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  1. #2671
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    Quote Originally Posted by bull.... View Post
    3.12 resistance might be giving way , been held back recently compared to others.

    this interesting

    In October last year Genesis and Tilt Renewables announced a strategic relationship between the parties for the development of more renewable energy for the New Zealand market

    https://www.nzx.com/announcements/334675

    castle hill partnership?
    "The Waverley Wind Farm comes at a price that is competitive with other forms of baseload electricity, which is particularly important as we meet demand from the transport and industrial heating sectors looking to electrify in the coming years,”

    Genesis running a wind farm as a base load station??!? The press release goes on to say that the wind farm will actually be owned by Tilt Renewables, with Genesis contracted to take all the power output.

    Waverley Capacity is forecast to be 130MW. If these run 24/7 then the power generated over a year would be:

    0.130GW x 365day x 24hours/day = 1138GWh

    However, we know this is not going to happen. Expected generation over the year is 450-460GWh. So 'capacity utilisation' over a year is expected to be:

    450-460 GWh / 1138 GWh = 40%

    How can a wind power station which is expected to operate to capacity only 40% of the time be a 'base load' power generation station?

    SNOOPY

    P.S. Bull, I think you might be right about the Castle Hill scheme being the next wind farm project for Tilt.
    Last edited by Snoopy; 17-05-2019 at 09:11 PM.
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  2. #2672
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    Quote Originally Posted by Snoopy View Post
    ......

    How can a wind power station which is expected to operate to capacity only 40% of the time be a 'base load' power generation station? ......
    To put it simply, it can't.

    I suspect that what they mean is that it will be priced in the base at $0.01 per MWh. This ensures that it gets dispatched ahead of other forms of generation. Right now the national wind generation total is 447 MW out of an installed capacity of 690 MW. All of it except for 35 MW at NWF is offered into the market at $0.01 per MWh.

  3. #2673
    ShareTrader Legend Beagle's Avatar
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    Term deposit, call account and bond yields getting cut back over the last wee while since the OCR cut and now some people are predicting another cut or even two to the OCR.
    Even REIT yields which have become something of a quassi bond proxy are falling heavily and popular REIT's like GMT and VHP and similar now paying only about 3.6% (PIE yield).

    Gentailier GNE with its ~ 5.5% yield 80% imputed = 5.5 / 0.776 = 7.1% gross is looking mighty attractive as a bond proxy. Yes there may be very gradual tailing off issues in the very long run, or maybe there won't be but 7.1%, my goodness that's pretty compelling so I think I might get some more.
    Last edited by Beagle; 18-05-2019 at 05:16 PM.
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  4. #2674
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    Quote Originally Posted by Jantar View Post
    EP3 has an operating range (not desirable) of around 180 to 380 MW. Percentage wise this is a much smaller range. With CCGT plant it is often the GT core that causes the most issues.
    Quote Originally Posted by Jantar View Post
    To put it simply, it can't.

    I suspect that what they mean is that it will be priced in the base at $0.01 per MWh. This ensures that it gets dispatched ahead of other forms of generation. Right now the national wind generation total is 447 MW out of an installed capacity of 690 MW. All of it except for 35 MW at NWF is offered into the market at $0.01 per MWh.
    There is one other way that the Waverley Wind Farm could be seen as 'baseload generation'. Could it be that Genesis are planning to operate it in tandem with 'Unit 5' aka EP3 (designed as a baseload generation unit from what I can gather). IOW when the wind is blowing 'Unit 5' is throttled back. Not sure how practical this would be given a not completely flexible operating range for EP3 as Jantar has indicated above.

    SNOOPY
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  5. #2675
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    Quote Originally Posted by Beagle View Post
    Gentailier GNE with its ~ 5.5% yield 80% imputed = 5.5 / 0.776 = 7.1% gross is looking mighty attractive as a bond proxy. Yes there may be very gradual tailing off issues in the very long run, or maybe there won't be but 7.1%, my goodness that's pretty compelling so I think I might get some more.
    My 'Headwind' post 2614 was looking at the construction of the 'Castle Hill Wind Farm', not 'Waverley'. However, exactly the same logic applies to Waverley, including the 33% reduction in cashflow (and hence dividend) to build the whole of Waverley should it get the green light.

    The term's 'long term' and 'short term' are always subject to personal interpretation. But with hints from Genesis that an announcement on Waverley may be made within a couple of weeks, I wouldn't count this issue as something to be considered 'in the very long run'.

    Having said this, Genesis appear have 'pulled a rabbit out of the hat' by not having to front up any capital to build Waverley: Tilt will do that. I can't decide whether management are being incredibly clever in expanding their generation capacity this way, or incredibly naive. It seems an almost master stroke to palm all the capital cost of development of Waverley to someone else, while maintaining the benefit of having the total output of that power station set aside for the exclusive use of Genesis Energy. Yet I feel this project is very unlikely to be a 'free lunch' for Genesis. There must be a hook in this deal that allows the party that will build and own the Waverley Windmill Power Station -'Tilt'- to take the construction risk. It is hard to believe the Genesis Board would be so naïve that they cannot see the counterparty risk. Anyone care to speculate as to what that counterparty risk might be?

    SNOOPY
    Last edited by Snoopy; 18-05-2019 at 08:48 PM.
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  6. #2676
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    Quote Originally Posted by Snoopy View Post
    There is one other way that the Waverley Wind Farm could be seen as 'baseload generation'. Could it be that Genesis are planning to operate it in tandem with 'Unit 5' aka EP3 (designed as a baseload generation unit from what I can gather). IOW when the wind is blowing 'Unit 5' is throttled back. Not sure how practical this would be given a not completely flexible operating range for EP3 as Jantar has indicated above.

    SNOOPY
    This would be an ideal way of operating any wind farm. Unfortunately the way our electricity market operates this is not possible. it would require a totally different market and dispatch system which, in my opinion, would be a big improvement over what we currently have.

    The Waverly wind farm is small enough that it could be matched with E3P. although using E3P in that manner would put more stress on the plant.
    Last edited by Jantar; 19-05-2019 at 10:20 AM.

  7. #2677
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    Quote Originally Posted by Jantar View Post
    This would be an ideal way of operating any wind farm. Unfortunately the way our electricity market operates this is not possible. it would require a totally different market and dispatch system which, in my opinion, would be a big improvement over what we currently have.

    The Waverly wind farm is small enough that it could be matched with E3P. although using E3P in that manner would put more stress on the plant.
    a/ I see an electricity system in NZ with a largely updated Transpower grid. That allows much more flexibility in what stations can 'compete' to satisfy any instantaneous load.
    b/ I see gentailers (in particular Contact and Mercury) able to store energy in their 'battery lakes' at time of modest power requirements, while geothermal stations do the heavy lifting of the baseload requirements.
    c/ I see wind power stations able to feed all their generation into the grid while they are sufficiently blown to do so.
    d/ I see very little if any new capital is required to build new power stations needed to meet future growth.

    It looks like a near ideal set up to me. What could be better?

    SNOOPY
    Last edited by Snoopy; 19-05-2019 at 07:14 PM.
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  8. #2678
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    Quote Originally Posted by Snoopy View Post
    a/ I see an electricity system in NZ with a largely updated Transpower grid. That allows much more flexibility in what stations can 'compete' to satisfy any instantaneous load.
    b/ I see gentailers (in particular Contact and Mercury) able to store energy in their 'battery lakes' at time of modest power requirements, while geothermal stations do the heavy lifting of the baseload requirements.
    c/ I see wind power stations able to feed all their generation into the grid while they are sufficiently blown to do so.
    d/ I see very little if any new capital is required to build new power stations needed to meet future growth.

    It looks like a near ideal set up to me. What could be better?

    SNOOPY
    a/ An updated grid? yes please. The whole industry would like to see that happen. Particular attention is needed in the lower south island, and east coast of the north island.
    b/ At present it is only Meridian that has that full flexibility of storage, with a small amount of flexibility available to Mercury. Contact has little flexibility in using Hawea for storage, and its Clutha stations are more run of river type stations.
    c/ That is the way it works at present.
    d/ That depends on the type of stations needed. Future intermittent generation does require storage, either battery or pumped storage hydro power.

  9. #2679
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    Not going to get into the whole technical side of things Snoopy...requires to much effort on my part and I will leave that to you and Jantar and anyone else interested, I simply can't be bothered. They have a road map to achieve EBITDA of $400m - $430m by FY21 as detailed in their presentation and the current yield is 7.1% gross on just a 78% payout of free cash flow and forecast of ~ $360m EBITA. There is clearly substantial headroom with that modest FCF payout ratio and EBITDA is forecast to increase ~ 10%-20% over the next two years. Those numbers are good enough for me to say in this extremely low interest rate environment its a good hold. http://nzx-prod-s7fsd7f98s.s3-websit...460/297344.pdf
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
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  10. #2680
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    Quote Originally Posted by Snoopy View Post
    I can't decide whether management are being incredibly clever in expanding their generation capacity this way, or incredibly naive. It seems an almost master stroke to palm all the capital cost of development of Waverley to someone else, while maintaining the benefit of having the total output of that power station set aside for the exclusive use of Genesis Energy. Yet I feel this project is very unlikely to be a 'free lunch' for Genesis. There must be a hook in this deal that allows the party that will build and own the Waverley Windmill Power Station -'Tilt'- to take the construction risk. It is hard to believe the Genesis Board would be so naïve that they cannot see the counterparty risk. Anyone care to speculate as to what that counterparty risk might be?
    Here is what the counterparty 'Tilt' says about building windfarms in their FY2018 Annual Report:

    ---------

    Flexible strategy on offtake

    Wind and solar farms sell electricity into markets where there is inherent price uncertainty over the life of the asset. This price uncertainty can be swapped to offtake buyers via a long term fixed price power purchase agreement (PPA) but the appetite of buyers for PPAs in terms of pricing and term varies with market conditions and with the influence of emissions and renewable energy policy evolution.

    Our strategy is to take a portfolio approach that allows some flexibility in the timing of PPA contracting as well as some merchant and medium term power sales contracts. This strategy is evident with the Salt Creek Wind Farm where PPA off-take arrangements were implemented after the investment decision for this smaller scale development. This flexibility allows us to choose the best outcome for each project and removes one area of constraint in getting a project to investment decision

    --------------

    The Tararua Tilt Windfarm assets are 100% contracted until the end of their asset life, and I think the Genesis consented Waverley is likely to fit into that business model.

    Under Note 6, plant and equipment are forecast to have a depreciation rate of 5 to 33%. If Wind Turbines are the most long lived of property plant and equipment, full depreciation equates to 20 years from when each particular turbine is commissioned.

    Under note 4 the accumulated depreciation for the year at Tilt was $78.635m. Under Note 6 Generation production costs were $20.088m If this is spread between Australia and New Zealand in proportion to book asset value in each country, then the proportion of depreciation relating to NZ operations was:

    $219.740m / ($944.103m + $219.740m) = 0.19, or 19%.

    So annual depreciation of the NZ Wind farm operations are likely to be:

    0.19 x ($78.635m + $20.088m) = $18.8m

    This relates to 196MW of Tararua Wind Farm Generation in New Zealand. Waverley wind generation is forecast at 130MW. So annual depreciation and operational running costs for the new wind farm could be around:

    $18.8m x (130MW/196MW) = $12.5m

    This a base cost and includes turbine running expenses that weirdly seem to be contacted out to the turbine supplier Veritas. But it doesn't include any profit margin Tilt will have to cover off to make the business case stack up.

    I am guessing that Tilt will need to charge Genesis somewhere around $25m per year to make this deal stack up. That will be a big hole in Genesis's so called 'free cashflow' going forwards, before any borrowing costs incurred by Tilt. Those will also have top be passed on by Tilt to Genesis as well. Yet whatever the total, it will all be tax deductible for Genesis Energy. At least that is how I expect the deal to be spun - let's see!

    SNOOPY
    Last edited by Snoopy; 24-05-2019 at 09:55 AM.
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