Contact Energy - CEN Chart

**GTM 3442** · 31-01-2012, 07:15 PM

I rather see electricity as a perfect commodity - you can't tell one "brand" from the other (like petrol). And, like petrol, production/generation costs are pretty similar between the companies ( Brand A's windfarm costs pretty much the same to run as Brand B's). So it's kinda hard to build a "brand preference".

So the various companies will try to reduce production costs - either by building new capacity, or by trading existing generation capacity.

Either way, they're going to be doing more spending, and less paying of dividends, methinks.

Small tangent - how does the team see this affecting the small players - KCE or HED ?

**macduffy** · 31-01-2012, 07:47 PM

I would have thought that production/generation costs would vary quite considerably between those with older, mainly hydro stations and those with a bigger proportion of generation from more costly gas or wind plants. Certainly, the newer capacity will be more expensive and the various companies' costs will be influenced by the proportion between older and newer facilities as well as the mix of generation types.

I don't see this as leading to marked differences in prices to the consumer, however, but rather to different degrees of profitability as the more efficient companies take advantage of their lower production costs.

I could be totally wrong about this, not having any particular insights into the industry.

**macduffy** · 01-02-2012, 10:18 AM

I could be totally wrong about this, not having any particular insights into the industry.

Infratil, who hold 51% of Trustpower, published an interesting study last year on wholesale electricity prices in NZ. They concluded that the price required to justify new generation construction varies according to type from a little over 7c/kwh for the best geothermal projects to a bit over 12c/kwh for coal fired, gas and some of the less viable South Island wind prospects. New hydro generation was not included being too location specific and "too minor to have a significant impact on NZ medium term prices."

Clearly, those companies with a high proportion of "legacy" hydro generation will have the lowest costs.

**fish** · 01-02-2012, 07:11 PM

Originally Posted by macduffy

Infratil, who hold 51% of Trustpower, published an interesting study last year on wholesale electricity prices in NZ. They concluded that the price required to justify new generation construction varies according to type from a little over 7c/kwh for the best geothermal projects to a bit over 12c/kwh for coal fired, gas and some of the less viable South Island wind prospects. New hydro generation was not included being too location specific and "too minor to have a significant impact on NZ medium term prices."

Clearly, those companies with a high proportion of "legacy" hydro generation will have the lowest costs.

This of course is precisely what cen have been onto for the last few years.
With no significant rain forcast for at least a week,lake levels and inflow low and power demand usually rises in february we are likely to see much bigger rises in the cost of power . CEN are looking -in my eyes-to have a very profitable second half to the financial year .

I had an order in at 4.79 at close today which failed as just at the close someone changed their order at the last second .There are now very few sellers at under 4.95 so I wouldnt be surprised if cen hit $5 again before the week-end .

**Arbitrage** · 01-02-2012, 08:36 PM

The 30 day and 90 day moving averages are still on a downward trend with no obvious upswing. I wonder whether Origin is waiting for the right price.

**fish** · 02-02-2012, 09:28 PM

Originally Posted by Arbitrage

The 30 day and 90 day moving averages are still on a downward trend with no obvious upswing. I wonder whether Origin is waiting for the right price.

Or manipulating the price .
As I have stated before I believe 1 or 2 sellors are trying to manipulate the price down .
For instance today the buy order i placed at close yesterday for 10000 shares was completed.
This however took 33 trades -three trades at 329 shares -the highest transaction -then 3 trades at 212 and so on until a lot of trades at 1 .
Personally I dont mind people selling me shares at way under what i perceive the value as i have infinite patience, time and still working earning lots outside the sharemarket . I will be buying more .
P.S as i write this the current electricity price is over $200 at Otahuhu so contact will be making at real killing with gas turbines strategically positioned here . No rain forcast so prices could rise a lot more as hydrogenerators cut down production and people switch on air conditioners and have fridges working overtime .

**fish** · 03-02-2012, 06:51 AM

Considering many factors it seem to me that the coming months will likely be the third and final chance for origin to make a cheap takeover offer and then next year reap all the benefit of improvents cen have made plus those made by transpower-especially the new cook strait poles.
They have the added assistance of investors tempted to sell cen to buy into the state generators .
Consider this -if mighty river power lists in 6 months investors may want to raise new funds-origin offers a low but attractive offer-say $7.50 ,the current sp. is under $5-would 4 out of 5 shareholders accept the offer and move into mighty river to make some big gains?

CJ · 03-02-2012, 07:05 AM

Origin could even time it such that the offer closes say 2-4 weeks before the SEO float. That would be a good way to get the small investors to accept so they would just need to convince the bigger investors who may not get the same sized allocation in the IPO as they hold in CEN.

**fish** · 07-02-2012, 08:46 PM

Wholesale power prices continue to surge ahead-now over $200 in the SI for much of the day .Yet someone is still doing some very strange selling-one day at the end of last week someone sold me just 1 share at $4.79. Today was more productive-208 shares. I guess it must be some sort of no cost computer trading as it seems no sense to keep on selling 1 share at a time ?
http://www.electricityinfo.co.nz/comitFta/ftapage.main
This is 10 times the price it was same time last year

**Hoop** · 08-02-2012, 11:34 AM

Originally Posted by fish

Wholesale power prices continue to surge ahead-now over $200 in the SI for much of the day .Yet someone is still doing some very strange selling-one day at the end of last week someone sold me just 1 share at $4.79. Today was more productive-208 shares. I guess it must be some sort of no cost computer trading as it seems no sense to keep on selling 1 share at a time ?
http://www.electricityinfo.co.nz/comitFta/ftapage.main
This is 10 times the price it was same time last year

Hi Fish
This is not strange behaviour....it's classic human behaviour. A group of investors (maybe small) are sensing, rightly or wrongly, that a bottom is somewhere close...they want to buy into CEN and they think they have plenty of time if they do it early...and they also think the price could go lower thereby they are accumulating slowly... so the last thing they want to do is jump in and outstrip supply at that price and push up the price while still accumulating....This group of individuals are also willing to temporary halt their buying if they see a bad day and allow the stock to fall then re-enter with their slow buying strategy again.....This doesn't necessarily raise their brokerage costs...as the investor can go online and readjusts the buy price/volume amount with the remaining order....A good tactic for the accumulator is to look at the share depth and if there are enough shares at a certain price to satisfy the accumulator for the meantime they (accumulator) buy up all those shares except one. Why?...because most people go on-line and don't use depth therefore they see that the share price /buy price/sell price has not changed..therefore they are unaware of whats happened and this minimizes the buy pressure signal.

Fish I'm a little surprised this has happened with CEN usually it happens with an illiquid stock that has big gaps within the sell prices.

Fish..I know you are not a TA fan but the short term CEN Chart has picked this activity up. My previous chart post#361 29th January is very long term and doesn't reflect CEN's short term behaviour so a shorter term chart (below) has picked up this behaviour.... The accumulation/distrubution indicators are showing slight divergence to the shareprice indicating that here isn't a huge number of investors or any big players doing it....Although this slight divergence is deemed slightly bullish it is best to be cautious as other TA indicators have not followed yet (not shown on chart)..

A buy signal for a stock need more than one indicator (or indicator group) firing off.....The OBV indicator is a good stock indicator (Phaedrus's favourite) it shows the flow of "smart" money.