Contact Energy - CEN Chart

[alex f]

Is there a government review being held, regarding the generator market. Stuff mentioned a review due out later this month and it not being so good for the dominant generators.
I can’t seem to out find much about this ( after CNU went to $1.28 years ago after a com com ruling, I worry)
Who’s doing the review? Likely outcomes?

[Sideshow Bob]

Tauhara Project Update - NZX, New Zealand’s Exchange

No worries when costs go up $140m...........

[Biscuit]

Tauhara Project Update - NZX, New Zealand’s Exchange

No worries when costs go up $140m...........

Yes, 20% increase in cost nothing to be sneezed at but some of that is apparently for "increased capacity".

[Biscuit]

Profit up 70% - great. But operating free cashflow down 17%. Their explanation:

"While operating free cash flow is lower year-on-year, this is a feature of
our generation asset mix. When it rains, operating earnings increase as we
don't have to run more expensive thermal generation, but cash flow is
impacted as we store the gas we purchased for use in the future."

Does that make any sense? I would have thought there would be no significant extra cost in turning up the throttle on the hydro generators?

[alokdhir]

Profit up 70% - great. But operating free cashflow down 17%. Their explanation:

"While operating free cash flow is lower year-on-year, this is a feature of
our generation asset mix. When it rains, operating earnings increase as we
don't have to run more expensive thermal generation, but cash flow is
impacted as we store the gas we purchased for use in the future."

Does that make any sense? I would have thought there would be no significant extra cost in turning up the throttle on the hydro generators?

To me it seems they saying instead of cash now they have inventory of gas which is stock ...so no big deal !!

[Biscuit]

To me it seems they saying instead of cash now they have inventory of gas which is stock ...so no big deal !!

Yes, exactly. But for that to impact cashflow, it must have cost them quite a bit to increase power from the hydro. I'm just a bit surprised that that is the case.

[alokdhir]

Yes, exactly. But for that to impact cashflow, it must have cost them quite a bit to increase power from the hydro. I'm just a bit surprised that that is the case.

Only cost attached with having inventory is carry cost ie financial interest that should not be much at current rates ...for me nothing much to worry about

[turnip]

Profit up 70% - great. But operating free cashflow down 17%. Their explanation:

"While operating free cash flow is lower year-on-year, this is a feature of
our generation asset mix. When it rains, operating earnings increase as we
don't have to run more expensive thermal generation, but cash flow is
impacted as we store the gas we purchased for use in the future."

Does that make any sense? I would have thought there would be no significant extra cost in turning up the throttle on the hydro generators?

As I understand it, there are costs to inject the gas into the storage site, and also since Contact doesn't own the storage facilities anymore they would also have to pay some sort of rent for the volume they use. These costs wouldn't have been incurred if they had burnt the gas directly instead of storing it.

Edit: And of course, they are still paying for the gas itself whether it is burned or stored.

[Biscuit]

As I understand it, there are costs to inject the gas into the storage site, and also since Contact doesn't own the storage facilities anymore they would also have to pay some sort of rent for the volume they use. These costs wouldn't have been incurred if they had burnt the gas directly instead of storing it.....

Thanks Turnip, still seems like a lot of extra cost (aside from the gas, which they pay for anyway). Also, gas storage costs were higher (12M) in the PCP than in this period (11M).

[Cyclical]

Yeah, probably most of that would be at the First Gas Ahuroa site I assume?