Power shares

[Airw0lf]

I've got a friend fairly high up in Meridian, so I've got an insight to this.

Essentially from what I understand, Rio want to negotiate now, whilst they still have leverage. Their operation here is profitable (note: pre this disaster), and is 'eco friendly' so what they are saying is largely bluster.

At the moment the hydro station is connected directly to tiwai, and not anywhere else. There is a 2 year programme to link it to the main grid, which will then have dual power supplies north and be great to the country.

So if Rio walk away, Meridian take a 2 year max hit which is very doable for them in what is a highly profitable period. Rio know this and are trying to lock something in while they still have some power ( yay pun!)

I hope your friend high up in Meridian isn't telling you that Manapouri hydro station isn't grid connected - that's complete rubbish. Manapouri is fully integrated into the national grid, as is Tiwai. However if Tiwai were to exit, Manapouri's generation (and a lot of other South Island hydro generation) would face bottlenecks in getting to market further north. There are transmission projects that can be employed to fix this capacity issue but I'd be shocked if it could all be done in 2 years. It would be closer to 3-5 in my estimation. However we can all agree that during that period (however long it may be) Meridian's generation revenues will suffer due to a combination of low price and/or spilled water that can't be made into electricity. In that time, generators like MCY and GNE with stronger North Island presences will potentially perform better than MEL.

My two cents on Rio's thinking - absolutely they will want to play hardball right now with Meridian. They will point to the low aluminium price, etc. but the reality is that this decision will swing on their view of the long-run aluminium price, not today's price. Crude oil is at $25 - that doesn't mean people aren't going to continue investing in oil and gas.

Lastly, don't forget that if Rio exits, they are on the hook for a very large remediation cost. So that's a significant NPV negative hole for them in the exit scenario. Continuing operations needs to be even more NPV negative than that for them to want to quit.

[Jaa]

Aluminum price in both NZD and AUD must be starting to look pretty good following today's crash!

Follow the USD price here: https://www.bloomberg.com/quote/LMAHDS03:COM

[bull....]

Aluminum price in both NZD and AUD must be starting to look pretty good following today's crash!

Follow the USD price here: https://www.bloomberg.com/quote/LMAHDS03:COM

demand going drop so probably more pain to come. the biggest benefit if RIO close the smelter is cheaper power for consumers as it floods the market , probably help more people now than the ones who lost there job in southland

[ratkin]

I am guessing much less electricity used during a lockdown?

Although with winter coming on, home use should be far higher than normal. Will that be enough to set industrial stoppages?

[percy]

I am guessing much less electricity used during a lockdown?

Although with winter coming on, home use should be far higher than normal. Will that be enough to set industrial stoppages?

Come for a run over to my area,Hillsborough/Opawa and note the big number of Nissan Leaf cars,and you will be buying power shares.!.
Take care to watch out for all the electric bikes,they are faster than they look.
Talking of cars did you ever buy your the vehicle from Turners,to park where your neighbour parked his camper van.?

[ratkin]

Come for a run over to my area,Hillsborough/Opawa and note the big number of Nissan Leaf cars,and you will be buying power shares.!.
Take care to watch out for all the electric bikes,they are faster than they look.
Talking of cars did you ever buy your the vehicle from Turners,to park where your neighbour parked his camper van.?

Haha not yet, there is a bit of a truce at the moment. Genesis is certainly on the watchlist but will probably wait for the smelter decision.

[bull....]

way the power shares are falling , rio must be going to bail

[Beagle]

way the power shares are falling , rio must be going to bail

Yes, its looks like the word has got out to industry insiders and they're telling their mates to bail.

[Tomtom]

Just wait for the next round of business subsidies surely? Keep the staff with the subsidies, mothball the plant and get 12-18 months to see if there will be a bounce or a depression.

[Sideshow Bob]

Yes, its looks like the word has got out to industry insiders and they're telling their mates to bail.

Normally MEL, GNE, MCY etc would be a safer haven in these sorts of times.

When they are all down 8-9% this morning, certainly seems that way......