NWF - NZ Windfarms

[flyinglizard]

Very interesting, $0.25 has been mentioned couple of times. I just talked to my wife, who bought a truck load of NWF, about 9 months ago at the average price of $0.138, she said that she will hold something above $0.50. Both of theories are mysterious to me.

[Grimy]

I've only mentioned 25 cents as it is the point where I will need to do a rebalance (or at least seriously weigh up the options). Not a magic number - just one where I think I'll be too heavily invested.
But if your wife has any info. that leads her to think they'll get to 50 cents anytime soon, I'll be all ears!

[fish]

I've only mentioned 25 cents as it is the point where I will need to do a rebalance (or at least seriously weigh up the options). Not a magic number - just one where I think I'll be too heavily invested.
But if your wife has any info. that leads her to think they'll get to 50 cents anytime soon, I'll be all ears!

Perhaps it is to do with future EPS .
My understanding is that this year all production is hedged at around 90 .
Next year it is going to be a lot more .
It would be good if someone more capable than me could work out scenarios for EPS in the future .
It seems to me that running costs are unlikely to increase significantly but revenue will.

[fish]

I've only mentioned 25 cents as it is the point where I will need to do a rebalance (or at least seriously weigh up the options). Not a magic number - just one where I think I'll be too heavily invested.
But if your wife has any info. that leads her to think they'll get to 50 cents anytime soon, I'll be all ears!

Perhaps it is to do with future EPS .
My understanding is that this year all production is hedged at around 90 .
Next year it is going to be a lot more .
It would be good if someone more capable than me could work out scenarios for EPS in the future .
It seems to me that running costs are unlikely to increase significantly but revenue will.

[flyinglizard]

https://www.emi.ea.govt.nz/Forward%2...G_LONG&_si=v|3


Double the number next year. 90 is too low.

Screenshot 2021-06-29 100138.jpg

[wagwan]

Interested to start a discussion around NWF - where we are now and looking forward.

For me, while maybe now not significantly undervalued, still one of the more underappreciated stocks on the NZX

Initially bought in Oct / Nov 2020, and have had a good ride since then - my rationale at the time, which largely still holds, was:

• Historically fairly inconsistent and underperformed. Largely due to poor management - board (Vector appointed to 2016) and exco objectives not aligned with shareholder interests - and, instability of revenue and exposure to variations in wholesale electricity market. Reflected in stagnant SP.
• However, in the last 2-3 years:
  
  • Significant improvement in management, board oversight and understanding of where value for shareholders lies
  • Revenue and dividend stability - in securing Variable Volume Fixed Price Agreements (VVFPA) to provide revenue stability
    
    • Result of this being, crucially, dividend regularity and reliability
    • Since Dec 2020 further VVFPA contracts confirmed
    
    
  • Continued reinvestment in CAPEX and maintenance programme, to ensure extend lifetime of current wind turbine assets
    
    • As per annual reports, with regular maintenance, 35-40 year asset life is not unreasonable to assume
    • Issues with previous supplier of components alleviated as no operate an independent maintenance programme
    
    
  • Context of ESG investing and social and govt movement towards clean energy; along with

Things that still stand out:

• • NWF IPO'd some 15 years ago at circa $1, which was essentially a capital raise to build the current wind farm
    
    • Some debt in the capital mix, but essentially that initial equity funded an asset base which as per last Annual Report was valued at ~$54m
    
    
  • Business model now is essentially to maintain the wind farm and sell power generated under the VVFPA to one of the big players in wholesale market
  • Cash then used to maintain existing assets, and surplus (~$7.6m last year) paid to shareholders.
  • Low OPEX and very simple organisational structure - believe there's 10 employees.
  
  
• Lowly geared and consistent approach to debt amortisation
• Recently renewed banking facilities for another ~3 years with BNZ

So in sum:

• The Business
  
  • Inconsistent past, but significant improvements in the last 2-3 years
  • Solid board and management, who are now acutely aware of, and take into account, shareholder interests and understand this is an income stock
  • Simple model, low OPEX, so few key variables outside asset maintenance and revenue stability and security
  • Consistent approach to amortisation of debt, and no immediate requirement apparent to take on more as CAPEX funded out of cashflow. Will reflect in improvement in EBITDAF / EPS etc etc over time assuming all else if equal
  • Solid asset base: 25 year lifespan (takes us to ~2030) without maintenance, 30-40 years with maintenance. Freehold ownership of land.
  
  
• Context
  
  • Movement towards ESG and demand for clean energy, supported at community and government level
  • Fairly insatiable hunger for yield in any kind of asset class
  • Futures for wholesale electricity match expectation that cost of energy will continue to increase as move towards renewables accelerates, and cost per unit generated remains high comparative to non-renewables
  • Tiwai limited impact as NWF North Island based and increased demand for energy over 3-5 years could easily eclipse Tiwai hole - driven by genera demand, and one offs such as data centres (Microsoft AKL) and agriculture moving from coal / diesel generation to renewables (ie: hydro) in South Island - two tangents, but interesting to read up on
  • Looking forward, futures pricing well above hedged position as per flyinglizards post above. Will drive EPS, dividend, yield and finally SP
  • Recent shortages of natural gas supply and only ~10 years of gas reverses based on current demand - with hydro lakes increasingly being low, this will likely drive further increases in wholesale markets? Flow on for NWF being: same asset base, same OPEX / CAPEX, improved per unit revenue, directly flow to EPS and divi
  
  
• Issues
  
  • Finite asset life, and need for significant capital raise at end of life
  • Mitigant being that this won't be for some time (at least 10 years would think)
  • NTA / Share is now ~$0.13, so at $0.24 now trading at a 84% premium to NTA. Back in Nov / Dec 2020, when trading at ~$0.14 (ie: roughtly equivalent to NTA) premium was essentially nil for high yielding asset base
  • Now, wondering where the roof is for SP? Assuming Final Divid is ~$0.004, gross yield could fall to ~3-4%, still not bad in context of current interest rate environment and wider NZX, however given strength of NZ economy and increasing possibility of rate hikes (90% priced into wholesale markets by Nov 2021) does this start to not look so attractive?
  • That said, is the above offset against likelihood of future EPS growth on back of VVFPA negotiated at what would assume is a higher futures price of 130+?

Keen to hear what others have to say and anything missed !

[RTM]

I am a happy holder, up 65% since purchasing. A few dividends along the way as well.
Thanks for your summary, I also wonder about them being a take-over target ?
Was wondering if Tilt might have had a look at them, nothing so far.
Should have bought more.....how many times have I said that...so easy looking back.

[RTM]

Duplicate................

[fish]

NWF after agreeing to a higher fixed price agreement for all its production from 1/1/22 to30/9/2022 are due to issue EBITDAF for 2022 in the next week.
I have high expectations .

[Arthur]

Hi Fish
The wind run was disappointing in the last quarter and the power price received was well below market. I hope you are right, but expect that you will be disappointed.