what price tiwai are paying Meridian for power ?? And will it have to be in the prospectus ??

[POSSUM THE CAT]

McDongle effectively nothing the Govt is paying for the first 30million dollars worth

[robbo24]

vote national, but shocked and appalled by this stupidity play. Opposition would have a field day (if they weren't so useless), and national have been proven retarded by Rio barely 24 hours after the fact. hope some "analyst" heads roll for this!

What is the price of aluminium going to be in the next few years Moosie?

[RTM]

McDongle effectively nothing the Govt is paying for the first 30million dollars worth

Not " The Govt Possum".....its us, the people of NZ. Every tax payer has been signed up to help Rio Tinto.

[mcdongle]

Ok i think i get it now, I pay tax, The government give some of that to Rio, Who buy power from Meridian , Who would give some of it back to me in dividends. Until they close the plant.

[777]

And if the smelter closed down then Meridian would get no revenue from them and the government and shareholders would not get as big a dividend and those that would be redundant would be on an unemployment benefit. The flow down affect from having the smelter in Southland would be lost as well.

$30m well spent IMO.

[POSSUM THE CAT]

777 why not sell them Meridian Energy then and offer to give them 0.5 cents a unit for any power they did not use. Far better deal for govt. as the smelter wanted to own Manapouri in the first place. Govt built it & sold them cheap power instead. And to the best of my knowledge made a mistake in the design and built the tail race tunnel to small in capacity. So power station cannot operate at full capacity at any time.

[mcdongle]

And if the smelter closed down then Meridian would get no revenue from them and the government and shareholders would not get as big a dividend and those that would be redundant would be on an unemployment benefit. The flow down affect from having the smelter in Southland would be lost as well.

$30m well spent IMO.

Yep, But i am just trying to get it straight in my mind should i buy in or not . At the moment i will not be doing so

[RTM]

I thought they built another tail race tunnel to increase that capacity ? Some time after the power station was commissioned. There is an excellent DVD doco on it if anyone is interested.

[Fred114]

They're talking about lisiting on NZX on Friday 18 October.....

http://www.radionz.co.nz/news/business/216720/list-date-speculation-for-meridian-energy

[Snoopy]

Yep, But i am just trying to get it straight in my mind should i buy in or not . At the moment i will not be doing so


I see you are seeking out your own understanding of the business prospects for Meridian. To do this in advance of an advertising hype is IMO the right attitude to take. However, with any 'buy' or 'no buy' decision there are always the two factors of:

1/ what you are paying for and
2/ how much you are paying to get it.

What you will be paying for with Meridian is becoming clear. But how much you will have to pay is completely unknown. So my suggestion is that you wait to find this out, before deciding if Meridian is a good investment or not.

SNOOPY

[winner69]

Meridian Energy has turned in a strong 53 percent increase in underlying net profit after tax of $162.7 million, but has had to write down the total value of its assets by $476 million to reflect the lower power prices it will get from the Tiwai Point aluminium smelter.

isn't it amazing that just before an ipo there is huge increases in profitability

Revenues up 7% but underlying profit up 53% .....good stuff

And the uncertainty re tiwai all cleared up

The ipo will be a resounding success

[fungus pudding]

Meridian Energy has turned in a strong 53 percent increase in underlying net profit after tax of $162.7 million, but has had to write down the total value of its assets by $476 million to reflect the lower power prices it will get from the Tiwai Point aluminium smelter.

isn't it amazing that just before an ipo there is huge increases in profitability

Revenues up 7% but underlying profit up 53% .....good stuff

And the uncertainty re tiwai all cleared up

The ipo will be a resounding success

Why is that amazing?

[CJ]

Why is that amazing?Totally predictable ;)

[fungus pudding]

Totally predictable ;)

Why was it predictable?

[winner69]

Why was it predictable?

Because amazing things always happen just before an ipo

[fungus pudding]

Because amazing things always happen just before an ipo

.
Always?

[CJ]

Has anyone had a look at the cash burn associated with capital maintenance? ... Ask Snoopy - hes been looking over the books for all the power cos on this issue.

[biker]

I thought they built another tail race tunnel to increase that capacity ? Some time after the power station was commissioned. There is an excellent DVD doco on it if anyone is interested.
Yes they did. There was a wonderful story around at the time that they left a bulldozer inside the first one which hindered the flow!

[Balance]

Totally predictable ;)

Write off everything you can in the last financial year, book every conceivable contingencies - that's why profits were down 52% last year.

So it takes a 108% increase in profit to take Meridian back to 2011 profit!

Executives are all salivating at the bonuses on the way.

[blackcap]

Write off everything you can in the last financial year, book every conceivable contingencies - that's why profits were down 52% last year.

So it takes a 108% increase in profit to take Meridian back to 2011 profit!

Executives are all salivating at the bonuses on the way.

Surely our executives have more integrity than that Balance ;)

[Goldstein]

What interests me is the timing of these sales - regardless of whether you think they are a good idea or not.

To rush this through under a climate of low aluminium prices and no current prospect of another high user is just ridiculous on the part of the government,

I'll probably look to buy some Meridian on the market after the sale. Disc: don't own any MRP - thought I'd just observe that one.

[CJ]

What interests me is the timing of these sales - regardless of whether you think they are a good idea or not.

To rush this through under a climate of low aluminium prices and no current prospect of another high user is just ridiculous on the part of the government,

I'll probably look to buy some Meridian on the market after the sale. Disc: don't own any MRP - thought I'd just observe that one.I may be wrong on this but my understanding is that losing Tewai would be positive, or at worse neutral, for Meridian but negative for the other companies.

Having said that, MRP is net short on generation so it wont be impacted fully either.

[Goldstein]

I may be wrong on this but my understanding is that losing Tewai would be positive, or at worse neutral, for Meridian but negative for the other companies.

Having said that, MRP is net short on generation so it wont be impacted fully either.

Not sure CJ. It would definitely be worse for other companies due to the surplus generation meridian would bring to the market if the Tiwai Pt contract terminated. However, the spot prices work on location (SCADA points) and I'm not sure how good it would be for Meridian to lose such a big user near their generation.

[CJ]

Not sure CJ. It would definitely be worse for other companies due to the surplus generation meridian would bring to the market if the Tiwai Pt contract terminated. However, the spot prices work on location (SCADA points) and I'm not sure how good it would be for Meridian to lose such a big user near their generation.the Tiwai contract is meant to be very cheap so even transmitting up to Auckland, the should still get a higher price.

It should also have the capacity to smooth out the peaks so the leaker plants won't be as valuable anymore.

[Lizard]

I thought it was interesting that they reversed over $800m of re-valuation gains on the generation equipment in this result, rather than the normal trend of booking gains. Have cashflow projections fallen substantially and thereby decreased npv or have they raised the discount rate (seems unlikely)? (Refer note 22). Still, the generation plant is valued at $6.2bn, vs approx $2.6bn cost (less depreciation and impairments).

If we trust MEL valuers cashflow projections more than our own, then NTA at @$2.90/share maybe a good valuation starting point?

[CJ]

Most of that refers to the Tiwia contract. Are you sure the balance wasn't realised on the sale of the Oz wind farm. Away from my desk so can't check.

[Lizard]

Most of that refers to the Tiwia contract. Are you sure the balance wasn't realised on the sale of the Oz wind farm. Away from my desk so can't check.

Yes, I'd presumed Tiwai must be a big factor. Macarthur doesn't seem to affect the generation assets though if I'm reading it correctly, as assets transferred seem to be in the form of a "finance lease receivable" (offset by borrowings) which came from "capital work in progress" portion of assets.

[Lizard]

Yes, I'd presumed Tiwai must be a big factor. Macarthur doesn't seem to affect the generation assets though if I'm reading it correctly, as assets transferred seem to be in the form of a "finance lease receivable" (offset by borrowings) which came from "capital work in progress" portion of assets.

Actually, I take that back - under notes 27 and 30, I'm not at all sure that the new smelter contract has been included in valuations. Although I can't be sure how the valuers or Meridian management may have allowed for it in their data and valuation assessment.

[iceman]

So its official. Listing in early November and payment in installments with 60% up front and rest 18 months later.

[CJ]

So its official. Listing in early November and payment in installments with 60% up front and rest 18 months later.and with a cap on the price to retail investors, this has the change of being a good stag if insto's have to pay more.

[blackcap]

and with a cap on the price to retail investors, this has the change of being a good stag if insto's have to pay more.

That was my initial thought too CJ. Just wondering how many we (retail investors) are going to be able to get

[CJ]

That was my initial thought too CJ. Just wondering how many we (retail investors) are going to be able to getIt really depends on if the cap comes into play. It is a much bigger float so scaling shouldn't be as bad as MRP but having said that, if the scaling isn't as bad, then will their be a stag opportunity?

[Joshuatree]

Im hearing instalment receipts with full div on the partly paid. Looks like my conduit to the inner circle is kosher:sneaky2:

[Wolf]

How would a stag work on this? Are we still able to pay for the shares up front

[macduffy]

How would a stag work on this? Are we still able to pay for the shares up front

The shares will trade as "partly paid" and the new owner takes on the liability for the uncalled amount. Nothing unusual in this - in the past, issues were often paid for in instalments, sometimes listed along with the fully paids of the same company. The practice lost a lot of popularity when the Dunedin insurer, Standard Insurance, I think it was, collapsed due to the misdeeds of its Sydney manager leaving an uncalled liability of One Pound on each share. Investors lost their entire investment and had to pay the uncalled liability so partly paids began to be looked at askance. But that was in the early 1960's and memories fade ..........

:mellow:

[Wolf]

haha. So i pay 60% then stag it. Do i still have to pay the other 40%? I'm still confused to how this works.

[Xerof]

What can't you understand about macduffy's explanation - if you sell, the new owner carries the obligation to pay the balance

[777]

Telstra did the same in recent times.

Well recent for me anyway.

[macduffy]

haha. So i pay 60% then stag it. Do i still have to pay the other 40%? I'm still confused to how this works.

If you don't own the shares when the final payment is due then you won't have to pay the 40%.

[macduffy]

Wolf, its just occurred to me that you may be under a misapprehension as to how the "stag" price will be arrived at.

It will take account of the fact that 40% of the issue price has still to be paid, eg if the shares are issued at say $1 - for the sake of simplicity - they will trade at a price that reflects the fact that only 60c has been paid and that another 40c will need to be paid by holders at a future date.

Cheers

[Wolf]

Aaaah thanks.

[Arbroath]

60% now - 40% in 18 months - with 3 divies in between ... Those with advanced spread sheet skills will love this!


It will probably be a net yield of around 9% which will drag the punters in. Of course as the 18 months goes by it'll become what it always was, about a 5.5% yield similar to MRP.

[blackcap]

Whats this ridiculous notion from Russel Norman that the govt is giving away $40m of interest??? Come on that is pure politics. As an investor I am willing to pay more for my installment receipt because I effectively have a loan that on the face of it seems interest free for 18 months. But that interest is already priced into the price that I am willing to pay for the 60% stake in my Meridian share. So either way it makes not difference! Or am I missing something here. Yes the govt will have to borrow $40m but they will probably get $40m more by selling Meridian this way than if they sold it all in one go. So in the end will not have to borrow the extra $40m. I guess the politicians on both sides will milk it for what its worth.
For what its worth, the retail investors get a better price than the instos maybe... I may look for a largish amount this time. And may get them because many retail ppl will be put off by the MRP debacle that was a share float.

[CJ]

Whats this ridiculous notion from Russel Norman that the govt is giving away $40m of interest??? .Exactly. the deferred payment will be factored into the price.

[robbo24]

Do they credit check people first?

Is there any fancy way to make money from deferred payment shares?

If I wanted to could I pay them off early?

[Xerof]

No, if you dont pay, you dont get shares, (you initially have an instalment receipt), and the Crown will sell your shares, keep the 40% owing and pay you the balance. (The instalment receipt becomes worthless at second payment due date)

no different to a share, trade it like one

no, you cant pay it off early

[fish]

It will probably be a net yield of around 9% which will drag the punters in. Of course as the 18 months goes by it'll become what it always was, about a 5.5% yield similar to MRP.
The expectation that it will drag in investors is keeping the lid on CEN sp.
I cant understand why anyone would want to buy these state owned companies-the assets are unbalanced and profit making strategies 15 years behind CEN.
CEN comes with a 14 cent dividend as of today plus tax credits making a gross of nearly 8%.Prospects for this year are looking good with generation cost cuts-southern lakes full and new geothermal-Te Mihi

[Arbroath]

The expectation that it will drag in investors is keeping the lid on CEN sp.
I cant understand why anyone would want to buy these state owned companies-the assets are unbalanced and profit making strategies 15 years behind CEN.
CEN comes with a 14 cent dividend as of today plus tax credits making a gross of nearly 8%.Prospects for this year are looking good with generation cost cuts-southern lakes full and new geothermal-Te Mihi

don't disagree with you fish - I think CEN is probably the best exposure in the whole sector. Meridien though will create some excitement because of the yield at a c. net 9% for the first 18 months. Thats just my yield guess on the announced structure though - might end up being closer to 7.5-8% - depends how keen the Govt is to have this go well after MRP.

[Snoopy]

60% now - 40% in 18 months - with 3 divies in between ... Those with advanced spread sheet skills will love this!


As will the traders....

The other effect of installment receipts which no-one else has mentioned so far is that they are far more volatile, than equivalent head shares. For example, if the market perceives the worth of a power company has declined by 10%, those installment receipts at 60% part paid must decline by 17% in value to reflect the 10% company perceived decline. That is because all of the market variation will have to be taken up by the already listed portion: the partly paid shares. Partly paid shares are leveraged to any ebbs and flows in the market until fully paid up. And with a close election and the future of the smelter all making things uncertain over the next 18 months, traders could have a field day with Meridian.

SNOOPY

[blackcap]

Like having leveraged equities without the margin call :)

Actually just realised that was wrong. The margin call is implied in a zero installment receipt price.... sold by default.

[winner69]

60% now - 40% in 18 months - with 3 divies in between ... Those with advanced spread sheet skills will love this!

You don't get belg ...it's simpler than that

Key said yesterday you are getting the shares at about half price so you are really getting a double dividend ....or something like that but was stressing the half and double

So need for spreadsheet skills belg .....easy peasy

[CJ]

You don't get belg ...it's simpler than thatyou dont get to choose a price for the IPO (unless it hits the cap) so you have to choose to buy based on a hope, no spreadsheets required.