Bottoms in
https://www.stuff.co.nz/business/127...7+January+2022
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Likely to provide a far better return than a Bank term deposit (which will have a negative real return with rising inflation driving a rising interest rate environment )
Looks a really good yield that has the potential to massively increase when current Tiwai contract expires .
As to the SP impossible to pick the bottom but it must be close .
The rationale I use is ask myself is the sp likely to be a dollar higher in 5 years or a dollar lower.Then I move to 2 dollars higher or lower and so on
Yes the new contract will be different in due course but that's quite some time away and then there's this to also consider.
What faith do you have in management who were so stupid to sign such a MASSIVE giveaway deal to Tiwai point with no price escalation clause if Aluminum recovered ? How do you have confidence in these people going forward that they can execute future commercial deals that optimize returns for shareholders ?
For mine, Rio showed management up as completely incompetent and for my money that insight has value to me in terms of whether I would choose to trust management going forward.
Disc: GNE shareholder on a vastly higher yield and a believer that all things highly ESG are currently priced well beyond fair value for no other reason than its the "flavour of the month and year to do so"
This new data centre is good news for both Meridian and Contact.
https://www.stuff.co.nz/business/127...OZv9Ii6AXEBv8U
Thank you for confirming this-I tend to forget about Contact with Tiwai but they also felt compelled to give cheap power to Tiwai .
Jantar your expert input is always much appreciated .
Can I ask your opinion re the future of the tiwai contract assuming aluminium price stays high .
I assume the data centre has already negotiated a supply price which would be higher than Meridian and Contact are supplying Tiwai now .
Has Tiwai shot itself in the foot by paying a low price in the current Contract ?
Would it be in Tiwai s best interest to start negotiating now for 2025 onwards ?
I no longer have the inside information I used to have access to. My gut feeling is that Tiwai has shot itself in the foot to some extent. If they decide to keep operations going they may be able to negotiate a favourable short term contract, but longer time frames will see them paying similar to other large users. Apart from the data centre MEL and CEN are investigating a hydrogen plant in Southland that would use a similar amount of energy that Tiwai does now. The advantage of a hydrogen plant is that it can stop production instantly and remain off without damage until supply is restored. That means they can react to price, and have a ceiling price at which production would stop. The smelter can't be offline for more than 90 minutes without suffering damage.
I would assume that tentative negotiations for electricity supply to the data centre have already happened, and would likely to be at least 50% higher than Tiwai pay.
thanks Jantar
Hydrogen plants look exciting-so versatile and as you say can stop energy requirement instantly
wholesale prices are spiking high as I write .
It used to be said that cen made big profits in a dry year but is this still the case ?
Is mel positioned well in this regard?
Media coverage on Tiwai Point aluminium smelter - NZX, New Zealand’s Exchange
Meridian Energy notes today’s media coverage on the future of the Tiwai Point aluminium smelter. Meridian confirms it is not in discussions with the smelter’s owner, NZAS1, about a new electricity contract. The existing contract between Meridian and NZAS ends on 31 December 2024.
1NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%).