MEL - Meridian Energy

[PSE]

xrfalcon and Harvey Specter on the same sheet, we need the research for cheap solar panels and batteries and once this is in place we can start the glide path and wean ourselves off the big grid.
I think the gentailers are sharing the additional costs among consumers and they should stop doing that as they will put the price up I suspect it is the media that would kill them as they are well hated by the public becuase privatisation has proved so much more expensive.
The glide path will never work in NZ of course because we have an islanded network and our peak demand is in the cold winter, a sharp comparison to the intercontinental united states grid for example which is much stronger and has peak demand in summer for airconditioning load.

[PSE]

I don't think the Tiwai Point smalter closing would be a benefit to all.

Power company shareholders (the Mums & Dads the government promoted the IPO towards), regardless of the company, would get hammered. MEL more so due to HVDC link transmission constraints. Those nice dividends that we & the government enjoy would be slashed and the SP would head south effecting NZ Super fund. Bluff and Southland economies would get hammered, thousands of jobs would be effected directly or indirectly, social welfare costs increase, all when the Chch rebuild is starting to wind down. It would be a major economic shock in 2017 if the smelter were to close. Bill's surplus would be gone, and it's an election year

The smelter is not the problem. The real problem is the huge difference in electricity price paid by the smelter v's Joe Bloggs (domestic supply profit much much greater than Tiwai supply profit [if there is any]), and the individual cost components being hidden in domestic kWhr pricing (allows each cost contributor to point the finger at someone else, accountants are very good at that).

My read is that those 3 new transformers currently being installed are a sign that the smelter isn't closing anytime soon, but the shift towards distributed generation will slowly accelerate because no company on the supply side will voluntarily reduce their margins, and there was such fierce industry opposition to separating out the individual cost components of the kWhr price (even though they already do it for large commercial customers). However this PV solar is a long game, due to high entry cost of distributed generation. ie. $6k investment for a tiny 1.5kW system

xafalcon, am I hearing the gentailers can't end their subsidy for offsetting solar?. Surely they could have an additional charge for solar connections and this is what they will do at some point, before too much more money is wasted?
Subsidies for industry are bad news and not good for all when ended but neccesssary to be done gradually. My feeling is that Tewai will be in negotiation with the thermal stations and if agreement can be reached a CCGT may not need to be mothballed.
I don't think I need to analyse the market to prevent overcapacity, that's what markets do best - probably a flat wholesale market for a few years but no crisis. Maybe will trigger losses for people who paid to much for gentailers but a fool and their money are soon parted.

[Joshuatree]

Courtesy of Huxley on genesis thread. Tiwai point made $74 million profit last year

http://i.stuff.co.nz/business/indust...ugh-conditions

[Baa_Baa]

You might be right, in the long game, who knows really (or cares)? Meantime MEL are amongst the best investments on the market right now. Pontificating about solar isn't going to change the immediate facts, and even yourself has admitted IPO holders at their buy price are in the money.

xrfalcon and Harvey Specter on the same sheet, we need the research for cheap solar panels and batteries and once this is in place we can start the glide path and wean ourselves off the big grid.
I think the gentailers are sharing the additional costs among consumers and they should stop doing that as they will put the price up I suspect it is the media that would kill them as they are well hated by the public becuase privatisation has proved so much more expensive.
The glide path will never work in NZ of course because we have an islanded network and our peak demand is in the cold winter, a sharp comparison to the intercontinental united states grid for example which is much stronger and has peak demand in summer for airconditioning load.

[Joshuatree]

Being one of only two smelters in the world to produce"ultra high purity aluminium" has to create some sort of premium i guess. And re the future pricing of ALU (on geniuses thread) arguments for higher and lower pricing creates the uncertainty (until July 1?)that mkts don't like.
Re Tiwai going on about the super high transmission costs, i guess its because they are the only ones using that particular infrastructure; no one else to share the costs with.

The expensive task of rehabilitating Tiwai point ; 100's of millions of $?. One more reason to stay operating.

[Harvey Specter]

Being one of only two smelters in the world to produce"ultra high purity aluminium" has to create some sort of premium i guess.

Not necessarily but unless you own the other one, you cant really close it down without major impacts on the market (assuming people acutally want ultra high purity) which would cause someone to start up a new one???

Plus remember they have to pay half a Billion remediation costs if they close. They wont be looking at short or even medium term prices. They will be looking long term.

[Joshuatree]

Yes agree with that as said in my post. July the 1st a storm in a teacup maybe.

"The expensive task of rehabilitating Tiwai point ; 100's of millions of $?. One more reason to stay operating.[/QUOTE] JOSH

[Rep]

At the IPO price incl the instalment to be paid, the yield is pretty reasonable and represents a good rate of return to compensate for the earnings risk associated with the Tiwai Point supply contract.

Medium term, despite the adoption of technology, I can't see that consumption of electricity per capita is going to reduce. LED lighting uses less electricity but when you start getting used to that level of light in every room you end up using more power, for every PV advancement - there's another step toward more electric vehicles and I've lost count of the number of devices that seem to require charging daily. Add an Apple Watch instead of a quartz or the automatic one I still wear and that's another increment. Our McMansion has heat pumps which are efficient but we used to make do with wearing more clothes and a thicker duvet on the bed in winter...

Add to the overall drift upwards in population growth, then unless something really disruptive comes along to wean householders away from using it as electricity did to coal ranges - then medium term we are still going to be relying on the gentailers for a while longer....

[PSE]

Baa baa IPO holders will be in the money if they sell, which they should do while the price is high.
Otherwise it is a profit on paper only.
Solar will adversely affect the gentailers profits due to the misalocation of capital into an uneconomic source and they should stop the waste. Will always need the grid in NZ.

[Baa_Baa]

PSE with respect, I took your point to be about ROE, which at the IPO price if held until your doomsday scenario, will be a nice earner for the patient investor. There have already been significant dividends paid out, which will stop if the shares are sold. The capital gain is immaterial as you say unless it is realised by selling the shares. The current price is declining back to being a reasonable earner, if not as appealing as the IPO, hence yield investors interest will increase. I doubt many MEL investors are particularly concerned about solar energy threatening their investment anytime soon, but JMHO.
Cheers
BAA

Baa baa IPO holders will be in the money if they sell, which they should do while the price is high.
Otherwise it is a profit on paper only.
Solar will adversely affect the gentailers profits due to the misalocation of capital into an uneconomic source and they should stop the waste. Will always need the grid in NZ.