CHI - Channel Infrastructure Ltd (NZR)

[Joshuatree]

Maybe they could refine some chelsea golden syrup when gaps in the pipeline flow ,appear.Utilise it to the max.

[bull....]

Kinda regret buying into this one heavily a few years ago ... still making a profit but only because of the reasonable dividends ... was hoping this puppy would go up to $3 at one point ... oops

back in 2016 the comapny stated they were going to become a top 50 quartile dividend payer with lower debt levels 10 - 20% and short term payback projects. so im not surprised many including myself brought into the hype, unfortunately they have failed misserably to live up to the hype.

[RTM]

New GM has got a background in renewables. This could be his version of putting up new wallpaper. Very expensive wallpaper at that. I hope they build oppourtunity cost into their calculations as when the railway line heads to the port (another of shanes projects) I am pretty sure that the substaintial land holding that the refinery wants to turn into a solar farm will be worth a lot more that it currently is.

Your point about the solar farm on the land more or less adjacent to our new major Port is a good one. Agree, this land probably of a lot more value supporting the port. I guess the solar farm could go elsewhere ? Just needs somewhere it can hook up to the electrical grid ? And a friendly lines or power company ?

[Beagle]

The business model from a minority shareholders perspective is fundamentally flawed.
The $9 barrel processing fee cap is there purely for the fuel companies benefit and has not been raised for even the effects of inflation for many years, let alone for the increasing ESG and compliance risk or the increasing capex required.

Its a pure cyclical company run for the fuel companies benefit, not minority shareholders benefit. The real dividend is the cheap refined fuel which the fuel companies apply an arguably exploitive mark-up too. Why would you bother...

[macduffy]

Precisely, Beagle. It hurts to advocate losing another company from our skinny NZX but really, NZR would be doing minority shareholders a favour by encouraging oil companies, including the newer, smaller ones to buy those minority shareholders out.

[Pumice]

Precisely, Beagle. It hurts to advocate losing another company from our skinny NZX but really, NZR would be doing minority shareholders a favour by encouraging oil companies, including the newer, smaller ones to buy those minority shareholders out.

Just a thought.... could minority shareholders pool their stock and act as an agent for a competitor fuel company in the same way the oil company shareholder do? maybe they need some competitive tension.
Be interesting to see what processing fee could be negotiated on whether the 70/30 GRM split would hold etc

[bull....]

share price looks like it wants to test its 2014 lows again , terrible performance , not surprising because minority investors have always played second fiddle to the majors interests

[SailorRob]

And it's still massively overvalued. Through immense effort and taking huge risk they manage to make on average 30 mil net profit a year over the last 10 years. All this company deserves as a multiple is 10, so based on earnings the company should have a market cap around 300 mil. Less than half what it does now. Solar farm will be a massive disaster, uneconomical and will go way over budget. The pipeline is the cream dragged down by the rest of the business. The pipeline the deep water port and tank farm and land are great long term assets which may be able to earn good profit in the future. Right now CAPEX is the killer and it ain't going away.

As others have said - massive difference between normal shareholders and the shareholders that use the refinery.

[bull....]

this may not be good for nz refining earnings. refining margin must be bad

from z statement today

The contractual arrangements that Z has with the New Zealand Refining Company (NZX: NZR) means we havea ‘floor’ in the processing fee that we pay to the refining company. Third party forecasts regularly provided toZ estimate that during 4QFY20 refining margins will drop below the ‘floor’ level and may require Z to ‘top up’the refining company

[bull....]

the debt matrix might blow out on bad refining margins making borrowing for those solar projects etc unattractive due to borrowings