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Thread: Power shares

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    This is a huge bombshell - anybody and everybody thought Tiwai was here to stay permanently and all the power co's rallied to ridiculously record high levels... almost despicable CEN and MEL are trying to spin this as good news.

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    Quote Originally Posted by trader_jackson View Post
    This is a huge bombshell - anybody and everybody thought Tiwai was here to stay permanently and all the power co's rallied to ridiculously record high levels... almost despicable CEN and MEL are trying to spin this as good news.
    Always just a matter of when not if it closed.

    Hopefully agreement has been on commercial terms (sure it would have been, I think.....) and not done to fill an election promise??

    Election 2020: Labour promises to keep Tiwai smelter open longer | Stuff.co.nz

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    Quote Originally Posted by Sideshow Bob View Post
    Always just a matter of when not if it closed.

    Hopefully agreement has been on commercial terms (sure it would have been, I think.....) and not done to fill an election promise??

    Election 2020: Labour promises to keep Tiwai smelter open longer | Stuff.co.nz
    There is no bombshell with this, it may also stay open past that date, really this is as much certainty on it as there has been in recent times.

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    Quote Originally Posted by Raz View Post
    There is no bombshell with this, it may also stay open past that date, really this is as much certainty on it as there has been in recent times.
    It is almost certainly not going to stay open past that date - the next 4 years will probably be a process of gradual wind down and jobs will be gradually lost instead of almost all immediately lost later this year - so it wasn't a worst case 'hard' exit [very bad news] scenario, rather, just bad news for the power sector being confirmed - and it both CEN and MEL have had to reduce their pricing to be able to secure these last 4 years. Probably about as best outcome as the south could want, but overall certainly not a good outcome for the power sector in general.

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    Quote Originally Posted by trader_jackson View Post
    It is almost certainly not going to stay open past that date - the next 4 years will probably be a process of gradual wind down and jobs will be gradually lost instead of almost all immediately lost later this year - so it wasn't a worst case 'hard' exit [very bad news] scenario, rather, just bad news for the power sector being confirmed - and it both CEN and MEL have had to reduce their pricing to be able to secure these last 4 years. Probably about as best outcome as the south could want, but overall certainly not a good outcome for the power sector in general.
    As with all these deals, the devil will be in the detail, which we just don't know yet. Meridian made a pretty generous offer on energy charges (a combined multi-year $250m discount) last year that was rejected. The bit of the bill that Meridian could not control was the line charges. We have to assume that Transpower has come to the party on these. But to what extent? Whether Meridian has had to bite further into their own profit margins further is unknown.

    I disagree with your assessment TJ. I don't think you can gradually wind down a potline. You either operate it or you don't. So I see employment stabilised at today's levels right through until 2024. The four year timetable to closure is useful, because it gives time for Transpower to upgrade their transmission lines to get all that stranded power further north if needed. It also gives time for a hydrogen fuel plant to be built if that indeed is seen as an alternative industry that could take over from Tiwai.

    The best outcome for the power industry, and for the planet globally would be for Tiwai top continue indefinitely. But no private business could give that assurance. Thus taking everything into account I think today's announcement is about the best that could be expected under current circumstances. But how will this affect the share price trajectories of the gentailers?

    SNOOPY
    Last edited by Snoopy; 14-01-2021 at 09:04 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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    Quote Originally Posted by Snoopy View Post
    As with all these deals, the devil will be in the detail, which we just don't know yet. Meridian made a pretty generous offer on energy charges (a combined multi-year $250m discount) last year that was rejected. The bit of the bill that Meridian could not control was the line charges. We have to assume that Transpower has come to the party on these. But to what extent? Whether Meridian has had to bite further into their own profit margins further is unknown.

    I disagree with your assessment TJ. I don't think you can gradually wind down a potline. You either operate it or you don't. So I see employment stabilised at today's levels right through until 2024. The four year timetable to closure is useful, because it gives time for Transpower to upgrade their transmission lines to get all that stranded power further north if needed. It also gives time for a hydrogen fuel plant to be built if that indeed is seen as an alternative industry that could take over from Tiwai.

    The best outcome for the power industry, and for the planet globally would be for Tiwai top continue indefinitely. But no private business could give that assurance. Thus taking everything into account I think today's announcement is about the best that could be expected under current circumstances. But how will this affect the share price trajectories of the gentailers?

    SNOOPY
    I actually agree with what everything you've said - but with the power co's at such lofty valuations, combined with chat on here about how Tiwai can't shut because of its green credentials, one would have thought today's announcement (a certain step closer to closure) would have reminded the sector that Tiwai's operation, and fairly large contributions to the NZ economy (and power demand!), is far from a sure thing, and therefore today's announcement would been bad news (but not very bad news)... if any other business was one step closer to losing their biggest customer in a few years time with no clear path on what would be an alternative, it would no doubt send a shiver down that business's spine... hence it is somewhat gobsmacking to see MEL up on the open!

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    Quote Originally Posted by Snoopy View Post
    The best outcome for the power industry, and for the planet globally would be for Tiwai top continue indefinitely. But no private business could give that assurance. Thus taking everything into account I think today's announcement is about the best that could be expected under current circumstances. But how will this affect the share price trajectories of the gentailers?
    Here is my take on where I think Mr Market should take the prices of the 'Big 4' gentailers with today's announcement.

    1/ Meridian Energy Given the large rise in share price of late, I expect the price of MEL to fall. Today's deal will, at best, lock in today's level's of profitability. So for Mr Market, it will be a case of 'buy the rumour' 'sell the fact'.

    2/ Contact Energy This should be enough to 'green light' the new Tauhara baseload geothermal station. Good news, although with the share price having risen so much already, CEN should be flat going forwards on today's news.

    3/ Mercury Energy This is great news because stable power demand in the south will mean Mercury's new Turitea windfarm will allow the increased use of Waikato River system as a 'battery' in the North. Water flow can therefore be better optimised for profit. Price to rise.

    4/ Genesis Energy Possibly the end of Unit 5 at Huntly (to be replaced by Contact's Tauhara) and maybe the end of the Rankine units as well as the Waikato river becomes the North's new battery. A serious erosion in the company's generation base. Share price to fall.

    SNOOPY
    Last edited by Snoopy; 14-01-2021 at 09:55 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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    Hopefully Southland takes notice of the 'deadline' this time, instead of everyone sticking their heads in the sand and then moaning when the inevitable occurs. There really seems to be an attitude down there of 'we're too big to fail and it is the responsibility of the rest of nz to subsidise our main employer '. Having worked at the smelter as a contractor, I have doubts about the employability of a lot of the old hands. I frequently came across NZAS people who took pride in doing as little as possible. They're not all like that of course but it is an attitude that is well known to the rest of Southland's engineering sector. It's not a work ethic that will be attractive to many modern employers.

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    Yet Mr. Market has not responded either way to this news after a period of rapid pricing action in prior days? To me it seems very suspicious when there is no reaction to "new" information being announced.

    Perhaps thid warrants a closer look by the FMA into this to make sure there is no 'Spanish business' going on.

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    Quote Originally Posted by Tomtom View Post
    Yet Mr. Market has not responded either way to this news after a period of rapid pricing action in prior days? To me it seems very suspicious when there is no reaction to "new" information being announced.

    Perhaps thid warrants a closer look by the FMA into this to make sure there is no 'Spanish business' going on.

    I was wondering in the last week or so if it was related to Tiwai, seems a lot of people knew. No way those Ten percent days were just a coincidence.

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    Quote Originally Posted by ratkin View Post
    I was wondering in the last week or so if it was related to Tiwai, seems a lot of people knew. No way those Ten percent days were just a coincidence.
    Investment banks/analysts often get information directly from the company to analyse before the public, so no surprises that information was leaked or known before the public knew about it.
    Last edited by JSwan; 14-01-2021 at 05:24 PM.

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    Quote Originally Posted by ratkin View Post
    I was wondering in the last week or so if it was related to Tiwai, seems a lot of people knew. No way those Ten percent days were just a coincidence.
    Quote Originally Posted by JSwan View Post
    Investment banks/analysts often get information directly from the company to analyse before the public, so no surprises that information was leaked or known before the public knew about it.
    I think you guys are just being too cynical. Those 10% days were Blackrock pumping up their Global Clean Energy ETF.

    It was obvious the political will was there to do a deal with Rio Tinto. It was also obvious that Meridian was going to do a deal. Today all that was announced was 'a deal'. We got no details of what that deal was. There was no surprise about anything that was announced today. Maybe that is why Mr Market was not surprised?

    SNOOPY
    Last edited by Snoopy; 14-01-2021 at 10:31 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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    Quote Originally Posted by Snoopy View Post
    I think you guys are just being too cynical. Those 10% days were Blackrock pumping up their sustainable energy fund.

    It was obvious the political will was there to do a deal with Rio Tinto. It was also obvious that Meridian was going to do a deal. Today all that was announced was 'a deal'. We got no details of what that deal was. There was no surprise about anything that was announced today. Maybe that is why Mr Market was not surprised?

    SNOOPY
    Perhaps but not meaning to be cynical, none of the gentailers are worth anything near where theyíre priced at.

    When returns on invested capital imply a forward eye watering PE in no growth assets, you know the future is about being first at the exit when the tide turns.

    Tears will follow soon enough. Imo the tide just turned. Caveat emptor

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    After all that Blackrock already owns 14.34% of Contact probably 20% before anyone wakes up saying wow how overpriced

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    Quote Originally Posted by Snoopy View Post
    Here is my take on where I think Mr Market should take the prices of the 'Big 4' gentailers with today's announcement.

    1/ Meridian Energy Given the large rise in share price of late, I expect the price of MEL to fall. Today's deal will, at best, lock in today's level's of profitability. So for Mr Market, it will be a case of 'buy the rumour' 'sell the fact'.

    2/ Contact Energy This should be enough to 'green light' the new Tauhara baseload geothermal station. Good news, although with the share price having risen so much already, CEN should be flat going forwards on today's news.

    3/ Mercury Energy This is great news because stable power demand in the south will mean Mercury's new Turitea windfarm will allow the increased use of Waikato River system as a 'battery' in the North. Water flow can therefore be better optimised for profit. Price to rise.

    4/ Genesis Energy Possibly the end of Unit 5 at Huntly (to be replaced by Contact's Tauhara) and maybe the end of the Rankine units as well as the Waikato river becomes the North's new battery. A serious erosion in the company's generation base. Share price to fall.

    SNOOPY
    As they say , prediction is difficult.
    You got every single one wrong Snoops.
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    For clarity, nothing I say is advice....

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    Quote Originally Posted by peat View Post
    As they say , prediction is difficult.
    You got every single one wrong Snoops.
    Power Companies.JPG
    Snoopy might have lost the battle but will he win the war ?

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    Quote Originally Posted by peat View Post
    As they say , prediction is difficult.
    You got every single one wrong Snoops.
    Ah that may be true. But I remain a model of consistency. I do have a 100% record :-).

    Not sure how this Blackrock thing is going to play out. If they now have 14% of Contact, they must be getting near that 10% shareholding cap the government allows them to hold with Meridian. There is nothing to stop Blackrock rejigging their relative ratings and going after more Contact. That would explain why Contact went down and Meridian went up yesterday!!!?! ;-P. If Blackrock want to maintain their NZ gentailer relativity within the fund, surely Mercury is the next target with the most potential. That would explain why it was the worst performer of the group in Thursday's trading ;-P. Anyway what all this proves is that I have absolutely no idea what I am talking about in the current situation.

    I will continue to hold my CEN and MCY shares and hope. IIRC it was Winner who mentioned holding and hoping in the context of a share investment strategy. I will keep holding my breath and hope it works for me.

    SNOOPY
    Last edited by Snoopy; 15-01-2021 at 08:15 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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    Quote Originally Posted by Snoopy View Post
    <snip>

    If Blackrock want to maintain their NZ gentailer relativity within the fund, surely Mercury is the next target with the most potential.

    <snip>

    SNOOPY
    I imagine that it's an index fund, following a specially commissioned index which can be revised to let them do whatever they feel like with a minimum of transparency.

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    But aren't Blackrock just benchmarking against the S&P Global Clean Energy Index? Therefore Blackrock don't rejig, the S&P people do that.
    Re thresholds, there is no 10% limit for Contact as they were sold off years ago. The upper barrier for Blackrock buying more Contact is therefore the 20% threshold at which a full takeover is triggered.
    Last edited by KJMLimited; 15-01-2021 at 08:35 AM.

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    Quote Originally Posted by Snoopy View Post
    As with all these deals, the devil will be in the detail, which we just don't know yet. Meridian made a pretty generous offer on energy charges (a combined multi-year $250m discount) last year that was rejected. The bit of the bill that Meridian could not control was the line charges. We have to assume that Transpower has come to the party on these. But to what extent? Whether Meridian has had to bite further into their own profit margins further is unknown.
    Looks like MEL dropped their pants, as Rio Tinto are still in negotiation with Transpower:

    MELBOURNE, Australia--(BUSINESS WIRE)-- Rio Tinto has reached an agreement on a new electricity agreement with Meridian Energy that allows New Zealandís Aluminium Smelter (NZAS) to continue operating the Tiwai Point aluminium smelter until December 31, 2024. The extension provides certainty to employees, the local community and customers while providing more time for all stakeholders to plan for the future.

    While discussions with the New Zealand government are progressing in relation to their commitment to address the smelterís high transmission costs, a new agreement has been reached with Meridian Energy in relation to power prices, making the smelter economically viable and competitive over the next four years.

    source: https://www.riotinto.com/news/releas...ations-to-2024

    Quote Originally Posted by Snoopy View Post
    Here is my take on where I think Mr Market should take the prices of the 'Big 4' gentailers with today's announcement.

    1/ Meridian Energy Given the large rise in share price of late, I expect the price of MEL to fall. Today's deal will, at best, lock in today's level's of profitability. So for Mr Market, it will be a case of 'buy the rumour' 'sell the fact'.

    2/ Contact Energy This should be enough to 'green light' the new Tauhara baseload geothermal station. Good news, although with the share price having risen so much already, CEN should be flat going forwards on today's news.

    3/ Mercury Energy This is great news because stable power demand in the south will mean Mercury's new Turitea windfarm will allow the increased use of Waikato River system as a 'battery' in the North. Water flow can therefore be better optimised for profit. Price to rise.

    4/ Genesis Energy Possibly the end of Unit 5 at Huntly (to be replaced by Contact's Tauhara) and maybe the end of the Rankine units as well as the Waikato river becomes the North's new battery. A serious erosion in the company's generation base. Share price to fall.

    SNOOPY
    Brilliant summary and I agree 100%.

    Quote Originally Posted by KJMLimited View Post
    But aren't Blackrock just benchmarking against the S&P Global Clean Energy Index? Therefore Blackrock don't rejig, the S&P people do that.
    This is wrong, Blackrock are very active managers, they own iShares e.g. they are the index.

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