Consumer pricing is not relevant when NZR is a large industrial consumer. There is no detail in the announcement that lets anyone draw conclusions on cost effectiveness and so shareholders just have to trust the Board decision. Nor is there is a reference to subsidisation in anyway. Solar installation has been decreasing in cost over the past few years and the power generation efficiency has been increasing. Again, there was no reference to the technology assumed in the cost-benefit analysis. The other factor to take into account is the amount of solar energy available throughout a 12 month period at the proposed site. Northland is not the highest region for sunshine hours but then solar intensity is also a factor.
With regard to NZR margins, I note that Asian refining has been under strong competitive pressure of late, with too much production in the region and hence low margins, but I also note that NZR had an extended shutdown period last FY and so the question is whether the lower margins outweigh this year's increased production or not.
Mixed messages for refining profitability here. Expect high margins with recent production but further out the Asian over capacity threatens Singapore refining margins. NZR follows Singapore margins.
I think allowing for NZR's uplift and the present value of NZD:USD, that the in-progress year is looking pretty positive (especially relative to the present share price). The article linked below indicates Singapore complex margin of US$3.50 for the quarter just completed, which should hopefully translate to an NZR margin of around US$8 in the upcoming two monthly update. And any spike like is presently happening may get them briefly over cap. Without a shutdown this year, cashflow should be pretty tidy.
Had to roll my eyes at the solar farm though. I wish they would just stick to their knitting.
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