If the Tauhara geothermal project goes ahead, will there inevitably be a rights issue similar to when Te Mihi was built, or does Contact have other funding options?
If the Tauhara geothermal project goes ahead, will there inevitably be a rights issue similar to when Te Mihi was built, or does Contact have other funding options?
Contact has the option of creating new capital out of thin air. This is how Mercury Energy fund the construction of their new power stations. This 'thin air capital' is a creation based on current wholesale power price. 'Thin air capital' is created by revaluing existing renewable electricity generation assets based on the current wholesale power price. This method requires the wholesale power price to keep rising to work.
If the value of an existing power station falls, then the 'thin air capital' can disappear into, you guessed it, 'thin air'. This could happen with a fossil fuelled power station when the cost of generation is suddenly increased by the imposition of a higher carbon tax, for example.
The fact that Contact Energy has so far elected not to raise any 'thin air capital', and instead use 'real capital' for expansion, makes the company a more conservatively geared investment than it would otherwise be. I see that as a good thing.
SNOOPY
Last edited by Snoopy; 23-02-2020 at 10:02 PM.
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Thanks Snoopy. Mercury and Contact did both sell some assets last year, Mercury says it is using the proceeds to build its new wind farm, but I don't suppose Contact could do the same, the Tauhara geothermal project sounds like it will be a much bigger project.
(I hold CEN and MCY, and am looking forward to participating in a rights offer if CEN needs one to build Tauhara.)
Last edited by turnip; 25-02-2020 at 07:46 PM.
Reason: hold CEN and MCY
Given the current price of CEN..being at least a third it was a while ago...am I nuts in thinking that it may be a good buy at present... cheers..perhaps 25 %..sorry
Given the current price of CEN..being at least a third it was a while ago...am I nuts in thinking that it may be a good buy at present... cheers..perhaps 25 %..sorry
the latest half year eps was less than a quarter of the pcp. 8.3 vs 38.6
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Originally Posted by Raz
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