Contact Energy - CEN Chart

[dreamcatcher]

today, close to 4m shares changed hands, price up 22 cents...Ich denk mich laust der Affe - I think, a monkey is picking my lice (meaning here is: unbelievable surprise or not?)

Futures and derivative 21st and 28th plus a favorable DOW - S&P500 but well done on your CEN accumulations

[Independent Observer AUNZ]

Very steady at that 7.20 mark at the moment. What are predictions for the interim dividend? I assume something around the 15c mark again? Or will the board be keen to drive a bounce on the shareprice and push up towards 20c?

[Rowdy Flat]

Very steady at that 7.20 mark at the moment. What are predictions for the interim dividend? I assume something around the 15c mark again? Or will the board be keen to drive a bounce on the shareprice and push up towards 20c?

Board are committed to increasing returns to shareholders. I'm picking 15 - 16.5 c as likely range. Today's announcement will have eyes furiously rolling from a few on here.

[Simsee]

Hi all new to this site. Wondering if anyone has an idea about what happened to CEN today ? No announcement of note other than the woke one from yesterday thanks

[peat]

Today's announcement will have eyes furiously rolling from a few on here.

I just done understand WBC's (financial) motivation to provide cheaper loans for a business achieving ESG goals.
Perversely WBC is now incentivised to hinder CEN's ambitious ESG targets.

Simsee
I don't think anything much happened really , a few more sellers today than buyers?

[Rowdy Flat]

Strong monthly ops report for Dec...bodes well.

[Snoopy]

My first share was Contact Energy after Dad the electrical engineer made sure the whole family got the maximum allocation in the 1999 float. It has under-performed over 20 years as Origin Energy bled it dry and its assets like Sparky (the now decommissioned Otahuhu Gas Fired Station) and the New Plymouth gas storage facility have not been the best in the industry.

Sparky wasn't that old!

It was commissioned in January 2000, upgraded in 2005 from 385MW to 404MW and ceased generation at the end of September 2015. The typical lifespan of a combined cycle gas power station at 30 years is double that. What a debacle.

I have transferred Jaa's top post from the 'My First Share Purchase' thread.

I have also been a Contact Energy shareholder since 1999 and my recollection of these events is somewhat different.

IIRC, the decommissioning of Otahuhu was a result of projected carbon charges going out into the future that tipped the economics in favour of a new geothermal power station, Te Mihi, that Contact built as an effective replacement. The fact that the turbines at Otahuhu still had some significant life left was not ideal. But the residual capital cost in a gas turbine plant is not that significant over a fifteen year life remaining time frame. I suggest the price of gas, the security of gas supply and the cost of any potential carbon offsetting charges would be far more important. It was these factors that lead to the demise of the Otahuhu gas plant.

I think it was still possible these turbines had a market residual value. But I don't recall any announcement of a sale post decommissioning. Of course the turbines were written off so maybe there is no requirement to report what ultimately happened to them? What I did find surprising was that Contact managed to lose money on the Otahuhu land when sold. Losing money by selling suburban land in Auckland must take some special talent!

Not sure by what you mean by the underperformance of the New Plymouth gas storage facility Jaa. This was commissioned to take advantage of the take or pay contract that Contact Energy signed to buy gas. Storing gas that they would have otherwise had to pay for but not take sounds like an excellent business idea to me. To my knowledge the gas storage facility was extremely successful. Granted it has now been sold to a third party that will allow Genesis Energy to use it as well as Contact. But I am not sure that you can use the sale of this facility, that Contact still uses, as 'proof' it was a bad idea. If Contact's Energy's debt had not been so high at the time, I think the facility would not have been sold.

Lastly the 'underperformace' you talk about over 20 years I question. The NZX50 (a gross index that includes dividends) rose from 1902 when it was established on 7th March 2003 to 11,901 on January 23rd 2020. Averaged over 17 years that is a compounding annual rate of return of:

1902(1+r)^17 = 11,901 => r= 11.4% per year

On 7th March 2003 the CEN share price was $4.42. On 23rd January 2020 it was $7.45. Averaged over 17 years that is a compounding annual rate of return of:

$4.42(1+r)^17 = $7.45 => r= 3.1% per year

But that ignores dividends that have averaged 7-8% per year and the initial period of four years before the NZX50 was started when the share price of CEN nearly doubled. So I would argue that Contact Energy has provided returns very close to the NZX50 (or equivalent) since it was listed. Probably slightly above in fact. I would not have expected a 'boring utility' to have done as well as this.

SNOOPY

[Marilyn Munroe]

from Contacts half year profit announcement;

“The impact of the recent under-investment in New Zealand’s ageing gas fields has been acutely felt over the past six months with the supply of natural gas proving unreliable, leading to thermal input costs increasing sharply."

[sarcasm] Bur surely the Coalition Government would have consulted widely and foreseen this and not indulged in hasty virtue signaling.[/sarcasm]

Boop boop de do
Marilyn

[peat]

Dont you think they are deflecting though?
They know they are reliant on gas generation for the 'top' of their delivery quota i.e anything they need to deliver above geothermal and hydro. And yet they were exposed!

[couta1]

Not a good result but the market dont care, up 30c.