NWF - NZ Windfarms

[Jantar]

Jantar, you and PSE obviously know stuff that I don't.
However my impression is that the management have been hamstrung by PNCC litigation and have put considerable effort into resolving the issues. They have had to tread carefully and play it as diplomatically as possible. You may be being unfair to them.
Can you please elaborate on the "potential well above what is currently being realised".

The potential gains have nothing to do with the legal battles, but more to do with the trading function. NWF could increase their income through more active trading. In fact looking back through their market offers I'm not even sure that they have a professional trader, nor is there any indication that their CEO understands how the market works.

[JAYAY]

. Bottom line is that a well managed company doesn't trade at 30% of book value.

I think that the main reason for the low share price is that a highly political situation has existed, hopefully to be resolved before much longer, scaring the punters away.
I think that with guys like Michael Stiassny and Simon Mckenzie on the board, incompetent management would be dealt with quick smart.
Those guys are just as keen as we are to see NWF live up to its potential.

[Harvey Specter]

Bottom line is that a well managed company doesn't trade at 30% of book value.

if it is trading at such a discount to build cost, why hasn't TPW or one of the other big gentailers taken it over. Overhead costs could be eliminated completely as it run by their existing staff.

[JAYAY]

if it is trading at such a discount to build cost, why hasn't TPW or one of the other big gentailers taken it over. Overhead costs could be eliminated completely as it run by their existing staff.

I hardly think the major shareholders are going to let that happen. Not at such a bargain basement price.

[Jantar]

I'm watching the electricty market on a quiet saturday night, and can see one of NWF's problems very clearly.

MELCA are generating 1451 MW of which 62 MW is from wind, but all from the coastal wind farms near Wellington.
CEN are generating 888 MW of which 82 is from a GT peaking unit.
GNE are generating 835 MW, of which 605 MW are from Huntly. 1 coal unit and their CCGT.
MRP are generating 720 MW of which 45 is from Southdown.
TPW are generating 85 MW, but none from wind.
NWF is not generating a single MW.

The wholesale price at Bunnythorpe is $104, and windfarms in general are earning almost nothing.

Because of the way the market is structured, when the wind blows, wholesale prices are low. When the wind doesn't blow wholesale prices are high. NWF management needs to learn how to take advantage of these situations, rather than suffer when wind generation is low.

[Baa_Baa]

if it is trading at such a discount to build cost, why hasn't TPW or one of the other big gentailers taken it over. Overhead costs could be eliminated completely as it run by their existing staff.

Harvey, with respect no company can take over an existing customer base and eliminate the acquired company's overheads. There may be efficiencies available for sure, but there is a ratio of staff-to-customers that must be retained, hence importing increased operating costs. Wouldn't know whether its a viable acquisition target though.

[Jantar]

Baa baa this company has no customers except the wholesale electricity market. We need maintenance staff not so many expensive managers, most of these can be improved and the huge amount of cash on the balance sheet can be extracted.
To a gentailer the company is worth much more than 15c as they can sell power to customers rather than getting fleeced by Jantar on the wholesale market
Jantar if you have a solution to intermittent generation there is a fortune to be made, I would think management's assumption of a 15% discount to average price is a reasonable one? As the overcapacity in the market calms down in the next 3-5 years we should see NWF generating for 50 bucks, selling for 80 bucks and paying a dividend? Doesn't NWF have to offer in at 0 and take whatever people will pay, like I say don't know much about the market so appreciate your thoughts.

All wind generation is offered into the market at $0.01 and is therefore a price taker on the wholesale market. There are plenty of ways to hedge that intermittent generation to make it profitable, otherwise Trustpower and Meridian would not be interested in it.

[JAYAY]

All wind generation is offered into the market at $0.01 and is therefore a price taker on the wholesale market. There are plenty of ways to hedge that intermittent generation to make it profitable, otherwise Trustpower and Meridian would not be interested in it.

I know next to nothing about hedging except that it comes at a cost and that the Company has investigated doing it in the past.
Maybe it is just not economic in the small company situation.

[Jantar]

I know next to nothing about hedging except that it comes at a cost and that the Company has investigated doing it in the past.
Maybe it is just not economic in the small company situation.

I suspect that the only hedges they investigated would have been CFDs. They would likely not have been economic for wind generation. There are other forms of hedging that would be. Pioneer Generation manage to hedge thier wind farms, and they are only 1/6 th the size of NWFs.

[JAYAY]

I suspect that the only hedges they investigated would have been CFDs. They would likely not have been economic for wind generation. There are other forms of hedging that would be. Pioneer Generation manage to hedge thier wind farms, and they are only 1/6 th the size of NWFs.

I am sure they would have investigated the options thoroughly.