Originally Posted by
xafalcon
Question for Hoop regarding NZ generators in relation to your post above
"rising bad debt levels as people without jobs struggle to pay on time or renters just quitting the property and shift leaving a bad debt..Failed companies or falling demand due to product surplus = fall in manufacturing output so less power used...The flow on effect is Utility companies announce lower profits lower dividends..some smaller Utility companies may fail putting the fear of God up the defensive Investors.....and so on...The end result is that Ultilities play catch up with the rest of the market and so are eventually mauled..."
With extra generation capacity required to be built by approx. 2019, where are you expecting to see the negative driver(s) coming from?
When I analyse your list I come up with
rising bad debt levels as people without jobs struggle to pay on time or renters just quitting the property and shift leaving a bad debt = very difficult in NZ to do this. Unless you own the property you have to give a bond, which limits the ability to "cut & run". Home owners less likely to default and have an asset that can be sold
Failed companies or falling demand due to product surplus = fall in manufacturing output so less power used. = plenty of other users to soak up any reduced usage at this point in time, new generation construction can be easily postponed = increased fcf
The only significant threat I see for NZ generators and their income stream and dividend payments is the closure of Tiwai Pt. This issue will be forced (either way) before any additional generation capacity is committed. With minimal over capacity at present, even total closure of Tiwai Pt probably won't represent a real threat to business viability, more a short term perturbation.
With government ownership of 51% of most power generators, comcom won't get involved (not that they have anything to get involved with, there is already plenty of competition)
Other positive power demand factors include
NZ has high immigration (1.3% population growth)
Business seems to be doing very well, according to NZIER. Many expanding
Low interest rates, stimulating consumer activity
New FTA export opportunities
Rampant tourism growth
I see the NZ power generators being in a very nice situation regardless of whatever the next 3-4 years may bring (short of a natural disaster/ foot & mouth, other extreme situation)