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  1. #1471
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    Quote Originally Posted by fish View Post
    It certainly is a very perverse situation that proves we have a system that promotes absolutely wasteful burning of gas.
    why would contact not store their gas?Why have a thermal plant at almost full load whilst spilling water ?
    Maybe they are. Contact are the only company with gas storage, but there is a maximum amount that they can pump into the ground. If their Take or Pay amount is greater, then they would have to burn the excess.

  2. #1472
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    Quote Originally Posted by Jantar View Post
    Maybe they are. Contact are the only company with gas storage, but there is a maximum amount that they can pump into the ground. If their Take or Pay amount is greater, then they would have to burn the excess.
    Its so irresponsible with global warming etc.
    There has to be better solutions-having a more flexible gas contract,converting the gas into lpg,another pump,selling the gas to industry etc.
    As a contact shareholder I will be communicating my feelings to the company

  3. #1473
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    Quote Originally Posted by fish View Post
    Its so irresponsible with global warming etc.
    There has to be better solutions-having a more flexible gas contract,converting the gas into lpg,another pump,selling the gas to industry etc.
    As a contact shareholder I will be communicating my feelings to the company
    I think take or pay gas is the curse of an oligopoly on both the sell and buy side of the gas market in New Zealand. Everything that is being pulled out of the ground from Kupe are chains of carbon atoms, with hydrogen atoms bonded outside of them. Eight carbon atoms in a row and you have octane, a constituent of petrol. The more carbon atoms in the chain, the more likely that compound is a liquid. Liquids are easier to transport and store than gas. LPG is largely made up of three carbon atom chains (propane) and four carbon atom chains (butane).

    The stuff they call 'natural gas' is mostly methane. Methane has only a single carbon atom. Any gas can be liquified. But in practical terms the pressures and low temperatures needed to do this with methane would make such a process uneconomic. So you can't readily convert 'natural gas' to LPG.

    There is a separate market for selling gas to industry that already exists.

    The alternative to having take or pay might be to put all the staff at Kupe on zero hour contracts. Wait until the power price gets high. Then go through the commissioning phase to get the pipes up to speed. Pipes/Valves that have lain unused for some time may have developed gas leaks. So they would all have to be tested and given the safety OK by OSH. Finally after a week or so gas would start flowing. The question is, would those workers at Kupe accept zero hour contracts? And would the demand for the gas still be there once the ramp up phase of the gas plant was complete?

    SNOOPY
    Last edited by Snoopy; 09-05-2015 at 02:43 PM.
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  4. #1474
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    Fascinating thread; thanks all.
    Am trying but struggling to convert this info into buy , hold or sell

  5. #1475
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    Quote Originally Posted by Jantar View Post
    Second point is that power prices do not depend on expectation, other than climate forecasts to help determine what the inflows are likely to do in next season.
    That is what I meant by expectation!

    This summer inflows were down, and storage was low, but there no fear of shortages as long as resources were managed, which they were. Prices were being set by Contact having problems at Otahuhu (OTC) and running the Stratford (SFD) peakers much harder. They are more expensive to run so there was less low cost generation in the stack. Fear did not enter into the price, only availability of water and gas.
    As I said, the fear of running out of water and gas. This is a rational fear that is real. So you do agree with me that the electricity market is governed by expectation and fear after all!

    SNOOPY
    Last edited by Snoopy; 09-05-2015 at 03:05 PM.
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  6. #1476
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    Quote Originally Posted by Joshuatree View Post
    Fascinating thread; thanks all.
    Am trying but struggling to convert this info into buy , hold or sell
    So am I Joshuatree! More stoking of my steam powered abacus I have yet to do. But in a nutshell:

    1/ I think I am going to pull the petrol and LPG revenue stream out of the published results (somehow). This will probably be by taking a discounted cashflow view of Kupe reserves off the share price.
    2/ What is left will be the electricity generating and retailing side of the business. And that should give a better yardstick to measure up against those other NZ gentailers.
    3/ I will derive my average estimate of future electricity earnings by superimposing each actual result from 2008 to date on the current capital structure, then taking an average.
    4/ Some of these actual results will require adjusting, because payments for frequency keeping, as an example, are no longer possible to the same level under current law.

    I sit on the doghouse ready to be corrected for this approach. But from where I sit, it seems to me to be the most promising road to follow.

    SNOOPY
    Last edited by Snoopy; 09-05-2015 at 03:04 PM.
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  7. #1477
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    Quote Originally Posted by Snoopy View Post
    That is what I meant by expectation!



    As I said, the fear of running out of water and gas. This is a rational fear that is real. So you do agree with me that the electricity market is governed by expectation and fear after all!

    SNOOPY
    No I do not agree with you at all. In 1992 there was real fear of running out of water, that was pre-market. In 2001 there was fear of running out of water. This year there was no fear of that at all.

    Perhaps I should explain how hydro generation prices are calculated (as per the text book, not exactly how we do it).
    Imagine a hydro dam that is absolutely full. There is no room for any more water to be stored, and inflows are exactly equal to outflow at full load. If that station is backed off by 1 MW, then it will spill and that water is lost. Therfore the water value is $0 per MW.
    Imagine a dam that is absolutely empty. No more water can be taken from it without breaching resource consent levels, and inflows are equal to outflow at minimum load. If 1 more MW is needed, then the hydro station can only supply it if everything else is already running and that 1 MW is what is required to prevent a blackout. Therefore the value of that water is greater than the most expensive other form of generation on the system. In NZs case that is Whirinaki generation.
    So maximum and minmum limits are now set for the water value and the next stage is to determine intermediate values. The simplest way is a single straight line price path from $0 to the maximum $ per MW, and I think that is what some forward planning analysts do. The more correct way is to to set a target reservoir level that will vary according to seasonal inflows and planned outages of other generation plant in the company's portfolio.

    This way the offer price for hydro generation is determined by a model using actual storage, planned storage, actual inflows, expected inflows, and other plant availability. Thus as hydro offer prices rise, it is a signal for more thermal generation to ramped up.

    I know that at least 3 of the 5 main gentailers use such a model. So fear does not enter into the equation anywhere.
    Last edited by Jantar; 10-05-2015 at 04:33 PM.

  8. #1478
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    Quote Originally Posted by Snoopy View Post
    I think take or pay gas is the curse of an oligopoly on both the sell and buy side of the gas market in New Zealand. Everything that is being pulled out of the ground from Kupe are chains of carbon atoms, with hydrogen atoms bonded outside of them. Eight carbon atoms in a row and you have octane, a constituent of petrol. The more carbon atoms in the chain, the more likely that compound is a liquid. Liquids are easier to transport and store than gas. LPG is largely made up of three carbon atom chains (propane) and four carbon atom chains (butane).

    The stuff they call 'natural gas' is mostly methane. Methane has only a single carbon atom. Any gas can be liquified. But in practical terms the pressures and low temperatures needed to do this with methane would make such a process uneconomic. So you can't readily convert 'natural gas' to LPG.

    There is a separate market for selling gas to industry that already exists.

    The alternative to having take or pay might be to put all the staff at Kupe on zero hour contracts. Wait until the power price gets high. Then go through the commissioning phase to get the pipes up to speed. Pipes/Valves that have lain unused for some time may have developed gas leaks. So they would all have to be tested and given the safety OK by OSH. Finally after a week or so gas would start flowing. The question is, would those workers at Kupe accept zero hour contracts? And would the demand for the gas still be there once the ramp up phase of the gas plant was complete?

    SNOOPY
    Snoopy there are other alternatives that are more in keeping with a social and climate responsibility-underground storage as with contact-maybe they need a more powerful pump?Why isn't genesis doing the same as contact?

    As you probably know methane can be processed and stored as lng -then it can be used in transport-maybe it should be taxed at a lower rate than petrol/diesel as it is so much cleaner-
    I feel it is very wrong to be spilling water and burning gas instead to generate electricity.
    If it costs to store gas you have to realize that the cost of that gas before storage is close to ZERO in situations such as now.
    Last edited by fish; 09-05-2015 at 04:14 PM.

  9. #1479
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    Take or pay, thanks to Enron distorts market decisions. Spilling water and burning take or pay gas is offensive.
    If the gas is not competitive it should be left in the ground.
    This has nothing to do with 0 hour contracts, that's another discussion.

  10. #1480
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    I think take or pay is an example of suppliers colluding in a monopoly against the consumer. As Adam Smith said " people of the same trade seldom meet together even for merriment and diversion but that the conversation ends in a conspiracy against the public".
    It's as if genesis said we will only build a CCGT if we are guaranteed $70MWh which is absurd. The market should be left alone but this monopolistic behaviour should be stamped out.
    Gas should fluctuate like electricity on a spot market.
    When companies make investments they alone should carry the risk and reward.

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