Pulse Utilities

[Tasman Capital]

With the listing of Pulse Utilities planned for this month I think it appropriate that Pulse have a thread of its own. Also many of the readers of this forum are shareholders in Tasman Capital and will automatically become shareholders in Pulse prior to the listing of Pulse via the compliance listing method facilitated by Tasman.

The business media are beginning to pick up on the Pulse story – I will post the original press release that started the recent media coverage so you can see the full story.

Disclosure: My name is Joseph van Wijk and I am a director of Tasman Capital and have recently been appointed a director of Pulse Utilities.

[Tasman Capital]

Here is the original press release:

MEDIA INFORMATION

NOVEMBER 6, 2007

Power Retailing in New Zealand Set To Be ‘Unbundled’ As Pulse Utilities NZ Aims For NZAX Listing

The power retailing industry in New Zealand is on the way to being ‘unbundled’, with energy company Pulse Utilities NZ announcing its proposed listing on the NZAX in mid-November.
Following several years of development, Pulse is on track with its plans to give New Zealand consumers access to significantly cheaper electricity and roll out a network of smart electricity meters to provide consumers with more control over their electricity usage.
Pulse believes household electricity consumers and small businesses have had a raw deal for many years, paying far too much for their power and are facing more rises in the future through their traditional suppliers. Pulse intends to deliver cheaper power to its customers – much closer to the wholesale price, says James Martin founder and CEO of Pulse.
In addition the patented smart meter technology will allow consumers to make better choices on how they use power.
Pulse directors believe the potential for its business is significant, with growing disquiet among consumers about rising power prices. Pulse is a registered electricity retailer, one of only seven able to offer time-of-use electricity supply contracts. Its business model is based on offering consumers lower cost electricity whilst retaining a fixed daily fee for asset rental and retail services. This strategy will deliver significant growth in its asset base and provides utility-grade ongoing cash-flows. In time, additional services, such as alarm monitoring and home automation will be added to the same smart device to provide additional revenue in the future, thus increasing the “stickiness” of the asset, according to Mr Martin.
In a letter to shareholders, Pulse directors state: “With a successful listing, a larger group of shareholders, and additional funds, we will be in a position to begin full implementation of our business plan in preparation for a launch of our retail offering in early 2008.”
A former Sky Network TV executive, Mr Martin says: “The timing is right – latest data shows a 28.2% increase in the price of power for residential consumers over the past six years and, a further increase of up to 20% from meeting obligations in emissions trading targets under the Governments Kyoto proposal.
“With environmental and pricing issues to the fore, the conditions are ideal for our technology and approach that will enable consumers to save money and power. Thus, Pulse could also be considered a ’green’ stock,” says Mr Martin.
“We view this very much as an ‘unbundling’ of the power retail sector, much along the lines of the developments that have been taking place in the telecommunications industry. The parallels are very clear.
“This is an exciting time for Pulse and consumers, as retail competition has finally arrived. Our target in New Zealand is conservatively estimated at 61,000 customers by year five, a projected 3.5% of electricity connection points. If this level of market penetration is achieved, our business plan anticipates that Pulse would be earning revenues of approximately $93 million and a projected profit of $11 million after tax. This makes Pulse an exciting long-term prospect for investors. None of these projections include Australia.”
The Company’s profit projections are only based on its New Zealand activities but Pulse intends to expand into the Australian market, which is gearing up for replacement of up to eight million meters from December 2008. Pulse already has the exclusive rights to use its unique technology in Australia as well as New Zealand.
Mr Martin formed Pulse Utilities seven years ago to develop the advanced meter technology. With the ability to remotely read, report and act on customer power consumption every half-hour the technology was the first certified mass-market meter device developed in New Zealand, and has continued enhancements to the product since.
Don Purdon has recently been appointed as Executive Chairman. Pulse will not be raising money from the investing public prior to its float. It expects to list on the NZAX in mid-November via a compliance listing facilitated by Tasman Capital Ltd says Mr Purdon. Pulse plans a migration to the main NZSX board at a later stage.
-o0o-

[Yossarian]

thanks for the update taz

[Nevl]

I read the article yesterday and like the pulse story and will be watching. One question I have is about the overseas expansion. I know that too many Kiwi companies go offshore underfunded and thinking that they can break into internation markets with a $20mill and a she´ll be right i have a great product attitude. See Cadmus, Provenco,VTL, Navman and too many other Kiwi manufactures( I use Navman as an example as the sucess of Tom Tom should show what could have being done)

IMO the best way to go offshore is big and bold. Building up slowly just allows smarter competitors to see what you have and then do it better and bolder.

Anyway thats my 2 cents and I look forward to seeing you going ahead and hopefully getting some of the action myself.

[Tasman Capital]

I understand that the Executive Chairman of Pulse will be on the TV1 business breakfast show tomorrow morning - Wednesday 14th Nov - so check it out if you are up that early.

Also, Pulse have updating their website at www.pulseutilities.com with more on the Pulse story if you are interested.

Good comments and question Nevl - watch this space for an answer soon.

[minimoke]

Pulse has me interested if they can come up with a retail price of close to $38 MWH (current average wholesale price) and I’ll be looking at signing as a customer. But there is nothing in their business plan to date that will see me investing. Playing the electricity market, which is watt Pulse appears to be asking its consumers to do is beyond my enthusiasm to save a few bucks. I doubt there are really that many people out there who want to play at that game. With five minute prices fluctuating from $10 to $41 it would be a full time job trying to work out when the best time to buy/use power might be. If someone is in the middle of cooking dinner and prices hit $45 will they turn the oven off – no. But they will be turned off Pulse when they see their power bill come in. Do they find a visiting meter reader a bother – probably no and certainly not 3.5% of consumers. Other threads had a start value of $2.70 a share – this has now fallen to $2.00 a share. The media strategy needs to ramp up!

[mibo]

...Playing the electricity market, which is watt Pulse appears to be asking...

Pun intended?

[shane_m]

seems like they are trying to target the AMR metering market. NSW and Victoria already moving to AMR metering. No one in the market place has a full AMR system yet over here, so everyone is trying to get their product out NSW and Victoria govt. I think Vector in NZ has already chosen siemens as their supplier for AMR meters. I am not sure how many power meters are in Auckland, there is more than 4 million meters in Victoria, so who ever get the contract will do well.

[minimoke]

Check out this link for the video. http://tvnz.co.nz/view/page/1320238/1446063

So if I have it right Pulse won’t be making any money on the sale of electricity. They can’t if they are selling at close to wholesale price with a targeted 3.5% of market share.


And Joseph has said (“Pulse will not be trying to convince consumers to spend large amounts of money to buy a smart meter which offers benefits which most consumers do not value – half hour meter reads.”) so the money won’t be made from the sale of meters so where will the profits come from.

Its got to be from the rental. So the sums suggest $11m profit from 61,000 consumers = $687 a year for the meter rental. Pulse reckon a consumer can save 30% off their bill so for a domestic consumer the meter rental will account for probably half the power bill.

So what happens if I buy a house with a Pulse meter and a Sky dish but I don’t want to use Pulse or Sky. The sky dish gets to stay on the roof with no service. My power supply and meter?

[Tasman Capital]

minimoke – thanks for your contribution - I can see you are a skeptical person by nature which is probably a good trait for an investor but can I suggest not being too quick to write Pulse off - you wrote-off Tasman before it closed its IPO yet Tasman is doing well and has lots of work planned for next year too. Your style of analysis of Tasman is on the Tasman thread for everyone to see where you are very quick to jump to a conclusion, I see that has not changed. For a start, may I suggest that $11 million divided by 61,000 is $180 and not $687. As for the share price, that will be determined by the market when it lists – likely to be 21 Nov - but $2.70 was the mid-point of the valuation range. You are probably getting the $2 based on a market cap calculated by a journo using the rights issue price of $2 - the rights issue is only available to Pulse shareholders (which includes all Tasman shareholders).