Jantar kindly identified some errors in my first version of this table. Time to put in his corrections
Mercury Energy Hydro |
Station Generation Capacity |
Mercury Notes |
Contact Energy Hydro |
Station Generation Capacity |
Aratiatia |
78MW |
Upgrade by FY2020 |
Atiamuri |
74MW |
|
Clyde |
464MW |
Waipapa |
51MW |
|
Roxburgh |
320MW |
Ohakuri |
112MW |
|
Whakamaru |
100MW |
Upgrade to 124MW by FY2020 |
Arapuni |
196MW |
Received 12MW upgrade in FY2011 |
Maraetai 1 & 2 |
352MW |
|
Karapiro |
96MW |
|
Total |
1059MW |
|
Total |
784MW |
Mercury Energy Geothermal |
Station Generation Capacity |
Mercury Notes |
Contact Energy Geothermal |
Station Generation Capacity |
Contact Notes |
Kawerau |
100MW |
|
Ohaaki |
48MW |
Mokai (25% owned) |
112MW |
|
Te Huaka |
28MW |
Completed FY2010 |
Rotokawa |
34MW |
Refurbished FY2015 |
Wairakei |
145MW |
Nga Awa Purua (65% owned) |
138MW |
Completed FY2010 |
Poihipi |
65MW |
Ngatimariki |
82MW |
Completed FY2014 |
Te Mihi |
166MW |
Completed FY2014 |
Total |
466MW |
|
Total |
452MW |
The first purpose of this comparison is to show how similar the renewable generation of each company is.
The second purpose of this comparison is to come up with a 'quantitative factor' that shows how we can estimate any undeclared 'thin air capital' on the Contact balance sheet. Competitor Mercury are very forthcoming with their 'thin air capital', regularly upgrading the value of their generation assets on an annual basis. Contact do not follow this policy, but that doesn't mean that no thin air capital is accumulating at Contact. It just means they are not trumpeting it in the annual accounts. Sniffing out hidden value is this hound dog's specialty, so this is why I remain 'on the case'.
I was a bit disturbed by Jantar's opinion that there is no fix for Contact's Ohaaki. The required water re injection rate quenching the field looks to be a long term death sentence for Ohaaki, and no doubt would require an annual write down in the value of that station should Contact adopt the policy of revaluing their generation assets each year. There is also a 'field risk' with most of the rest of the Contact geothermal portfolio all plugged into the Wairakei field. It is still possible that long term wholesale price increases over the geothermal portfolio will cancel out any production deterioration at Ohaaki though. Given this, I would suggest that for 'valuation purposes' we should assume that it is only the South Island hydro assets that are accumulating thin air capital. But even then with climate change changing the snow melt in the South, there could be some long term valuation adjustments to be made as a result.
Clearly there is not as much 'thin air capital' being accumulated at Contact than is being accumulated at Mercury. Also. I don't believe it is prudent that in a market with electricity wholesale prices largely flat, that we can assume any thin air capital accumulated in the past is a pointer to more of the same happening in the future. I do believe we investors can bank the thin air capital that has already been accumulated though, even if it hasn't been recorded in Contact's books.
Mercury has already calculated how much thin air capital they have accumulated over the last few years. I think it is a fair assumption that if we take this figure for any time period, then multiply it by a factor of:
784/1059 = 0.74
Or if you consider that the Mercury Geothermal power stations have increased in value over time, unlike their Contact counterparts, the multiplication factor might be:
784/(1059+466) = 0.51
One of those fractions will allow us to make an approximation of how much thin air capital has been accumulated by Contact over the same period. Once we know that figure, we can work out what size new power station that Contact can build, without going back to shareholders for more capital.