Contact Energy - CEN Chart

[BlackPeter]

We just need a large business to start selling these electric cars, offer special type of insurances as well as finance the loans, electric cars do cost a little more than the gas guzzlers.

Actually - electric cars are much cheaper to produce and to maintain (if produced in comparable volumes). It is just that at the moment the consumers value them more and are happy to pay more for them . Expect price of electric cars to drop dramatically as soon as they become staple transport ...

[Snoopy]

Electric vehicles will not run on fresh air.
They may need electricity.
So perhaps the projected numbers of electric vehicles,may help us work out future power demands.?
I would expect 1 million electric vehicles plugged into the grid overnight could lead to power black outs.
I would also expect an electric bus/train would require a lot more power than a small Toyota.
I am noticing a growing number of battery bikes on the roads too.

Your long term vision of 1 million EVs may be about right Percy. But we have a l-o-n-g way to go to reach that point. The government's goal is to have 64,000 EVs on the road by the end of 2021. In September 2017 there were only 4541 EVs on the road! I did some work on the possible implications of EV uptake on the Mercury thread under the 'Fraser's Fantasy' sub heading (posts 1004, 1005, 1016). I worked out that by 2021, Mercury might expect a $2.256m jump in profit by 2021 as a result. Worth having but not game changing. Contact haven't been so active in promoting EVs, but no doubt they can put in place an incentive scheme similar to Mercury's very quickly if it makes market sense. So any prospective annual profit jump for Contact would be 'ballpark similar'.

I wouldn't expect any power black outs from plugging in EVs overnight. There is plenty of time to put new generation in place to avoid that. I would be more concerned about too many people plugging in their EVs during the day into quickchargers at supermarkets during the winter months. That could exasperate the peak load problem. I think I recall the new generating capacity required with the long term uptake of EVs is something like 20% of all current power use. So if most recharging was done off peak, it is well within the capacity of the current Transpower and local lines capacity to cope with 1 million EVs without substantial new investment in the existing electricity distribution infrastructure.

SNOOPY

[Snoopy]

The following information I have taken from FY2016. I have chosen this as a representative year because:

1/ It is the first year in which the closure of Otahuhu was expected, so is more likely indicative of future station use patterns than previous years.
2/ The hydrological conditions appear more 'normal' than FY2017.

Contact Energy Hydro	Station Generation Capacity	Annual Energy Generation Capacity (B)	Actual Energy Generated (A)	Station Utilization (A)/(B)
Clyde	464MW	4234GWh	2289GWh	54.1%
Roxburgh	320MW	2920GWh	1802GWh	61.7%
Total			4091GWh

Contact Energy Geothermal	Station Generation Capacity	Annual Energy Generation Capacity (B)	Actual Energy Generated (A)	Station Utilization (A)/(B)	Notes
Ohaaki	48MW	438GWh	337GWh	76.9%
Te Huaka	28MW	256GWh	196GWh	76.7%	Completed FY2010
Wairakei	145MW	1323Wh	1075GWh	81.3%
Poihipi	65MW	593GWh	407GWh	68.6%
Te Mihi	166MW	1515GWh	1282GWh	84.6%	Completed FY2014
Total			3297GWh

Contact Energy Fossil Fuel	Station Generation Capacity	Annual Energy Generation Capacity (B)	Actual Energy Generated (A)	Station Utilization (A)/(B)
Stratford Peaker Gas Turbine	210MW	1916GWh	506GWh	26.4%
Stratford Combined Cycle	377MW	3440GWh	334GWh	9.7%
Te Rapa Gas Turbine	44MW	402GWh	221GWh	55.0%
Total			1061GWh

Thus we have a representative grand total generation figure of:

3297GWh + 1061GWh + 4091GWh = 8449GWh

SNOOPY

[horus1]

The review announced last week is far reaching and regards electricity as an essential service not a product. That is a change of philosophy and has big implications . I do not know how it will affect those in the electricity industry..

[Snoopy]

Thus we have a representative grand total generation figure of:

3297GWh + 1061GWh + 4091GWh = 8449GWh

The budget for constructing Te Mihi (166MW) back in FY2013 was $623m (refer to my post 617).

Using the scaling factor I derived in post 1514, we can now work out the 'thin air capital' that should now be 'off the books' at Contact Energy:

$494m x 0.74 = $366m

If we assume 45% gearing then Contact could borrow 0.45 x $366m = $165m against that sum.

This means the the money available to construct a new power station, using Contact's off balance sheet funds, is:

$165m + $366m = $531m

It doesn't look like Contact have accumulated enough thin air capital to construct another Te Mihi. But I reckon there might be enough in the kitty to build a 100MW geothermal station. Assuming that station had a utilisation rate of 85%, by how much would the power generating capacity of Contact Energy increase?

Energy Generated by New Station Over one year:

(100MW x 0.85) x 25 x 365 x (1/1000) = 776GWh

776GWh / 8449GWh = 9.2%

So this is the multiplication factor we need to increase the value of CEN shares by if we are to include in that the earnings value of the new station that 'could be built', without recourse to raising new capital from shareholders.

My normalised 'eps' figure for Contact Energy is a whole of business cycle figure. I have deemed FY2009 as the start of the representative electricity market from here on in.

Financial Year	CEN Normalised eps
2009	27.0cps
2010	25.3cps
2011	22.4cps
2012	24.6cps
2013	27.5cps
2014	27.1cps
2015	22.0cps
2016	22.2cps
2017	18.7cps
Multi Year Average	24.1cps

CEN Business Cycle share Price Average Value:

= 24.1c / ( 0.72 x 0.06) = $5.58 (based on a 6% gross desired earnings yield before tax). This is the 'fair value' as published in the adjacent table.

Note the above normalised earning valuation of the previous post does not make any allowance for off balance sheet 'thin air capital' that has been accumulated by Contact Energy. Making this adjustment I get a fair value for Contact Energy of:

$5.58 x 1.092 = $6.09

Given that Contact is trading well below that figure, it looks like an 'accumulate' at current market prices. Yet, ever the bargain hunter, I would be on the look out for 20% discount to fair value. That equates to $4.87. I say Contact would be a 'strong buy' should the current market volatility see the share price drop to that level.

SNOOPY

[Pavan Sharma]

Growing Electric Vehicles will be a major bonus for the power generators, and solar wont be enough to charge are especially if you are out all day and charge your car over night. Some solar panels don't store much power over the night and they suggests you try use more power during the day, which means in winter it'll probably just power your fridge for half the day.

[horus1]

If you buy and sell on the spot with Flick it doesnt matter . The spot at night is usually cheap.Do not use a generator retailer.

[RTM]

I know people are important...really important....and I know Bean Counters rate highly.......but I am somewhat surprised to see this as a price sensitive announcement for a power company.

"ADMIN: CEN: Contact announces departure of Chief Financial Officer
08:30a.m.
CEN
28/05/2018 08:30
ADMIN
PRICE SENSITIVE
REL: 0830 HRS Contact Energy Limited

ADMIN: CEN: Contact announces departure of Chief Financial Officer "

[Hectorplains]

I know people are important...really important....and I know Bean Counters rate highly.......but I am somewhat surprised to see this as a price sensitive announcement for a power company.

"ADMIN: CEN: Contact announces departure of Chief Financial Officer
08:30a.m.
CEN
28/05/2018 08:30
ADMIN
PRICE SENSITIVE
REL: 0830 HRS Contact Energy Limited

ADMIN: CEN: Contact announces departure of Chief Financial Officer "

Haha, it was tagged the same on the asx. I had the same WTF moment as you. Remember it's the exchange, not the company, that deems price sensitivity.

Last quarter report passed without comment here - numbers looked pretty good for Contact.

[Joshuatree]

Timely, thanks Gonzo. Our hydro stand us in good stead to help ameliorate future demand, usage, tech but with the Govt reviewing the sector, there has to be a little worry re the possibility of price caps/ intervention etc. And Winston did want to buy them back at one point. He made his point about them being majorly sold off in the first place(Contact ? being the exception).