TRUST POWER

[kura]

Isn't Snowtown the place where they found those "bodies in the barrels" ? (many years ago)

[Binklebonk]

quote:Originally posted by kura

Isn't Snowtown the place where they found those "bodies in the barrels" ? (many years ago)

Apparently so and the locals are very keen for the town to be famous for something else.

[kura]

quote:Originally posted by Binklebonk

quote:Originally posted by kura

Isn't Snowtown the place where they found those "bodies in the barrels" ? (many years ago)

Apparently so and the locals are very keen for the town to be famous for something else.

Ok then, how is this for a potential newsflash

Bodies found in abandoned windfarm site

[Snoopy]

Well here is a turn up for the books. A major NZ company that has been very successful on the market, yet there has been no posting for over six years!

Well I am not a holder, but I was wondering what might happen to Trustpower should a Labour/Green minister of energy come to power. I opened the FY2013 annual report and found the CEO was thinking aloud about the same thing:

"Recently, the Labour Party and New Zealand Greens have announced a proposed electricity policy that is a radical reversal of the progressive market reforms over the last fifteen years in New Zealand. Fortunately there is time for full evaluation of this model but I do note that, somewhat ironically, if the Central Buyer model was in place, and demand falls, such as with the possible closure of Tiwai, cost recovery would be more difficult for the Central Buyer and power prices would need to rise as the Central Buyer’s costs need recovering over a smaller sales volume. Under a market based framework excess supply leads to soft prices whereas with a centralised cost recovery Government department, prices must rise to cover fixed purchase cost obligations."

So says VINCE HAWKSWORTH, the Chief Executive.

I have to admit, this is not an angle I had thought about before.

SNOOPY

[Snoopy]

So says VINCE HAWKSWORTH, the Chief Executive.

Later on in the CEO report, Vince has more to say:

"Governments the world over do not have good track records of efficient allocation of investment capital or risk management through the electricity supply chain. Single buyer models perform poorly when future electricity requirements turn out differently to the planners expectation. Single buyers enter long term contract obligations and these must inevitably be underwritten by electricity consumers and tax payers."

"In contrast, the current market framework has, for the last twenty years, managed the transition away from dwindling low cost Maui gas and reliance on high carbon emission thermal plant to renewables without risk to electricity consumers or taxpayers. New Zealand is the only country in the world that has achieved unsubsidised wind generation through efficient and timely investments by market participants."

"Companies such as TrustPower have also invested huge effort and resources to establish a solid pipeline of potential new renewable projects. In aggregate New Zealand has an enviable resilience in its power sector with diversified low cost options for renewable power. However, TrustPower and the electricity industry need a workable regulatory environment to continue to deliver these outcomes. New Zealand can ill afford dramatic regulatory and policy interventions that cast aside the framework on which investors have made long term investment decisions. The consequent impact on private property values will surely deter continued domestic and foreign investment in New Zealand’s future infrastructure."

Stern stuff from Vince! The only problem is where overall demand is not growing (so the government can easily estimate demand), and there is no need to construct new power stations (so no direction of new private investment is required), I suspect the centralized buying model would work quite well.

SNOOPY

[Snoopy]

I was wondering what might happen to Trustpower should a Labour/Green minister of energy come to power.

Turn to page 42 of the FY2013 and look at the revaluation reserve. It comes to $1,025m. I see total assets are $2,976m. So it looks like Trustpowers assets are overvalued by a billion or so. All good grist to Labour/Green Minister of energy. Return on average shareholder funds is 8%. Sounds reasonable. But with a reduction is asset values by 1/3 our Labour/Greens Minister will be looking to reduce power prices by a third. A bomb here waiting for TPW shareholders?

SNOOPY

[Silverlight]

Turn to page 42 of the FY2013 and look at the revaluation reserve. It comes to $1,025m. I see total assets are $2,976m. So it looks like Trustpowers assets are overvalued by a billion or so. All good grist to Labour/Green Minister of energy. Return on average shareholder funds is 8%. Sounds reasonable. But with a reduction is asset values by 1/3 our Labour/Greens Minister will be looking to reduce power prices by a third. A bomb here waiting for TPW shareholders?

SNOOPY

Hi Snoopy,

Trustpower have their assets independently verified, and then add this to the balance sheet so their assets increase or decrease each year (to circa $3b today), like in the 2012 report it was revalued upwards by $200m.

Not a balance sheet guru, but what does the reserve actually mean, what is the purpose of the line item detailing the revaluations over time, if they are independently done?

Thanks in advance if you know the answer.

[Silverlight]

Hi Snoopy,

Trustpower have their assets independently verified, and then add this to the balance sheet so their assets increase or decrease each year (to circa $3b today), like in the 2012 report it was revalued upwards by $200m.

Not a balance sheet guru, but what does the reserve actually mean, what is the purpose of the line item detailing the revaluations over time, if they are independently done?

Thanks in advance if you know the answer.

To answer my own question I have refamilirsed myself with balance sheets. So the asset value is increased, and then transferred back into assets as retained earnings over the life of the asset. So the $1b would slowly be added as retained earnings over the life of the asset. Therefore Trustpowers assets are not overvalued by $1b, unless you disagree with the independent valuers, or were you jumping three steps ahead to say, that under labour/greens, the value of Trustpower ability to earn a specificed ROI would fall under a central buyer model, and then would be reflected in Trustpower devaluing its asset base back down by $1b?

[CJ]

Silverlight - the Greens disagree with the valuers and would revalue them back down to historical cost which would be below the cost to Trustpower (I understand they went on a buying spree when the lines companies had to divest).

[zigzag]

My house is over 100 years old, so I wish they would calculate my rates using the same method. I believe this is the jist of an idea I read from Infratil.