MEL - Meridian Energy

[Beagle]

The bigger threat is much higher bond yields like a NZ 10 year at 6-7% rather than 4.8%

Yeap there's that risk too.

Snapiti, nice post too
And even when / if the new transmission lines are built by Transpower their charges, (which I'm going to say are a major way for the Govt to milk the grid, because that's what they are), plus the gross level of inefficiencies in transmitting power all the way from Manopouri to say Auckland where its really needed, may make this a marginal exercise at best.

Gents, have another look at the recent quarterly releases from MRP and Meridian regarding demand and wholesale pricing. Plenty there to take on board.

[TimmyTP]

Of course I agree totally.
But how long approval through the enviroment courts will take is anyone's guess.
me thinks 3-5 years.
Lawyers love this stuff and land owners effected will challanged every step of the proccess

Environment court matters are certainly unpredictable. I remember someone in Coromandel objecting to the Albany-Orewa motorway extension and managing to delay it by about 5 years, over concerns about the spawning of a particular type of fish. Not suggesting we should ignore the environment, but 5 years seemed a little excessive:
http://www.nzherald.co.nz/nz/news/ar...jectid=2351231

[Beagle]

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%

Good post too. Doesn't mean on a PE of over 20 that the company faced with these serious business risks is a good investment though.
That said the irony that you couldn;t possibly build all those hydro stations and wind farms for anything like the market capitalisation of Meridian isn't lost on me.

[Joshuatree]

5 years seems reasonable/ realistic

[Daytr]

The best thing the Govt. could do with these assets is to keep them in public hands & make them non-profit by reducing private individuals power bills. It would have a massive stimulus effect on the economy putting money in the pockets of Mums & Dads & all New Zealanders that would be spent & multiply through the economy. Rather than making quite sizeable profits & then flogging them off for a discount, set aside a certain amount for infrastructure & renewable energy & then what is remaining reduces the cost of power for households which is excessive in NZ & going up at about double or more the rate of inflation. It will be interesting what the referendum result is, however unfortunately I suspect self interest will prevail. AIRNZ is a bit different as this was effectively a bail out, but perhaps its important enough for NZ as a brand & let alone provider of transportation & freight that it too needs to be controlled by the Govt.

[robbo24]

There is probably a lot of electricity reliant industries that would be happy to increase production or move into an environment with a [potential] oversupply of electricity.

[mouse]

There is probably a lot of electricity reliant industries that would be happy to increase production or move into an environment with a [potential] oversupply of electricity.

What Meridian should do is reduce the price of electricity to its South Island retail customers, such as Christchurch ones like me, and save on transmission losses to Auckland.
Plus encourage South Island commercial customers by reducing prices relative to the North Island.
Oversupply problem solved.

[Harvey Specter]

What Meridian should do is reduce the price of electricity to its South Island retail customers, such as Christchurch ones like me, and save on transmission losses to Auckland.
Plus encourage South Island commercial customers by reducing prices relative to the North Island.
Oversupply problem solved.

I assume they do price it cheaper (by the cost of transporting it north).

Despite what the greens say, the market is efficient (though it maybe questionable that everyone receives the marginal spot rate).

[vorno]

What Meridian should do is reduce the price of electricity to its South Island retail customers, such as Christchurch ones like me, and save on transmission losses to Auckland.
Plus encourage South Island commercial customers by reducing prices relative to the North Island.
Oversupply problem solved.

12% of the countries power doesn't simply get re-absorbed!

[Stu]

The best thing the Govt. could do with these assets is to keep them in public hands & make them non-profit by reducing private individuals power bills. It would have a massive stimulus effect on the economy putting money in the pockets of Mums & Dads & all New Zealanders that would be spent & multiply through the economy. Rather than making quite sizeable profits & then flogging them off for a discount, set aside a certain amount for infrastructure & renewable energy & then what is remaining reduces the cost of power for households which is excessive in NZ & going up at about double or more the rate of inflation. AIRNZ is a bit different as this was effectively a bail out, but perhaps its important enough for NZ as a brand & let alone provider of transportation & freight that it too needs to be controlled by the Govt.

WTF are you talking about? They are not in "public" hands to start with, they are in GOVERNMENT hands. Sheesh.
As for the "plan", why not do the equivalent and simply borrow a trillion from China and give it away to each household equally to "stimulate" the economy? It will be spent on flat screen TV and smartfones made in China and maybe random holidays in Fiji and the Gold Coast.
Travel agents and smartfone sellers will do well but say goodbye to a trillion NZ dollars


"It will be interesting what the referendum result is, however unfortunately I suspect self interest will prevail."

I suspect the the opposite, the majority who would rather spend their NZ dollars on smartfones and Fiji holidays while taking the chance to bitch about someone else apparently selling their "legacy" to foreigners (who they hate, but don't quote them on it).