Contact Energy - CEN Chart

[Onion]

I am following your example RGR367. Despite getting a better deal than the institutions, I don't believe this offer will be an out of the ball park hit for small shareholders. In the medium term, I am expecting downward pressure on the CEN share price because of rising interest rates. Ten year rates at 2.5% within a couple of years I think is likely. But to an extent my own modelling takes this into account (my base investment case is for a 4.5% gross dividend yield).

What finally swung me over the line was the vision beyond the new Tauhara station. The effective rebuilding of the Wairakei with 167MW 'Geofuture' project, and the obvious careful attention to the cost effectiveness of each project in relation to competitor's developments (Capital Raise Presentation, slide 10). 'Geofuture' is not specifically labelled on that chart. But I am pretty sure it is the next geothermal 'cab off the rank' once the three competitors wind projects are built. Neither 'Geofuture', nor the benefit of the mooted North Island battery project are part of the forecast EBITDA lift from Tanhara alone.

The development pipeline is based around a geothermal field Contact know well and they have the in house team to carry out such projects when and if required. So I think execution risk is low.

I talked to my contact at Jarden's during the week who was very cagey. They are involved in the offer and so are under a blackout period for personal customer advice. However, I was told that prior to the offer proposal and investment window opening, Contact was their preferred investment in the gentailer sector.

Taking everything into account, including the somewhat unappealing alternative of a 1% term deposit, I think there are enough reasons to give this offer a good go.

SNOOPY

Thanks for all the analysis and information you provide Snoopy. I am giving the offer a “good go” too.

[FatTed]

Thanks for all the analysis and information you provide Snoopy. I am giving the offer a “good go” too.

Second that thanks Snoopy, I'm also going to give it a nudge.

[Snoopy]

I'm on the fence. My current base cost is $6 so this increases the cost basis
I'm also wondering if we are due a market correction that could push the whole sharemarket down. 24 hours to ponder...

Hey Tango,, I am not saying your position is wrong. To use the baseball analogy, I don't think anyone is being offered a home run on a plate here. It may be the best action is to let this pitch go through and wait for a more wayward pitch to have a swing at. I haven't committed to my own 'first hit' strategy to the extent of not keeping some gas in the tank for second swing at this pitcher myself ;-). The good thing is in this game, we don't all have to follow exactly the same strategy to all be winners.

SNOOPY

[see weed]

I didn't qualify for the share offer, but have been accumulating under $7 at end of day for the last 5 days. My average price is 6.88 and hope to buy more next week as long as it is under $7 but may pay a bit more if I have to.

[RTM]

I'm in to the max. Will sell what I don't need. As it may take my portfolio % a bit high should the share price grow in years to come.
Currently @ 3.5% with average buy 5.59.

[tango]

Hey Tango,, I am not saying your position is wrong. To use the baseball analogy, I don't think anyone is being offered a home run on a plate here. It may be the best action is to let this pitch go through and wait for a more wayward pitch to have a swing at. I haven't committed to my own 'first hit' strategy to the extent of not keeping some gas in the tank for second swing at this pitcher myself ;-). The good thing is in this game, we don't all have to follow exactly the same strategy to all be winners.

SNOOPY

I thought about getting a firm allocation from Jordan but that that pitch go through because I thought it might be more attractive to wait for the SPP. The only catch is that an allocation from a broker is a definite amount of money and you don’t have to tie up 50 K while you wait for scaling.

I’m heavily invested in most of the energy shares. Kind of kicked myself for not selling down some MEL and CEN at market highs 😀

Right now, I feel that $7 is fair market value. I need to think about whether there could be an opportunity to buy at below market value in the next few months and whether the discount would be greater than any dividend foregone

[dibble]

Right now, I feel that $7 is fair market value. I need to think about whether there could be an opportunity to buy at below market value in the next few months and whether the discount would be greater than any dividend foregone

Just split the diff, half your CEN cash in, keep rest (and whatever they return to you) and see how it pans out. Given it's a decidedly average offer anyway it might give you more comfort.

[Biscuit]

Just pressed the button on the offer. More green energy for NZ, what's not to like, a reasonable company with a long term future.

[HKG2301]

I'm on the fence. My current base cost is $6 so this increases the cost basis
I'm also wondering if we are due a market correction that could push the whole sharemarket down. 24 hours to ponder...

You're not wrong to consider the strong possibility of a US-led market correction (the US has begun a long overdue sell-off as we speak!) but you might find these unfashionable utility stocks return to popularity. That's assuming a regular risk-off, economic downturn-led correction, as opposed to another pandemic shock!

Also depends on your investment timeline and portfolio balance, I guess. Trying to time the bottom is just as hard as timing the top, so averaging in whilst keeping some powder dry for later buying opportunities wouldn't hurt.

[Snoopy]

I’m heavily invested in most of the energy shares. Kind of kicked myself for not selling down some MEL and CEN at market highs

Yeah, gave myself a bit of a kick for not selling down then as well. Until I remembered my objective was to build a good dividend paying NZX portfolio. I was overweight with term deposits anyway (albeit these days that is merely equivalent to saying I had some ;-) ). So what would I have done with the money if I had sold? Put it in a cash deposit to wait for the next opportunity? I didn't see a plethora of such risk/return opportunities out there that I didn't own already (this was before the capital raising announcement of course). So in the end I was happy not to play the market with this one.

Right now, I feel that $7 is fair market value. I need to think about whether there could be an opportunity to buy at below market value in the next few months and whether the discount would be greater than any dividend foregone

Don't forget to factor in the brokerage saved by taking part in the direct offer as well.

SNOOPY