Contact Energy - CEN Chart

[CJ]

I can't see how any Labour/Green minister of energy could call that return excessive. Unless of course, they believe that those assets on the books are way overvalued.

SNOOPY

i think you will find their argument is the Dams were paid for by the taxpayer so they should only be able to recover their operating costs. Seriously!!,

That is the only way I can make their statements make seance because, as you say, the replacement cost of one of the hydro dams would probably be above book value.

[troyvdh]

giday...I have just googled "Cost to build the Clutha Dam"

Project cost 1.4 to 2 billion dollars
Stabalisation cost (2005) $936 million...

PS Did not Williamson Construction (NZ) and Zublin construction (German ?) go bust over this ....?.....16 different unions on site ?...may have contributed ..?.....

[Snoopy]

giday...I have just googled "Cost to build the Clutha Dam"

Project cost 1.4 to 2 billion dollars
Stabalisation cost (2005) $936 million...

PS Did not Williamson Construction (NZ) and Zublin construction (German ?) go bust over this ....?.....16 different unions on site ?...may have contributed ..?.....

Thanks for the research Troy. I can't remember what happened to those Clyde Dam construction firms. Perhaps someone else can?

But I have saved from notes that I took ten years ago ( I noted it was from a book on Electricorp from the ChCh public library, in the NZ collection I think, although I didn't note the exact title.)
According to my notes the build cost of the Clyde dam was $1.7billion dollars (in line with your figures). However when Electricorp moved the Clyde assets into the separate 'Contact Energy' bucket, they received $1.6b for the total assets transferred to Contact. Before that transfer of assets there was an $88.9m write down, which was made up of $41.4m in 'inadequate provisions' and $47.8m because of a reduction in gas rights and obligations.

The gas rights were obviously nothing to do with the Clyde dam, but would have been something to do with the take or pay gas supply contract from Maui, principally for the then aging now decommissioned New Plymouth power station. Reading between the lines of my notes, it looks like $1.6b of assets transferred to Contact may have included the Roxborough dam and all of those North Island gas assets as well!

The point I am making here is that Contact's power assets at the beginning were not on the balance sheet at anywhere near their construction cost. I well remember the controversy over all of the extra land stabilization work at Clyde. In fact my memory is that Electricorp deliberately put all their 'difficult' assets into the Contact bucket to be rid of them! I think the prevailing thought at the time was that if there was a big earthquake down south and all of that remediation work was insufficient it would be someone else's problem!

SNOOPY

[Snoopy]

If it is politically expedient for electricity prices to be excessive then they are and the numbers will prove it and many will happily believe it.

Perhaps. But I do believe you still need some structured way to regulate prices down. Not all power stations (or providers) will be regulated down on a simple percentage basis, because different power stations have different cost bases.

SNOOPY

[Snoopy]

i think you will find their argument is the Dams were paid for by the taxpayer so they should only be able to recover their operating costs. Seriously!!,

I think some maintenance budget on the dams themselves must be allowable. That would imply the dams should have some book value, even if it is a nominal one.

If the Labour/Greens policy was implemented, I can see the result on each power generating company being different, dependent on how 'optimistically' the power station asset values are sitting on the books. In the case of Contact Energy I predict a nil effect. But if I apply exactly the same 'Contact' valuation methodology to MRP (see Might River thread), then NPAT drops by 75% - ouch! I think there will be winners and losers with a Labour/Green energy policy. And I don't think Contact Energy is one of the losers.

SNOOPY

[Snoopy]

I am currently considering putting some power generating solar panels on my roof.

http://www.contactenergy.co.nz/web/s...ctricityathome

Contact are willing to pay me 17.285c per unit of electricity per kilowatt hour (kWh) excluding GST for any electricity that I export to them. However the contract is only short term and can be changed at one months notice. I believe that Meridian used to have a similar offer and suddenly slashed the amount they were willing to pay. The going rate for the other big four companies now seems to be about 5-6c/kWh. Obviously if the price can be slashed at such short notice, it makes a huge difference to the economics of any installation. So here are my questions:

1/ Does anyone on this forum have experience of selling electricity from your house back to Contact and how has it worked out for you?
2/ Why are Contact offering me so much more than their competitors? Theories welcome!

SNOOPY

[CJ]

2/ Why are Contact offering me so much more than their competitors? Theories welcome!

They are 'buying' generation capacity. They can drop at anytime to the 5-6c everyone else is offering and no one will change so they will have effectively locked in a long term supply.

But to be honest, they probably dont really care about anything other than being able to say they have X,000 customers which looks good from a green perspective. They have absolutely no control over when and how much energy you supply which is terrible from a network perspective - how do they know if they need to turn on their gas turbines to balance supply. And to make it worse, most of that power comes during the middle of the day, not at peak load.

What you really want is some form of storage (ie batteries) so you can shift the power generation (middle of the day) to when you actually consume it (6-9pm). Thats why Solar water is popular as the water is the storage mechanism. Alternatively, only get panels to cover you base load so you sell very little, if any back to the grid - Solar maybe viable at 30ckwh but it certainly isn't at 5ckwh. However, economies of scale suggests that isn't worthwhile given the installation costs.

[fish]

I am currently considering putting some power generating solar panels on my roof.

http://www.contactenergy.co.nz/web/s...ctricityathome

Contact are willing to pay me 17.285c per unit of electricity per kilowatt hour (kWh) excluding GST for any electricity that I export to them. However the contract is only short term and can be changed at one months notice. I believe that Meridian used to have a similar offer and suddenly slashed the amount they were willing to pay. The going rate for the other big four companies now seems to be about 5-6c/kWh. Obviously if the price can be slashed at such short notice, it makes a huge difference to the economics of any installation. So here are my questions:

1/ Does anyone on this forum have experience of selling electricity from your house back to Contact and how has it worked out for you?
2/ Why are Contact offering me so much more than their competitors? Theories welcome!

SNOOPY

Go for it snoopy-too good an offer to refuse .
If contact reduce the price in the future consider electric car -batteries are improving,has to be the ultimate way we go ?
It may be in contacts best interests not to reduce the price-good pr, 2/3 of their energy is hydro and South Island-having solar power in n.Island would help conserve hydro in droughts.
Solar power is actually more predictable than windpower

[Snoopy]

It may be in contacts best interests not to reduce the price-good pr, 2/3 of their energy is hydro and South Island-having solar power in n.Island would help conserve hydro in droughts.
Solar power is actually more predictable than windpower

Yes, very good point fish, although I do note CJ's point about the solar power coming on line in the middle of the day, so it won't affect power peaks. The only point I would make against your eminently sensible argument is that if solar energy is so good, wouldn't it make even more sense for Meridian, with their even larger South Island hydro set up than Contact, to have a really attractive generate your own electricity tariff? Meridian do have a scheme:

http://www.meridianenergy.co.nz/save...-and-metering/

But they will only pay a good price (25c/kWh) for the first 5kWh of energy you generate each day. After that you revert to a miserly 10c/kWh according to the website.

SNOOPY

[CJ]

But they will only pay a good price for the first 5kWh of energy you generate each day.

They use to pay the good price on all solar generated. Changed a few months back.