Contact Energy - CEN Chart

[BIRMANBOY]

Pandering to a Panda is always going to result in high fees.

The independant directors really are on notice. That's if they are truely independant and don't just panda to Origin to maintain their cushy fees.

[RGR367]

Got CEN since its IPO and even introduced my kids to owning shares on that IPO. I built up what I would consider substantial amount of shares of it since then but it's only now that I'm thinking that this is no longer the sort of boring and keep it on the drawer kind of shares without that excess capital being returned to us. I for one waited long enough. I will start unloading my holdings and concentrate on MELCA as far as energy sector is concern. It's a nice journey but yes the CEN Board towing to Origin is obviously the problem here.

[Snoopy]

I am not a lawyer but I suspect if CEN buys overvalued assets from ORIGIN that entails total spending overseas of 1 billion there will be legal remedies which I for one will be seeking.
I suspect there are a few lawyers on this thread that could share their knowledge.

Fish, the relevant quote from the Gaynor article is below:

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Origin has a number of geothermal interests, including a 49.9 per cent stake in Energia Andina S.A., Chile's leading geothermal exploration company, and a geothermal concession in Indonesia.

The concern is that Contact could purchase one or both of these assets from Origin for $225 million or lower, a figure below the 5 per cent sharemarket value that triggers the requirement for Contact to obtain shareholder approval. Contact would then have to contribute substantial capital to the development of these offshore geothermal assets with CEO Dennis Barnes indicating that the total expenditure could be up to $1 billion.

-----

If Contact buy a group of assets for up to $225m from Origin, (or anyone else), that is not enough money spent to warrant a special shareholders meeting to approve the deal. The suggestion is that in the ensuing years Contact may rack up total of up to one billion ( i.e. $775m more) developing these assets.

I don't think there is an avenue to object to the first part of the transaction because it is not material to the overall size of Contact. Likewise, once a business unit is established, I can't see there is any way to influence how management develop that asset.

I share your concern about overpaying for assets. I don't recall any objections at the time about Contact acquiring Rockgas from Origin. It seemed to me a sensible bit of vertical integration at the time as an alternative use for take or pay Maui gas. Perhaps in hindsight the deal wasn't so good. But the deal would have been made with various end line usage assumptions on the table and assumptions are not necessarily what happens in reality. Does Gaynor have a case here of being wise with the benefit of hindsight? I think it is a bit of a stretch to say that Contact will end up paying too much for Origin Geothermal assets, because they 'apparently' did so for Rockgas.

SNOOPY

[Snoopy]

I for one waited long enough. I will start unloading my holdings and concentrate on MELCA as far as energy sector is concerned. It's a nice journey but yes the CEN Board towing to Origin is obviously the problem here.

But Meridian is dominated by the government as a 51% shareholder. So won't the Meridan board just be towing the government line? Granted the respective majority shareholders (origin for CEN, NZ government for MELCA) may have a different philosophical outlook. But if your objection is a board potentially/actually towing the line of a majority shareholder, shouldn't you sell out of both CEN and MELCA?

SNOOPY

[Snoopy]

Pandering to a Panda is always going to result in high fees.

Not necessarily. Remember when the shareholders association queried the executive pay of then CEO David Baldwin (an Origin appointee)? IIRC There was a mismatch in what he was declared to be earning in the CEN annual report and what it was declared he was earning in Australia. Then it came out that Origin was topping his salary up, independently of what he was earning as CEO of Contact. Some story about seeing his overall pay was sufficient to make sure he wasn't poached (he wasn't and is still working for Origin).

So in this case, the Contact shareholders were not disadvantaged in cash terms.

SNOOPY

[Stranger_Danger]

But Meridian is dominated by the government as a 51% shareholder. So won't the Meridan board just be towing the government line? Granted the respective majority shareholders (origin for CEN, NZ government for MELCA) may have a different philosophical outlook. But if your objection is a board potentially/actually towing the line of a majority shareholder, shouldn't you sell out of both CEN and MELCA?

SNOOPY

This Government doesn't have a "line" - that is the point.

The MELCA chart, back when there a chance of a Government with a "line" being elected, was not pretty!

[PSE]

Got CEN since its IPO and even introduced my kids to owning shares on that IPO. I built up what I would consider substantial amount of shares of it since then but it's only now that I'm thinking that this is no longer the sort of boring and keep it on the drawer kind of shares without that excess capital being returned to us. I for one waited long enough. I will start unloading my holdings and concentrate on MELCA as far as energy sector is concern. It's a nice journey but yes the CEN Board towing to Origin is obviously the problem here.

MELCA has awesome assets rgr I was very keen at $1 and $.90 but am not remotely interested at $2 or wherever the nutbars have driven the price up to today. Be careful..

[NZSilver]

Kept an eye on CEN, thought it was looking good but this latest saga puts me right off - seems like origin is going to use the cash for its own ventures or move it into there own coffers... Thanks for the posts very enlightening

[RGR367]

MELCA has awesome assets rgr I was very keen at $1 and $.90 but am not remotely interested at $2 or wherever the nutbars have driven the price up to today. Be careful..

PSE, I know and if memory serves me right, MELCA has started even better than CEN from its IPO. Gut feel, GEN and MELCA are the only two I'm considering on their sector. GL to us all after CEN.

[tim23]

PSE, I know and if memory serves me right, MELCA has started even better than CEN from its IPO. Gut feel, GEN and MELCA are the only two I'm considering on their sector. GL to us all after CEN.

Melcas start way superior to CEN - Cen share price fell well back below issue price (so did Melca briefly), meanwhile you chart Gurus - could a chart have told you that CEN directors were going to hold on to the cash?