'Thin Air' capital since the GFC (FY2017 Perspective)
Quote:
Originally Posted by
Snoopy
The figures I present below are from FY2009 onwards. This is the first year after the GFC hit, and power usage growth changed from its historical pattern.
All base figures are taken from the 'Statement of Change in Equity' Group figure for the appropriate year.
|
Revaluation Hydro & Thermal Assets ($m) |
Revaluation Other Generation Assets ($m) |
Total Revaluation ($m) |
Pre Tax Revaluation ($m) |
Pre Tax New Capital Per Share (c) |
2009 |
0 |
170.987 |
170.987 |
244 |
17.4 |
2010 |
200.900 |
60.250 |
261.150 |
373 |
26.6 |
2011 |
153.300 |
135.275 |
288.575 |
412 |
29.4 |
2012 |
119.520 |
2.880 |
122.240 |
170 |
12.1 |
2013 |
30.960 |
26 |
57 |
79 |
5.6 |
2014 |
4 |
25 |
29 |
40 |
2.9 |
Total |
|
|
929 |
|
94.0 |
Note:
1/ eps figures assume 1,400m shares on issue throughout the whole comparative period.
2/ 30% tax rate assumed up until FY2012. 28% tax rate assumed from FY2012 forwards.
That first total figure represents the new 'thin air' capital that has appeared on the MRP balance sheet from 2009 to 2014 inclusive. $929m is a lot of money, perhaps even enough to fund a new power station, without going back to shareholders for more capital? It would certainly go a way towards that!
The last total figure represents the equivalent extra eps in a gross dividend form. This is the amount of extra gross dividend that
could have been paid to shareholders, should the MRP board have decided not to reinvest their 'thin air' capital. I do note the amount of 'thin air' capital has been decreasing, year on year. But perhaps this is not a problem, given MRP have declared they are not planning on building any more new power stations in the forseeable future? Furthermore when the need for more electricity generation does become apparent, value will once again arise out of thin air based on increasing energy use projections. So MRP may never need to raise capital again to build new power stations!
SNOOPY
Time to update my table
|
Reval. Hydro & Thermal Assets ($m) |
Reval. Other Generation Assets ($m) |
Total Revaluation ($m) |
Post tax New Capital Per Share ($m) |
Pre Tax Revaluation ($m) |
Pre Tax New Capital Per Share (c) |
2009 |
0 |
170.987 |
170.987 |
12.2 |
244 |
17.4 |
2010 |
200.900 |
60.250 |
261.150 |
18.7 |
373 |
26.6 |
2011 |
153.300 |
135.275 |
288.575 |
20.6 |
412 |
29.4 |
2012 |
119.520 |
2.880 |
122.240 |
8.7 |
170 |
12.1 |
2013 |
30.960 |
26 |
57 |
4.9 |
79 |
5.6 |
2014 |
4 |
25 |
29 |
2.1 |
40 |
2.9 |
2015 |
? |
? |
356 |
25.5 |
497 |
35.5 |
2016 |
? |
? |
=79+21 |
7.1 |
137 |
9.8 |
2017 |
? |
? |
38 |
2.7 |
52 |
3.7 |
Total |
|
|
|
102.2 |
|
less Special Dividends Declared (per share) |
|
|
|
-10.4 |
|
Residual Thin Air capital |
|
|
|
91.8 |
|
Note:
1/ Capital per share figures assume 1,400m shares on issue throughout the whole comparative period.
2/ 30% tax rate assumed up until FY2012. 28% tax rate assumed from FY2012 forwards.
3/ I notice that after FY2014 the break down in the annual report between 'Hydro & Thermal Assets' and 'Other Generation Assets' has ceased.
4/ In FY2016 I have added back the tax effect of the Southdown write down, to get the residual tax effect of the remaining generation assets.
5/ Since I am counting 'thin air capital' as an extra return over and above dividends, I feel it is appropriate to look at the 'post tax' effect of the new thin air capital. That aligns more closely with the post tax effect of dividends. Dividends 'post tax' are what shareholders get in their bank account.
6/ I have removed the special dividends declared over time , as these may been seen as a method of paying back excess 'thin air capital'.
7/ For the calculation of the 10.4cps special dividends paid, see my post 1003 on this thread.
91.8cps x 1,400m shares = $1,285m of retained 'hidden value' 'Thin air capital' over the years. Of course not all of this still exists because it has been used to build both the Nga Awa Purua (FY2010) and Ngatimariki (FY2013) power stations over the years. These power stations were built using a combination of new equity (the infamous 'thin air capital') and borrowings. We should also bear in mind that some of this thin air capital may be needed to retain the credit rating of the company. Put simply, the more capital the company have, the less borrowings they need. So some unspent thin air capital could contribute to a better credit rating for the company.
SNOOPY
Effective vs Potential Power Generating capacity
Quote:
Originally Posted by
Snoopy
A couple of interesting statistics from FY2012, a year without an unusual river inflow. Mighty River Power had a 51.4% capacity utilisation from their hydro stations and a very impressive 94% capacity utilisation from their geothermal stations. This gives an idea of the relative importance of the two kinds of generation in relation to total energy generated by MRP. Since the commissioning of the latest geothermal station (Ngatamariki) in 2013/2014, MRP have enough revalued capital on the books to build yet another 'free' geothermal power station if they so choose. Let's say this potential new station could deliver 100MW. By how much would that increase the base generating capacity of MRPs portfolio?
1044MW Hydro (existing) x 0.514 = 537MW (effective)
463MW Geothermal (existing) x 0.940 = 435MW (effective)
100MW Geothermal (new) x 0.940 = 94MW (effective)
Hence the effective new capacity increase is:
94 / (537+435) = 10%
I want to roll back behind an old post and talk about the topic of 'effective' power generating capacity. Why is this so important for investors? Because the new power generating capacity (where growth will eventually come from) must build on the effective power generating base (what power is generated in a 'normal' year) as opposed to what power could be generated if all existing power stations worked flat out. It is the incremental return on the effective effective power generating base that determines the growth that investors will get going forwards.
The example I wish to use is Mercury's recently decommissioned Southdown Gas Turbine Station. It was Mercury's only gas fired station, so back in FY2012 we can be sure that all of Mercury's gas fired generation came from that station alone.
On p51 of the float prospectus, this is what Mercury has to say about it:
"The 175MW Southdown Power station is capable of producing up to 1,400GWh of of electricity per year ."
175MW is the power of the station, but electricity is an 1,400GWh is an 'energy' output. Energy is the result of running a power station over time.
Q/ How many hours in a day? A/ 24 hours
Q/ How many days in a year? A/ 365
Q/ How many hours in a year A/ 24 x 365
Q/ How many MW in a GW? A/ 1000
So the theoretical maximum amount of power that Southdown could produce was:
175MW x (24 x 365) hours = 1,542,000 MWh = 1,542 GWh
This is greater than the maximum generating capacity of 1,400GWh that Mercury claim. So what's going on? I suspect that the Southdown plant had annual servicing requirements that meant it was not available 24/7 as I had assumed.
(1542-1400) /1542 x 365 = an minimum annual downtime for Southdown of 33 days
Does that explanation sound plausible?
I am going to keep using my own calculated potential figure of 1542GWh, because at least I know for sure how that was derived. And as long as I am consistent with my treatment of this data point going forwards, the figure I choose will not affect comparative calculations going forwards based on a ratio using this figure.
We were told that the actual energy generated by Southdown over the period was 589GWh. So this means the factor we need to multiply the 'maximum generating capacity' to get an 'effective generating capacity' is:
589 GWh / 1542 GWh = 0.382
Unfortunately that figure isn't likely to be consistent for other gas fired power stations. But as far as Mercury is concerned, the figure is moot going into the future anyway. 'Southdown' is now 'Shutdown'. What I need to do now, as a CEN investor, is to figure out what the equivalent figure would be for Contact's gas fired power stations.
SNOOPY