MEL - Meridian Energy

[Beagle]

http://www.sharechat.co.nz/article/6...ting-pricehtml

The glut of supply I was talking about earlier in this thread and shrinking demand is starting to take its toll already.
What happens with the Smelter closes and 14% of the nation's already over supplied power comes to the market.
Yes, you guessed it, the remaining big wholesale industrial users will be in the box seat and wholesale prices will plummet.
$30 a megawatt hour anyone ?
You've been sold a PUP, get out at a small profit while you can, why take a financial beating like poor hapless Mighty River Power shareholders ?

[robbo24]

Speculation can only get us so far! Shall more flock when the first dividend payment comes up? Time shall tell!

It didn't work for MRP...

[mouse]

http://www.sharechat.co.nz/article/6...ting-pricehtml

The glut of supply I was talking about earlier in this thread and shrinking demand is starting to take its toll already.
What happens with the Smelter closes and 14% of the nation's already over supplied power comes to the market.
Yes, you guessed it, the remaining big wholesale industrial users will be in the box seat and wholesale prices will plummet.
$30 a megawatt hour anyone ?
You've been sold a PUP, get out at a small profit while you can, why take a financial beating like poor hapless Mighty River Power shareholders ?

But, if the price of electricity comes down, then so will the cost of generation. You just mothball none profit making plant. It may lead to higher profits!

[silu]

The trend is really ugly on this one. $1 mark the psychological barrier. I deliberately held back at the IPO (applied only for 2k worth) but would need a trend reversal before I can contemplate topping up.

[ScrappyO]

quick dip under $1.00 now.

[Beagle]

But, if the price of electricity comes down, then so will the cost of generation. You just mothball none profit making plant. It may lead to higher profits!

Sorry I can't follow your logic. In Meridian's case as all their generation is from renewable resources they have one of the lowest cost structures out there, so they've got no expensive generation to shutter down.
In simple terms if there cost of generation is say $15 a megawatt hour and they are forecasting getting an average of $60 their profit would be $45 per megawatt hour but if the wholesale price collapses to say $30 per megawatt hour due to a massive potential glut of power generation their profit would be one third of what it was. Probably won't be that bad but all the signs of demand from recent quaterly power company releases make grim reading and there's plenty of new generation still being built, meanwhile we have the well known smelter issue pending and the Labour Greens. Don't forget there's no means to effectivly and efficiently transmitt Manopouri's generation at present if the Smelters owner pulls the pin.
I think its clear this stock was pitched to be attractive to those chasing income...but how will the company pay these huge dividends when the signs are already there that wholesale power prices are under very serious pressure ?

[Arbroath]

Sorry I can't follow your logic. In Meridian's case as all their generation is from renewable resources they have one of the lowest cost structures out there, so they've got no expensive generation to shutter down.
In simple terms if there cost of generation is say $15 a megawatt hour and they are forecasting getting an average of $60 their profit would be $45 per megawatt hour but if the wholesale price collapses to say $30 per megawatt hour due to a massive potential glut of power generation their profit would be one third of what it was. Probably won't be that bad but all the signs of demand from recent quaterly power company releases make grim reading and there's plenty of new generation still being built, meanwhile we have the well known smelter issue pending and the Labour Greens. Don't forget there's no means to effectivly and efficiently transmitt Manopouri's generation at present if the Smelters owner pulls the pin.
I think its clear this stock was pitched to be attractive to those chasing income...but how will the company pay these huge dividends when the signs are already there that wholesale power prices are under very serious pressure ?

You make some good points but one reason why Meridian is the pick of the bunch is because it has low cost generation so if wholesale prices fall say 20-30% it is the high cost generation that will be forced to close and Meridian will make less profit but can keep generating reasonable margins. It is like being a low cost miner of a commodity watching competitors go to the wall around you. Not great for you but you will survive.

Thats the negative. Now imagine with population growth and the slowing of the industrial demand decline how good a c. 8% yield may look if things turn out a little better than the market is pricing at the moment. I think a lot of the risk is in the price at this level. The bigger threat is much higher bond yields like a NZ 10 year at 6-7% rather than 4.8%

[Harvey Specter]

Snapiti - I think resource consents will be pushed through quickly if it means Manapuri can keep spinning and Huntly can be closed. National would fast track that, as would a Greens led government (oop I mean Labour led)

[Joshuatree]

10 years ? Nope

Hi Winston, Manapouri was built by Bechtel concurrently with Tiwai Point, the government at the time never intended the power to go elsewhere. If Tiwai were to close suddenly, up to 400MW of Manapouri output would be stranded without the transmission being upgraded (existing corridors) through to the HVDC terminal at Benmore.

http://www.3news.co.nz/Grid-can-cope...3/Default.aspx

As I understand there is a four year notification period, so the risk is that Transpower may not be able to get the transmission upgrade built in that timeframe, politically and/or physically. Sounds like a long time, but NIMBY's don't like transmission lines.

The 630MW potentially available (inc the stranded 400MW) from Manapouri would go into the market, likely displacing thermal output at Huntly, so there are risks to both Meridian and Genesis.

[Harvey Specter]

Resource consents are the easy bit the government has a lot less control over the enviroment court system. This will take years.

Courts only apply the law as set by Government. If government wants it done, it will be done.