MCY Mercury NZ ( MRP Mighty River Power)

[Aaron]

Sounds like a large amount of dead interest money is going out of the loop into the pockets of the lenders, to no gain to MRP; Nothing to lose by getting rid of debt, except the notion that it is always good to have a debt/equity ratio to talk about, and have dividends to talk about. Cut to the chase see the big picture and increase long term shareholder (Kiwisaver?) wealth rather than work your butt off for the bondholder/banker etc paying interest unnecessarily..
Saying you have a manageable debt to equity ratio is a bit meaningless ;debt is for investment, not dividends.Not just talking MRP, but many/most other companies.
But it seems politically incorrect/ not acceptable to the market to not have dividends, which is a bit irrational.
Think about it though; would you borrow money just to pay yourself??
Taken to the extreme, IIRC Hanover Finance directors paid themselves the entire value of the company leaving it with an infinite debt to equity ratio, worked out real well(for some)...

I don't disagree there Crac A Jac but you are fighting a world central bank policy of constant inflation which is beneficial for lenders over the long term provided interest rates stay low. This might come to an end soon and debt will be a noose around everyones neck but sadly we are more likely to see negative interest rates so all those sensible people who have saved and put money aside get killed once again.
Hanover, I think they just paid dividends because their income was growing with growth in interest income which probably jumped as default rates kicked in. As people weren't repaying their loans Hanover's assets would have been growing as well as the interest income was capitalised on existing loans. So all would have been looking good until everyone realised the loans weren't going to be repaid. Sadly the people who would have known about this were busy organising dividends to themselves from the remaining cash available. I could be wrong on this but that how I understood it. The worst thing is the rotten pr**ks got away with it and remain some of our most respected and wealthy individuals. Punishment for white collar crime is a joke. Wasn't Mark Hotchin in the NZ Herald recently?? Sorry a bit off track for the MRP thread.

[Crac A Jac]

Don't think its too far off track,I'm just taking an extreme case to get a point across.
PS
I had looked at Hotchin's own website and he said it is legal for a company to pay out all the value of the book assets as a dividend; which reflects a bit on him and the total weakness of the law and the SFO. I would have thought he et al could have been pinged on laws related to reckless director conduct.
It does seem that petty criminals get hit the hardest and white collar ones may get knighted in NZ(White collar fraudsters apparently commit 5-10% of crime in the States but do 90% of the dollar damage)

[Marilyn Munroe]

I had looked at Hotchin's own website and he said it is legal for a company to pay out all the value of the book assets as a dividend; which reflects a bit on him and the total weakness of the law and the SFO. I would have thought he et al could have been pinged on laws related to reckless director conduct.
It does seem that petty criminals get hit the hardest and white collar ones may get knighted in NZ(White collar fraudsters apparently commit 5-10% of crime in the States but do 90% of the dollar damage)

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

Woody Guthrie

Boop boop de do
Marilyn

[winner69]

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

Woody Guthrie

Boop boop de do
Marilyn

Woody was no fan of Don Trump's dad either -

I suppose
Old Man Trump knows
Just how much
Racial Hate
he stirred up
In the bloodpot of human hearts
When he drawed
That color line
Here at his
Eighteen hundred family project ....

http://www.theguardian.com/music/201...st-foundations

[horus1]

I have just noticed that KIP have installed solar at sylvia park and are extending it to other shopping centers . It is economic in Nz. This is the biggest threat to MRP and the other generators. In Europe solar is on all supermarkets .

[troyvdh]

Dear horus...Great news indeed...However your comment about "it is economic in NZ"...aaahh I beg to differ on this...We kiwis have (I believe) the sad issue in that we consider a house as a play thing...a method of making money..."we" must have ensuites...triple garages..300 meters .....blah blah..totally tragic....I believe on average we change houses every 7 years....totally insane I agree ....anyways...Its my belief that to "come out on top"....after installing a solar system is probably achievable after say ten years...just saying cheers

[mouse]

I don't disagree there Crac A Jac but you are fighting a world central bank policy of constant inflation which is beneficial for lenders over the long term provided interest rates stay low. This might come to an end soon and debt will be a noose around everyones neck but sadly we are more likely to see negative interest rates so all those sensible people who have saved and put money aside get killed once again.
Hanover, I think they just paid dividends because their income was growing with growth in interest income which probably jumped as default rates kicked in. As people weren't repaying their loans Hanover's assets would have been growing as well as the interest income was capitalised on existing loans. So all would have been looking good until everyone realised the loans weren't going to be repaid. Sadly the people who would have known about this were busy organising dividends to themselves from the remaining cash available. I could be wrong on this but that how I understood it. The worst thing is the rotten pr**ks got away with it and remain some of our most respected and wealthy individuals. Punishment for white collar crime is a joke. Wasn't Mark Hotchin in the NZ Herald recently?? Sorry a bit off track for the MRP thread.

Constant Inflation can easily be engineered. Until it becomes a bit difficult. Which is why our NZ Reserve Bank has failed to meet the 1% to 3% annual inflation target. Sack the boss I say and get another one who can meet his target. It is a very simple, measurable, target. Failure is not acceptable!
We then come to the Dreaded Deflation. What can we do with no inflation? When borrowing cash is easy and interest rates low. We might be able to borrow cash at 3%, but the actual annual cost of borrowing in a Deflationary economy might be 10%. Life is a problem. My solution is to sack the boss of The Reserve Bank. He has failed to meet his target!

[Snoopy]

Seems expensive debt they have - interest cost 9.4%

Some $300m of the debt is bonds at 6.9% - the rest must be awfully expensive.

With a ROE of 4.6% and a ROIC of 5.1% one could say debt is not 'bad'

What's their cost of capital? Not adding much, if any, value these days if f15 performance is typical.(returns above are after eliminating the $130m impairment charge)

Disc: know stuff all about those type of companies except this cursory glance at their financials.

Winner, may I direct you to my post 662 on this thread "2014 view Return on Equity >15% (one setback allowed) (Iteration 2)". There you will see how, for example, in FY2014 the ROE declared at 5.8% was really 49.7%! Not bad for a boring utility type share -eh? Just don't let any government ministers read the detail of the annual report that explains this! We wouldn't want any of those pesky voting customers knowing what the real story is! With this kind of equity return, leveraging things up by carrying some debt makes a lot of sense.

SNOOPY

[winner69]

Winner, may I direct you to my post 662 on this thread "2014 view Return on Equity >15% (one setback allowed) (Iteration 2)". There you will see how, for example, in FY2014 the ROE declared at 5.8% was really 49.7%! Not bad for a boring utility type share -eh? Just don't let any government ministers read the detail of the annual report that explains this! We wouldn't want any of those pesky voting customers knowing what the real story is! With this kind of equity return, leveraging things up by carrying some debt makes a lot of sense.

SNOOPY

Won't comment about this view Snoops because I think you actually believe it.

But seeing shareholders have only ever subscribed to $378m of capital (and the company has bought ~$50m of that back) Mighty River does really well eh

[Snoopy]

Won't comment about this view Snoops because I think you actually believe it.

But seeing shareholders have only ever subscribed to $378m of capital (and the company has bought ~$50m of that back) Mighty River does really well eh

Mighty River Power has greatly benefitted from the rise in the price of power over the years. All of those old hydro assets, some built before the middle of last century, just keep on chugging out electricity while the marginal cost of new electricity keeps rising. Discounted cashflow projections tell managment those hydro assets in particular are worth more and more. Real profits have been booked on these valuation increases and tax paid.

However, if the marginal cost of new -peak- power starts to reduce, then some of these MRP assets value gains might have to be have to be written back. Personally I don't believe that will happen. That means the gravy train of 'sitting on your hydro hands' will continue to deliver profits.

If more solar panels start appearing on suburban roofs, that won't cut down the peak loads on the system. That's because peak load and peak charge are not time matched for solar. So it is likely, IMO, that power consumers will face both a 'fixed charge' from the line company (as now), and also a 'fixed charge' on the energy component of the bill as well. With this type of charging system, the value of MRP dams will be preserved, even if there is a solar panel on every roof.

SNOOPY