Who's in for the Mighty River Power float?

[janner]

I can't imagine there being a huge effect as people will only really be able to pick up small parcels. Even if it does drop a wee bit, there is going to be an influx of mum and dad investors who will become interested in the market. That'll surge the market to news highs I'm picking.

Hmmmm.. Could be right ... Yes .. the Mum and Dads are beginning to trickle back.. Worth watching for bargains though..

[janner]

Don't think my lot would sign the off market forms."Thought you were giving them to us.! "

Is that not what any Father worried about his childrens future would do Percy ??..

[NZSilver]

1.6billion/$2000 = 800,000 (800k)

so if 800 thousand people invested, approx 1 in every 5 nzers. (do you think that many people have money kicking around to invest?)

all though aussie institutions will get to invest larger amounts then us

Either way $2000 is peanuts, at least $5000 guaranteed would be nice, more like 10k-20k.

We will get ripped off from buying what we are ourselves selling...

Buying a big allotment once market trading begins is the other option, but I guarentee you will pay at least a 10%+ premium to someone making a quick buck after they got a 100K+ worth of shares (probably Johnny and his mates)

Bastards......

[minimoke]

but it would seem a dangerous occupation to stag if you are not prepared to pay the tax on any gain. They have the technology available to efficiently follow the money,'I have never seen IRD chase a Stag. Ther sis always a first time but I doubt this will be it. The govt need this float to succeed - IRD will blow smoke but they will not show there teeth. Still in doubt - do the sums. Assume a 50% gain on a $2000 listing. So you sell at $3,000 making $1,000. Now IRD need to prove your intent to sell at a profit. My first argument would be to sell to gain funds to buy the next IPO. But OK, back to the sums - what IRD is missing out on Capital gains tax they save by not incurring massive investigative and prosecution costs.

[minimoke]

Oh please, whats all this angst over the $2,000 parcel. It was always going to be around this level. Don't you folks read your NZ IPO history books!. Do you have no idea the average kiwi doesn't have $10,000 to spare.

Govt was never going to be seen to be aiming this at their rich mates - its all about the Moms and Pops and they will scratch $2,000 - $5,000 from here or there, make 15 - 20 % and think John Key is very wise going into the elections.

This thing will be over subscribed, there will be scaling. We won't get $5,000 each but we will probably get more than $2,000. Thats why you get your whanua all lined up in advance - and I'm not talking just the wee cherubs under your roof. You farm as far a field as you can.

Oh and if you can't do an opportunity cost analysis of spending 5 minutes filling out an off market transfer form you ought not be in this game.

[bohemian]

What is the chance of a family trust with an ird code gettting shsres in the ipo?

[CJ]

If over subscription is the case why not then sign-up for $40K worth when you only have $15K? That way when they get back to you saying "sorry, we can only give you xxxx/xxxx amount" then you can laugh all the way to the bank if they allot you the amount (or more) that you want?

You have to pay upfront. The over subscription amount will be returned to you.

[fish]

$2,000 worth is the "guaranteed" minimum but we don't know yet whether (some) brokers will secure an allocation that enables them to offer a significantly larger parcel to their regular clients. That will all come out in the book-build, I suspect.

Personally i suspect it will be similar to the cen listing .

I think i applied for about 50k worth and was allocated only 2k so they had the use of my money for far too many weeks before it was returned .I think i bought more shares later for less than the listing price .

I also suspect there earnings this second half of financial year are severely under threat-i havnt looked closely at this but they have closed one of their huntly thermal power plants and are planning to close another one next year . Taupo catchment is very low and their hydro generation is due to drop massively unless we get loads rain soon-still no sign for at least another week-and probably weeks/months before taupo gets significant rain.

[Hoop]

...............................

One thing I will be looking closely at is the deferred maintenance. I suspect there will be a fair bit of massaging expenditure to show a strong revenue / dividend yield. I'm super suspicious when I hear of the potential for bonus shares for long term holders. I may be a cynic but I suspect there will be no coincidence between the time these shares are issued and major expenditure is required.

It scares me when the buying hype takes over even before the prospectus is out.

My homework tonight was to look at one of MRP dams....Arapuni Power Station....who is going to pay for the upkeep of this Historic Places Trust protected "monument" in the long term future Wikipedia (http://en.wikipedia.org/wiki/Arapuni_Power_Station)

[Pumice]

I'm glad they will allow overseas based Kiwis to invest.
One way to get around the likely scaling back is to get family members back in NZ who cant afford to invest, to buy on our behalf.

looking forward to this one.

[troyvdh]

Thankyou Hoop....this whole episode is quite spookey....folk appear to be quite in a frenzy about all this....I have not read all posts,....will/have folk compared say CEN...as an investment....I mean what really is the difference....are folk just assuming (i.e stag stag stag stag) that this whole exercise will be deliberately focused for seasoned investors who will stag this thing....have the EPS NTA Divs etc been disclosed yet.......surely ....comments are a plenty about why the SM is avoided...I wonder why...stag stag stag stag stag stag stag stag.....boring....

[Vaygor1]

Probably true Sparky.. But I think that it could be good cheap start, for some averaging up .. Who knows.. ??.

Also the thought hits me .. What is this IPO going to do to the market as punters cash up to invest.. ???..

Good point. Looking at the market in general today, the buyers are gone and the sellers are selling big. RYM down 14 to start with... practically no buyers at all... except me and Sparky if it keeps dropping.

[iceman]

Michael Wilson suggested on 3 News this morning that parcels of up to $ 10,000 could be unscaled

[minimoke]

I also suspect there earnings this second half of financial year are severely under threat-i havnt looked closely at this but they have closed one of their huntly thermal power plants and are planning to close another one next year . Quite right fish. Huntly is well worth looking at in more detail Last I read it was pretty much past its used by date. Likewise looking at teh deferred maintenance on the dams has to be considered. Its no coincidence the govt is bringing in a loyalty scheme.

[enzed staffy]

God, the more I hear about it the less interested I become

[CJ]

If my numbers are correct then the government is expecting roughly 1/3 of the 49% sold in the float to go off shore. Maybe I've missed it in the media but if I was anti-National/anti-asset sales that is the number I would be shouting about!They are shouting. Most people just choose to ignore them ;) Have you not signed the petition yet?

A third of the IPO will leave 84% in NZ hands. So national is focusing on the total ownership whereas labour/greens will obviously focus on the IPO amount. national have been consistant with the number the whole way through 85-90% in NZ hands so expect wither 10% or 15% to go overseas, depending on the price they can get. My guess is they would favour 10% knowing that more will head overseas post IPO. But they also have a price in mind.

National campaigned on it and won the election. My preference would be for them to float of just 1 or 2 and then have a breather, maybe another election, before deciding if they want to float the last. Lets face it, you dont need 3 SOE to keep the private sector honest, just 1.

[Minerbarejet]

So whats the 0800 number then

[Minerbarejet]

Cant find it on Google

[CJ]

Last I heard they had all but reached the 400,000 petition target, enough to force a referendum, so I would say it's debateable that most people are ignoring them ;) 400000 should not have been that hard given:

Party Votes
National Party 1,058,636
Labour Party 614,937
Green Party 247,372

[Silverlight]

$2000 is a joke!

I currently own MRP through being a NZ citizen. And at IPO my rights are being scaled back to just $2000 worth so that non-kiwis can buy in? How can Key and his cronies even pretend that this is keeping the assets we kiwis already own in kiwi hands? Kiwis should get ALL THEY APPLY FOR and it is non-kiwis that should be scaled back! This ensures that if non-kiwis want MRP then they HAVE TO BUY AT MARKET PRICE.

OUTRAGEOUS! UNFAIR! ... A Government out of control who thinks they are no longer accountable to their electors. Someone mount a class action and I'll contribute money too it. Damn this govt pissies me off!

Belg, just to be clear as a "citizen" you indirectly own only $800 worth of MRP, based on $3.6b valuation and population of 4.5m. The IPO is actually giving you an opportunity to increase your weight by 200% ($800 holding to $2400 holding) rather than be reduced by 50% to just a indirect $400 holding.

This highlights a very interesting issue, if the government had to follow through on their promise to guarantee every NZ investor $2,000 worth, and all 4.5m citizens apply, MRP valuation would have to increase by 6 times!

I.e. 4.5m people applying for $2k worth is $9b, the Govt is only selling half, to fill demand MRP would have to be valued at $18 billion!

[777]

By the way, My partner and I just pre-registered and there seemed to be a couple glitches with their web page. My own pre-registration worked well, but for my partners we had to go through the process 4 times for it to finally work. Each time I clicked to progress to the next stage of the process it sent me back to either the beginning or the previous section. Worked in the end though.

Yeah same here but I gave up. If it is too hard why bother.

[iceman]

By the way, My partner and I just pre-registered and there seemed to be a couple glitches with their web page. My own pre-registration worked well, but for my partners we had to go through the process 4 times for it to finally work. Each time I clicked to progress to the next stage of the process it sent me back to either the beginning or the previous section. Worked in the end though.

I can't even open it . Been trying for 5 minutes. Must be overloaded :)

[CJ]

Yeah same here but I gave up. If it is too hard why bother.if oversubscribed, you will get an extra 25% over those that didn't preregister.

I got through but just got a blue box at the bottom of the second page which was suppose to have the 'anti spam' question. Not sure if it was overloaded or not compatiable with Chrome.

[POSSUM THE CAT]

Did you expect a national govt. to get anything right.

[robbo24]

Don't worry you pack of commie pinkos, you have until 22 March to pre-register.

[toast2success]

I will admit I don't know enough about the energy sector to be hefting large fact based comments about, but it does alarm me that there are possibly mum and dad investors, the Bloggs, and the Blow families, possibly buying into the hype and may not really understand what they are buying . I will admit I fall into this category. I don't understand all the implications of what buying and not buying mean into this particular IPO mean , and in doing so am stepping back and not buying. I can't help but wonder if the marketing will be a success and attract those that normally wouldn't invest in these kind of things, but sadly their financial literacy may not be up to scratch. I'd love to speak or hear from someone that has actually sat down and invested some time into looking at this thoroughly.

Is this the guinea pig for future asset sales ?

[iceman]

I will admit I don't know enough about the energy sector to be hefting large fact based comments about, but it does alarm me that there are possibly mum and dad investors, the Bloggs, and the Blow families, possibly buying into the hype and may not really understand what they are buying . I will admit I fall into this category. I don't understand all the implications of what buying and not buying mean into this particular IPO mean , and in doing so am stepping back and not buying. I can't help but wonder if the marketing will be a success and attract those that normally wouldn't invest in these kind of things, but sadly their financial literacy may not be up to scratch. I'd love to speak or hear from someone that has actually sat down and invested some time into looking at this thoroughly.

Is this the guinea pig for future asset sales ?

I think those same concerns about people not understanding what they are investing in, risks and rewards, could be equally applied to other investments such as rental property and finance companies. But it is not a reason not to offer people various investment choices.

[Toasty]

Woohoo. I preregistered after only 3 attempts and an "Ajax error". Wasn't even sure you could still buy Ajax let alone clean your website with it....

[Snoopy]

Overloaded by the sounds as I was using explorer and had similar problems. It worked for me no problem first time around but I think I may have been one of the first who signed up.
Pretty poor to be honest as the supposedly knew they were going to have a lot of interest, surely the first thing you do is make sure your site is going to handle the traffic.


Think Retro. Use the 0800 number. Got through straight away. The girl on the other end of the line even spoke english!

SNOOPY

[Pumice]

To pre-register for shares, New Zealanders located in New Zealand can go to the website www.mightyrivershares.govt.nz or call 0800 90 30 90.

Any idea on how overseas based citizens can pre-register?
www.mightyrivershares.govt.nz site only allows NZ based kiwis.

[robbo24]

Any idea on how overseas based citizens can pre-register?
www.mightyrivershares.govt.nz (http://www.mightyrivershares.govt.nz) site only allows NZ based kiwis.

Move back to New Zealand... Or an IP proxy server.

[skeet]

I reg online, didnt seem to hard to do.

[robbo24]

Damn web - throwing up ajax errors ... clearly not tested thoroughly with all browser!

It's the server that creates the unique identification passwords down the bottom.

If you get that error, press refresh until it loads fully (showing the password).

I had to refresh a few times until it loaded properly (using Chrome, had the error a few times, then it worked).

Hope this helps.

[BIRMANBOY]

Whats that sound I hear? The pitter patter of countless lemmings gathering at the cliff edge?

[BIRMANBOY]

The stags are in season and rutting and nothing else is being considered....or I guess it could be the Flamingoes beaks?
I hear the hoof beats of stags, don't know what you're listening to Birman...

[iceman]

And now the entire site is not responding! In the cloud age with cheap increases in compute power this is just a joke!

Friggin' appalling! Failing at the first fence yet again ...

I wonder if the website was designed by Talent2 ?

[CJ]

I wonder if the website was designed by Talent2 ?
Even DotCom's mega crashed on the first day and he was using German servers. Scaling from 0 to '000s in an instant is difficult.

You have three weeks (having said that I have registered the whole family and all the members of the nearest cat colony - hopefully Gareth Morgan doesn't kill them off before the IPO).

[POSSUM THE CAT]

Belgarion try going through your brokers web site. After trying the main page and getting brassed off. Went through the DIRECT BROKING web site & went through on the second try.

[Minerbarejet]

Whats that sound I hear? The pitter patter of countless lemmings gathering at the cliff edge?
By George Ive got it at last. What with flamingos, stags, beavers and now lemmings this forum is obviously run by the wellington zoo:D

[BIRMANBOY]

Close, David Attenborough is my de-facto.
By George Ive got it at last. What with flamingos, stags, beavers and now lemmings this forum is obviously run by the wellington zoo:D

[CJ]

By George Ive got it at last. What with flamingos, stags, beavers and now lemmings this forum is obviously run by the wellington zoo:DWell all this monkey business has attracted the Hearld: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10869308

[janner]

LMAO, quote of the day!

"I have registered the whole family and all the members of the nearest cat colony - hopefully Gareth Morgan doesn't kill them off before the IPO."

I have not registered yet or even looked st the forms.. Waiting for the furore to die down. Does " New Zealander " mean Citizen or Permanant Resident ?? or Both !!..

[skid]

Just for reference--your not registered until you are issued with a number[like MRT 12345678]

[percy]

I have put the wife and myself on Craig's list,for a firm allocation.Be interesting to see if and how many we get.

[GTM 3442]

I have not registered yet or even looked st the forms.. Waiting for the furore to die down. Does " New Zealander " mean Citizen or Permanant Resident ?? or Both !!..

From the FAQ:
"Who can pre-register?
Only eligible New Zealand Applicants will be entitled to apply for shares as part of the retail share offer and, as a result, only New Zealanders located in New Zealand are invited to pre-register.
In order to qualify as a New Zealand Applicant, you must supply, as part of your application for shares in Mighty River Power (when the Share Offer is open), a:
1. valid IRD number; and
2. valid New Zealand bank account; and
3. New Zealand address; and
4. a declaration that you are a New Zealand citizen or permanent resident in New Zealand"

However access to the website (https://www.mightyrivershares.govt.nz/) has a country of residence restriction on it.

So who knows, really. Possibly one of them is correct. I suspect it will depend on (and change) according to what you read or who you talk to.

[troyvdh]

...anyone listen to RNZ just after 5 today....a professorial chap (from Auck Uni ?)...said in his opinion the current value attributed to MR (3b)...by the gument...is undervalued by 50%...and this will be realised in perhaps 7-10 years.....

.so stag stag stag stag stag stag stag....have a great day....if your investment horizon is akin to a gnat....If I get some...I will keep.....

[777]

Not a rort at all. Been the case for a long time. My kids are mid 20's and have had the numbers since toddlers. If they get a bank account then with no IRD number they get taxed at the high rate. An incentive to have one in my opinion.

[ratkin]

Have preregistered , hardly worth the effort though , must be easier ways tio make 2-400 dollars although on the news they did hint pre registered peiople might get higher allocation , but i doubt it

[rocketship]

Not a rort at all. Been the case for a long time. My kids are mid 20's and have had the numbers since toddlers. If they get a bank account then with no IRD number they get taxed at the high rate. An incentive to have one in my opinion.

Totally agree. I had to get IRD numbers for my two toddlers, to setup their Kiwisaver accounts this year. Looks like it may come in handy again!

[Minerbarejet]

Not a rort at all. Been the case for a long time. My kids are mid 20's and have had the numbers since toddlers. If they get a bank account then with no IRD number they get taxed at the high rate. An incentive to have one in my opinion.
Dead right - same here with a grandson

[GTM 3442]

WTF !!! My need children ... who are clearly NZ Citizens as they have passports to prove it !!!! ... must get an IRD number before they can buy shares? (backdoor to identity cards?)

It would be irresponsible of you not to have made sure your children have IRD numbers.

We went through this way back in the Contact Energy IPO as well, if you recall, so it should come as no surprise.

Better get used to it.

[CJ]

WTF !!! My need children ... who are clearly NZ Citizens as they have passports to prove it !!!! ... must get an IRD number before they can buy shares? (backdoor to identity cards?)

That'll cut the number of "kiwis" who can buy shares down by million or so and ensure there are plenty more for the Aussies, Yanks et al.

WHAT A RORT!!!!they will be receiving taxable income so should have an IRD number and bank account. Seems pretty obvious doesn't it?

[troyvdh]

No disrespect intended..dear Moosie....are you aged over 20 years of age....no offence intended....cheers....troy

[toast2success]

I have put the wife and myself on Craig's list,for a firm allocation.Be interesting to see if and how many we get.
man I've spent too much time on US websites...I first read this as you had put yourself and your wife on Craigslist....was getting somewhat concerned as to the lengths people were going to to raise $$ for this IPO.

[iceman]

man I've spent too much time on US websites...I first read this as you had put yourself and your wife on Craigslist....was getting somewhat concerned as to the lengths people were going to to raise $$ for this IPO.

All pretty simple really. Government wants NZ Citizens and Residents to get first bite of the cherry, as they are completely within their rights to do. In order to qualify, you need to prove NZ address, IRD number, NZ residency/citizenship and a NZ bank account number (to pay your divies into). My 4 children, all under 18, already can do this easily and have all pre-registered. Can't see what the problem is !

[Winston001]

Sorry to interrupt the excitement but a couple of questions:

Is Mighty River Power a safe solid investment?

Why would the seller price the IPO below the current PE for energy companies?

[winner69]

Sorry to interrupt the excitement but a couple of questions:

Is Mighty River Power a safe solid investment?

Why would the seller price the IPO below the current PE for energy companies?

A distressed seller ......or one who wants more cash

[toast2success]

All pretty simple really. Government wants NZ Citizens and Residents to get first bite of the cherry, as they are completely within their rights to do. In order to qualify, you need to prove NZ address, IRD number, NZ residency/citizenship and a NZ bank account number (to pay your divies into). My 4 children, all under 18, already can do this easily and have all pre-registered. Can't see what the problem is !

??? I'm not sure how my post was interpreted as there being a problem. I think we're talking about 2 different things.

[BobbyMorocco]

I have put the wife and myself on Craig's list,for a firm allocation.Be interesting to see if and how many we get.
man I've spent too much time on US websites...I first read this as you had put yourself and your wife on Craigslist....was getting somewhat concerned as to the lengths people were going to to raise $$ for this IPO.Haha like you I was thinking don’t people put themselves on Craigslist for reasons other than to buy shares? I think it would definitely be a question of how many rather than if when it comes to Craigslist….. you might get a whole lot more than you were expecting ;)

[CJ]

Is Mighty River Power a safe solid investment?

Why would the seller price the IPO below the current PE for energy companies?1) Probably. Doesn't mean the shareprice wont be over/under priced.

2) We dont know what the price is so cant comment. They would price under current PE as they want it to be a success so they can sell the other two. Just like a restaurant, you will return if you get value for money. You wont go back if you get ripped of, even if the food was quality.

[iceman]

??? I'm not sure how my post was interpreted as there being a problem. I think we're talking about 2 different things.

It wasn't. I accidently pressed "reply with quote"rather than just reply, which I meant to do as a general comment on the discussion. Apologies.

[iceman]

93,000 people pre registered yesterday !

[percy]

Haha like you I was thinking don’t people put themselves on Craigslist for reasons other than to buy shares? I think it would definitely be a question of how many rather than if when it comes to Craigslist….. you might get a whole lot more than you were expecting ;)

You do not have to take all or any, should you be offered.All I have done is expressed an interest,subject to reading the prospectus.

[BIRMANBOY]

Percy there is Craigslist and there is a list from Craigs investments..two different beasts.
You do not have to take all or any, should you be offered.All I have done is expressed an interest,subject to reading the prospectus.

[BobbyMorocco]

You do not have to take all or any, should you be offered.All I have done is expressed an interest,subject to reading the prospectus.

Whoooossshhhh!!!! Sorry Percy I was just having a bit of a laugh. There is another website called Craigslist where you can buy a lot of things that are a long way removed from the sharemarket. Type Craigslist into Google and have a look around..... you may find something you like ;)

[BobbyMorocco]

I'm not on Craigslist but Craigs did send me some stuff yesterday, so it looks like we are both on Craigs (investment partners) list so to speak. Good luck with getting your parcel, if you want one.

[Winston001]

I think it best you do your own homework when the prospectus is released. It is unwise to treat any persons comments on Sharetrader as advice to buy or sell shares, but the information we contest and share with each other is very useful to help make our own minds up about the quality or otherwise of investments.


Well said.

I do think it is worth looking a MRP with a critical eye given that NZ appears to have sufficient electricity despite predictions 8 years ago that we were running out.

Also I am a shareholder in Contact from the original listing in 1999 which was priced at $3.15. The share price 13 years later...$5.25. Not a stunning performance.

Just something to throw in the mix.

[CJ]

Also I am a shareholder in Contact from the original listing in 1999 which was priced at $3.15. The share price 13 years later...$5.25. Not a stunning performance. But a yeild of ~5% along the way (which is more like 10% on original purchase) so much better than money sitting in the bank. Infrstructure are meant to be stable so you shouldn't expect big capital gains.

However, look at TPW performance over the same period. Just something to throw in the mix.

[fungus pudding]

You do not have to take all or any, should you be offered.All I have done is expressed an interest,subject to reading the prospectus.

How did you do that? Expressions of interest are just that - not subject to anything.

[toucan22]

I pre-registered thru the mighty river shares govt site. Since then I have received 3 offers to pre-register from other organizations I deal with. Does anyone know if I can "pre-register" again with them? Is there any point?
Originally hoped to place an order with all of them. Is this possible or does everything ultimately come back to one scaled down issue based on your CSN number?

[CJ]

Infrstructure are meant to be stable so you shouldn't expect big capital gains.


So you don't buy monopolies because you can't expect a capital gain? I think you missed an important word (now highlighted).

Plus they are not monopolies, there being 3 SOE and 2 other listed Genitaliers. About 20 retailers, multiple generators.

[fungus pudding]

I pre-registered thru the mighty river shares govt site. Since then I have received 3 offers to pre-register from other organizations I deal with. Does anyone know if I can "pre-register" again with them? Is there any point?
Originally hoped to place an order with all of them. Is this possible or does everything ultimately come back to one scaled down issue based on your CSN number?

Probably, but they're unlikely to shoot you if you give it a go. I could be wrong of course. :eek2:

[ScrappyO]

I dont know if any other company gives their shareholders extra benefits for holding on to their shares, but i would like it if those who buy into this IPO, maybe get a voucher for so many free KW's per year. It would be good incentive to hold especially the way power prices are going.

[Snoopy]

I'm not worried about the Water Rights issue... it's a ludicrous claim.

At what point does the molecule of water, evaporated from the ocean off the Queensland coast (or Perth's coast, or Antarctica's coast, or Indonesia's coast) suddenly become the property of the local Iwi?

The whole thing is such a joke that it beggars belief. Those claiming ownership of this water are literally farting against thunder.


'Ownership' in the Maori sense is not the same as English law ownership and not something to be trifled with Vaygor.

I wonder how many of you got to read the court notes before they were taken down? Some of the claims really were ridiculous. I mean, whitebait as tanga te whenua? Can you imagine iwi members going to their freezers, defrosting their pottles of whitebait and opening bank accounts for each one? The court was right to throw that claim out. Anyway I believe the notes will be up again in 26 days as that is how long it takes for the official information act process to work through.

But the allowable 'children of the water' may raise a few eyebrows. Did you know for instance that Ngai tahu have opened bank accounts for the individual sperm whales sighted during their whale watch operations? Kind of makes sense when you realize it is actually the whales themselves that are the heart of making all that whale watch money for the tribe. No doubt there are certain -legal- tax minimization reasons for doing this. And sperm whales are sentient beings, and part of Maori society. The Maori can identify individuals by the nicks and scars on their fins and back. The brain power is certainly there - these suckers have language and a brain size that would put any ape (or dog!) to shame. And thanks to the iwi they have bank accounts! Those whales are just as much genuine New Zealanders as any of the people that are applying for MRP shares. So with the legal requirements of being:

1/ identifiable
2/ having sentient intelligence
3/ being tanga te whenua

there is nothing to stop Ngai Tahu putting their children of the water cycle' on the MRP share register. Of course this hasn't been widely reported, as some may find it controversial. But when you think about it, it all makes sense. In the grand scheme of things we are only talking about 30-50 individuals. So they unlikely to make that much difference in the overall share allocation picture. Some of these details may be revised when the official information act release comes out. But I am sure you all get the gist. What I do know is that John Key came out of his briefing with the Maori party with a big smile on his face. A small price to pay for political harmony.

SNOOPY

[peat]

2 other listed Genitaliers

Pray what is a listed Genitalier , my mind is boggling. :p

[Snoopy]

Pray what is a listed Genitalier , my mind is boggling. :p

A combination of a generator and a retailer.

SNOOPY

[CJ]

A combination of a generator and a retailer.

SNOOPYcorrect. I may have snuck an extra 'i' in there but Gentailer is an 'official' term widely used in the industry since the split off of lines business from the gentailers.

[bohemian]

I pre-registered thru the mighty river shares govt site. Since then I have received 3 offers to pre-register from other organizations I deal with. Does anyone know if I can "pre-register" again with them? Is there any point?
Originally hoped to place an order with all of them. Is this possible or does everything ultimately come back to one scaled down issue based on your CSN number?
Based on your ird number

[bottlerboy]

Good grief CJ
we all know what gentailers are.
Peat was just having a laugh at your "genitalier"

[BIRMANBOY]

Was it accompanied by a mighty river?
Good grief CJ
we all know what gentailers are.
Peat was just having a laugh at your "genitalier"

[fish]

I dont know if any other company gives their shareholders extra benefits for holding on to their shares, but i would like it if those who buy into this IPO, maybe get a voucher for so many free KW's per year. It would be good incentive to hold especially the way power prices are going.

No way -not PC for a start.
If this drought continues they may be calling on shareholders for funding .They are mainly hydro-the waikato river- and have relied on cheap power to supply about 25% more customers than they generate in an average year . No doubt they will have hedging policies for a dry year-but their hedging will now cost a lot more in the future .
It is unlikely they have hedged sufficiently for such a drought hence may be currently making big losses . Its going to take a lot of rain to refill lake taupo and we have a pattern of big highs over the contry blocking rain-I cant see much chance of significant rain before easter

[digger]

I dont know if any other company gives their shareholders extra benefits for holding on to their shares, but i would like it if those who buy into this IPO, maybe get a voucher for so many free KW's per year. It would be good incentive to hold especially the way power prices are going.

Sadly I do. It was called Robert Jones Investments. He gave a bonus issue to any shareholder who held for two years. Almost immediately after the announcement he set about selling as many shares as he could. It was some years ago and in those days a major holder did not have to report like today for every 1% movement. I would and should be banned from this site if I even told you half of what i think about Bob Jones.

So for me the idea of a loyality bonus does not from past experience sit too well.No doubt the govt means differently here as I suspect it is a politically correct thing to do to show an intention to keep shares in NZ hands. Or maybe when they end up overseas to say " We did our best to encourage NZ ownership"

[CJ]

Good grief CJ
we all know what gentailers are.
Peat was just having a laugh at your "genitalier"Didn't see the smiley face on the phone.


Was it accompanied by a mighty river?Ha

[robbo24]

Partial privatization can't be too bad for the Govt, can it?

If 49% of the profits paid as dividends are going to private shareholders, and these shareholders are paying tax on their dividends, then it's kind of like releasing the capital and still getting an income stream from capital you no longer own.

If someone offered me a good price to buy half of all my shares - and had to pay me 10.5% to 33% of the dividends - I would be all over it in a flash.

Not to mention keeping a controlling share, and, if things go bad then 49% of the risk is off the shoulders of the Govt/taxpayer.

I also enjoy watching pinkos and hipsters cry and moan about asset sales.

[toast2success]

It wasn't. I accidently pressed "reply with quote"rather than just reply, which I meant to do as a general comment on the discussion. Apologies.

No worries,

[macduffy]

I dont know if any other company gives their shareholders extra benefits for holding on to their shares, but i would like it if those who buy into this IPO, maybe get a voucher for so many free KW's per year. It would be good incentive to hold especially the way power prices are going.

There is a fairly recent precedent for the loyalty bonus in similar circumstances in this part of the world.

The Queensland state govt did this with their privatisation of Queensland Rail a couple of years ago. Incidentally, this turned out to be a highly successful float.

[ScrappyO]

There is a fairly recent precedent for the loyalty bonus in similar circumstances in this part of the world.

The Queensland state govt did this with their privatisation of Queensland Rail a couple of years ago. Incidentally, this turned out to be a highly successful float.

Im sure i have heard that they were keen on doing something similiar to what they did with Queensland Rail when they first started talking about selling SOE's.

.

[GTM 3442]

I also enjoy watching pinkos and hipsters cry and moan about asset sales.

What's a hipster ?

[noodles]

Partial privatization can't be too bad for the Govt, can it?

If 49% of the profits paid as dividends are going to private shareholders, and these shareholders are paying tax on their dividends, then it's kind of like releasing the capital and still getting an income stream from capital you no longer own.

If someone offered me a good price to buy half of all my shares - and had to pay me 10.5% to 33% of the dividends - I would be all over it in a flash.

Not to mention keeping a controlling share, and, if things go bad then 49% of the risk is off the shoulders of the Govt/taxpayer.

I also enjoy watching pinkos and hipsters cry and moan about asset sales.

I expect those dividend to be fully imputated. Thus the shareholder won't pay tax on that income.

No matter how you do the maths, the government is cashflow negative on an on-going basis.

[robbo24]

I expect those dividend to be fully imputated. Thus the shareholder won't pay tax on that income.

No matter how you do the maths, the government is cashflow negative on an on-going basis.

Imputed meaning tax is paid on the income before it is paid to the shareholder, and depending on the tax rate of the shareholder (personal income tax, company tax, trust tax rate) they may have to pay more tax - but tax paid all the same.

Are you a 2006 hipster or a 2009 hipster?

[Winston001]

Partial privatization can't be too bad for the Govt, can it?

If 49% of the profits paid as dividends are going to private shareholders, and these shareholders are paying tax on their dividends, then it's kind of like releasing the capital and still getting an income stream from capital you no longer own.

Not to mention keeping a controlling share, and, if things go bad then 49% of the risk is off the shoulders of the Govt/taxpayer.


SOEs pay tax already so there is zero gain to IRD in the sale. In fact its probably a lose situation assuming some shareholders have a lower personal tax rate.

This sale is mostly ideological. The SOEs for sale pay approx 3.3%pa and sovereign borrowing for a nation like NZ is about 3%. The govt could have avoided a lot of hype and public disquiet by simple borrowing the money. The main argument against is the extra loans would have brought us up to 30% of GDP which is on the edge of safety.

As for 49% vs 51% there is plenty of law which says a majority owner cannot oppress and run rough shod over a minority owner. The govt are aware of this.

[robbo24]

SOEs pay tax already so there is zero gain to IRD in the sale. In fact its probably a lose situation assuming some shareholders have a lower personal tax rate.

This sale is mostly ideological. The SOEs for sale pay approx 3.3%pa and sovereign borrowing for a nation like NZ is about 3%. The govt could have avoided a lot of hype and public disquiet by simple borrowing the money. The main argument against is the extra loans would have brought us up to 30% of GDP which is on the edge of safety.

As for 49% vs 51% there is plenty of law which says a majority owner cannot oppress and run rough shod over a minority owner. The govt are aware of this.

A lot of minority shareholder rights can be mitigated by a shareholder agreement/company constitution - both of which an astute investor such as yourself will peruse thoroughly before buying in, I am sure.

By your own calculation, the 10.5%-33% personal income tax rates, 28% company tax rate and 33% trust tax rate (imputed or not, tax will be paid well over 10%), the Government is gaining ground on this transaction. After all, 3.3% is 10% more than 3% and you're retaining at least [and clearly more than] 10.5% as tax. The Govt frees up capital, retains profits at a rate that is cheaper than borrowing.

Not to mention if the shiz goes belly up [i.e Solid Energy] it's not just the Government who shoulders the loss, or the risk.

I am sure if you, Winston, were a shareholder of Solid Energy you would have nipped the problems in the bud years ago.

[janner]

Just wait until the prospectus issued..

[Vaygor1]

Good grief CJ
we all know what gentailers are.
Peat was just having a laugh at your "genitalier"

CJ, I think Peat may have had a chuckle at your usage of the word 'genitalier'. I for one would be surprised if he has ever been in a position to witness and determine a level of humour regarding your assets.... well, unless Peat is a typo and is supposed to be Peek. :ohmy:

Can we shorten Partial Privatisation to just Privates?

[CJ]

This sale is mostly ideological.
Agree. Two reasons to support:

Solid Energy
POA v POT

Plus, is it the govt role to own commercial enterprises or is small govt providing a safety net best. Left vs right ideology

[Winston001]

Agree. Two reasons to support:

Solid Energy
POA v POT

Plus, is it the govt role to own commercial enterprises or is small govt providing a safety net best. Left vs right ideology

Mmm...to which I counter Air New Zealand which was partly privatised. Subsequently bailed out by the taxpayer.

The sale of the Kaingaroa State Forest to Fletcher Forests and a Chinese consortium. A big fail for those buyers (and admittedly a win for the taxpayer).

All I'm saying is that the govt doesn't have a monopoly on business failure. Leaving aside the finance company debacle, consider Feltex, the abysmal Telecom, the Warehouse's Australian adventures, GPG etc etc.

IMHO it is lunacy for any government to rid itself of core infrastructure assets, especially a small nation such as NZ.

[noodles]

The government's role should be to regulate monopolies, not own them.

Our power prices are too high. Like gst, it affects the poor more than the rich.

I say sell 100% and regulate.

[peat]

43704369Sales of electricity are growing, average price not so much

[iceman]

Even if those who registered received only their guaranteed $2000 of shares, it would add up to $400 million out of a possible $1.7 billion in shares that are up for sale.
source: http://www.stuff.co.nz/business/industries/8402544/Taking-the-plunge-in-Mighty-River

But if every kiwi picked up $10k ... the it'd be 2.0 billion and all-over-red-rover and everyone's happy.

And I'm looking for way more than 10k so ... So why set the expection that we're all only going to get 2k each?

Pretty simplle really ... Key and his cronies are making sure rich non-kiwis offshore and instos just get richer!

Or they may be doing it to positively surprise everyone who applied online for "$ 1,000 - $ 5,000" and announce we can all have $ 4-5k if we want !

[Toasty]

I haven't read the whole thread so this may already have mentioned. I was chatting to a guy today who suggested that the dams that MRP owns were pretty much all constructed before 1930 and that the concrete generally has a100 year life span. Possibly some capital reinvestment required in the nearish future....?

[macduffy]

I haven't read the whole thread so this may already have mentioned. I was chatting to a guy today who suggested that the dams that MRP owns were pretty much all constructed before 1930 and that the concrete generally has a100 year life span. Possibly some capital reinvestment required in the nearish future....?

I don't know anything about the longevity of concrete dams but according to MRP's website, the oldest of the Waikato River stations is Arapuni, commissioned in 1929. The others range from 1947 for Karapiro, Atuamuri 1958, Ohakuri 1961, Aratiatia 1964. "Old", certainly, but whether or not that indicates the need for early refurbishment or replacement, I wouldn't know. Possibly, some light might be thrown on the question through an engineering/ technical report in the prospectus.

[sideline]

"............ concrete generally has a100 year life span..................." ?????????????

That would be news to me. Near where I live is one of the water reservoir dams for Auckland, constructed of concrete in 1910.
No plans to tear it down or anything. The only thing that happened in the last 20 years was the installation of additional steel
anchors to strengthen it against earth quakes since the requirements and standards there have changed.

[macduffy]

In my experience it's just a matter of completing the form and sending it to the relevant share registry. Registries will send out an updated list of holdings on about a monthly basis but I suspect that the transfer can be regarded as being effective from the date of receipt in their office.

Why the concern?

[777]

If the family members already have a CSN number then you will be able to check on line when they are registered in their names. If not then it may take a while longer until they get the info in the mail. Once done you can file the transfer. I would give 48 hours just to be safe before you initiated a sell order. Be careful how much you pay for them as it may raise a tax liability in their name if the IRD decided they stagged them.

[ratkin]

People here saying IRD not going to chase up the staggers , however with a number of these floats one after the other , think they might make an effort for those that stag every one? Im not going to take the chance , dont want them questioning my other regular transactions

[CJ]

People here saying IRD not going to chase up the staggers , however with a number of these floats one after the other , think they might make an effort for those that stag every one? Im not going to take the chance , dont want them questioning my other regular transactionsIRD's computer systems are much better than they were in the past for this sort of thing - data analytic etc (I assume they use a different system to the clunky one they use for their records). Not saying they will but they could ask for a full list of taxpayers taht have sold and cross reference that list against other IPO's.

A few years back they got a list of all taxpayers that have disposed of property from the land transfer office and tallied it up to see who were buying and selling multiple per year.

[noodles]

I thought there was a $50000 threshold?

[macduffy]

According to the AFR, the MRP roadshow "kicks off " in NZ tomorrow.

Standby for a call from a broker near you!

[777]

I thought there was a $50000 threshold?

Maybe you are getting confused with FIF investing.

[macduffy]

NZ Herald article on MRP's geothermal plants.

http://www.nzherald.co.nz/business-editors-picks/news/article.cfm?c_id=1501981&objectid=10869794

Claims that when the latest is commissioned in mid-year, geothermal will account for 40% of MRP's output.

Oops! Just noted that article is dated 8 March. Old news

:blush:

[Jay]

Have not siad an actual date as yet as far as I can ascertain - Suppose to open Mid April for a couple of weeks, and list early May. Have to send your cheque( which no doubt they will bank straight away) with the application

[NZSilver]

National will def try and get it through before giverment budget day

[Major von Tempsky]

And according to the Midday News (TVNZ1) applicants for MRP now number over 400,000 - which is in excess of the anti petition signers ;-).
And as noted on the Elections board some people have both signed the petition and applied for shares. Bit like Shearer's undeclared $50,000 plus bank account in New York,eh.

[macduffy]

And according to the Aussie press:

Marketing for Kiwi electricity company Mighty River Power has stepped up a gear, with the book-runners sending analysts to meet investors ahead of the expected $NZ2 billion ($1.6 billion) initial public offering.

Goldman Sachs hosted a lunch in Sydney on Tuesday, where analyst Matthew Henry ran through his valuation. He compares Mighty River to fellow listed energy companies Contact Energy and TrustPower, which trade about 9 and 11 times earnings respectively (on an enterprise value-to-EBITDA basis).

It’s understood a fair portion of Australian investors have given analyst pre-marketing the wide berth and are waiting for the management’s roadshow in early April.

The company is expected to list in NZ and Australia in May, although the timetable is dependent upon regulatory approval in NZ.

[NZSilver]

MRP looks like a good investment longterm and probably short term, only worry for me being a long-term investor is the issue of tiwai aluminium smelter in bluff closing its doors and therefore there suddenly being a huge surplus of power (as off the top of my head this uses approx 25% of NZ power). Rio Tinto is not doing that great atm with the high aus doller an lower demand/prices for its iron, coal ect and is therefore rios is likely to cut costs were possible. So.. everything aside ie MRP prospectus not out ect, can anyone with more industry knowledge shed more light on what would the closing of the aluminium smelter would do for power prices, power company profits, MRP shareprice/profits/ potential growth?

Much appreciated,

Thanks.

[NZSilver]

sorry 15% NZs power

[janner]

MRP looks like a good investment longterm and probably short term, only worry for me being a long-term investor is the issue of tiwai aluminium smelter in bluff closing its doors and therefore there suddenly being a huge surplus of power (as off the top of my head this uses approx 25% of NZ power). Rio Tinto is not doing that great atm with the high aus doller an lower demand/prices for its iron, coal ect and is therefore rios is likely to cut costs were possible. So.. everything aside ie MRP prospectus not out ect, can anyone with more industry knowledge shed more light on what would the closing of the aluminium smelter would do for power prices, power company profits, MRP shareprice/profits/ potential growth?

Much appreciated,

Thanks.

Skog Norske.. Or is it Norse Skog..

Report this week..

Are closing a Paper Mill in Norway due to falling demand for paper.. they are also going to REDUCE production at their Mill at Kawerau.. BoP.. NZ. ( a lower cost producer )..

More reduction of electricity needs.. !!!..

Think that I will wait out the hype... Buy into the dips... Maybe !!! ..

[GTM 3442]

Does the Manapouri station connect to the national grid, or does it go straight to Bluff ?

[CJ]

Skog Norske.. they are also going to REDUCE production at their Mill at Kawerau.. BoP.. NZ. ( a lower cost producer )...Aren' they the mill that Z wants to build a wood chip power plant for?


Does the Manapouri station connect to the national grid, or does it go straight to Bluff ?I believe it is connected direct, not to the grid but a grid upgrade would be relatively quick to do. However, that would create an oversupply of power in the south Island so the upgrades to the cook strait cable would become even more important. Currently there are big north/south differentials as the cable is being upgraded and is not online.

[Lease]

Mighty River Power Float is a fundamentally bad investment.

Why I say it? Let's look some figures.

Up to 30 June 2012, Mighty River Power(MRP) earnings per share(EPS) is about 5C. Net Assets per share is $2.15, Dividend per share(DPS) is 9C.

The total number of shares authorised is 1,400,000,092.

Government plan to sell 49% of shares, which is 686,000,045 shares. The planned proceeds are 2 billion, after paying underwriter and other fees, the net proceeds should be at 1.7-1.8 billion, which is aligned with initial indicated figures which government announced partial sell-off assets in June last year.

Therefore, if net proceeds are 1.7b, the IPO price is 1,700,000,000/686,000,045=2.48. if net proceeds are 1.8b, the IPO price is 1,800,000,000/686,000,045=2.62. Take the middle point, the IOP price is at $2.55.

At $2.55, MRP trade at PE of 53, PB at 1.18, dividend yield at 3.36%.

There is a similar company which has already listed at NZX, Contact Energy. At today's closing price of $5.50, Contact Energy trade at PE of 21, PB at 1.16, dividend yield at 4.18%.

From all the three valuation indicators, MRP is more expensive.

Apart from valuation, let's look at business. Up to 30 June 2012, among MRP electricity generation, 61% is Hydro, 31% is Geothermal, 8% is Gas-fired.

For Contact Energy electricity generation, 50% is thermal, 22% is Geothermal, and 28% is Hydro.

Geothermal generation is the most environment-friendly one, which is major long-term direction of future electricity generation. For this point, MRP seems to have advantage.

However, in terms of prospect, Contact Energy has 166MW Geothermal project in place at Te Mihi. It also has got consent of 250MW Geothermal project at Tauhara. The two projects have total 416MW capacity, which is equivalent to 3644GWH output. Assume Contact Energy total output remain constant, it will have 56% of Geothermal generation.

But for MRP, it only has 82MW Geothermal project in place at Ngatamariki, equivalent to 718GWH output. Also assume MRP total output remain constant, it will only have 41% of Geothermal generation.

Conclusion: At NZX, a better and cheaper energy company has already been there, why should we buy MRP?

[robbo24]

Why I say it? Let's look some figures.

Up to 30 June 2012...

What about the more recent figures up to December 2012?

http://www.mightyriver.co.nz/Media-Centre/Latest-News/Mighty-River-Power-Reports-Increase-in-Net-Profit.aspx

[macduffy]

......which goes to demonstrate that power company earnings can fluctuate wildly from year to year. I'll wait to see the prospectus.

:cool:

[tosspot]

the thing is though, this company has the interest of the general public and we all know shares are a confidence game so when there's non professionals jumping on the bandwagon the IPO price is almost certain to fly up in the initial week or 2 so there is definitely money to be made of this.

[Aaron]

[QUOTE=Lease;399150]Mighty River Power Float is a fundamentally bad investment.

Thanks lease that was really interesting and information that might help me better understand the company and IPO. We will still need to wait for the prospectus though and then compare to Contact and Trustpower. So much hype beforehand that short term stagging of the ipo is likely to be profitable but long term investment will depend on asking price.

[POSSUM THE CAT]

Aaron Do not forget that stagging this may change your tax status. In my opinion the Tax department will watch every sale of these shares

[winner69]

Doubt it possum ....all too hard for them I would say even though I got caught many years ago having shares that never had or would never have paid dividends .....hey mr winner you didn't buy these for an income stream did you, just for the capital gains eh mr winner, like many other your holdings eh

As sparky says the meteor always misses the earth ...or something like that ....most of the time ...the chances of getting caught are pretty slim

[Aaron]

Aaron Do not forget that stagging this may change your tax status. In my opinion the Tax department will watch every sale of these shares
To be honest I would be keener to hold it as a long term dividend paying company if it is fairly priced. Stagging is pure speculation. If I thought stagging was going to be a sure bet for a quick 10%+ gain I might give it a go. Profits on stagging would be taxable and losses deductible but a one off punt would hopefully not change your tax status if you hold a portfolio that doesn't include much buying and selling except to rebalance. I think it was Martin Hawes that suggested two entities to separate the trading from the long term investing. Tax free capital gains is one of the greatest gifts the people of NZ give investors so why ruin it with too much trading and speculation. Anyway my understanding is the govt will want $1.8-$1.9Billion 1,900,000,000/400,000pre registrations is only about $4,750 each on average. 400,000 would include a lot of staggers(is that a word) so a lot of downward pressure on the price unless institutions and index funds need to top up. There were some price graphs in the herald a while back showing prices for Contact, Auckland Airport and Vector. Contact dropped soon after listing and it looked like it was about two years to get back to the lPO price. Airport not so bad and I think Vector went badly but that was probably govt regulating prices.

[Lease]

What about the more recent figures up to December 2012?

http://www.mightyriver.co.nz/Media-Centre/Latest-News/Mighty-River-Power-Reports-Increase-in-Net-Profit.aspx

MRP interim result up to 31 December 2012, EPS 5.39C, DPS 4.80C, we simply assume 2nd half year result is the same, thus full year EPS 10.78C, DPS 9.6C. At IPO price around $2.55, the forward PE is 23.65, Dividend yield 3.75%.

Contact interim result is EPS 12.2C, DPS 11C. Also assume 2nd half year result is the same, thus Contact full-year EPS is 24.4C, DPS 22C, at yesterday's closing price of $5.5, the forward PE is 22.54, Dividend yield is 4%. Still Contact is cheaper.

Given Contact business prospect is better(will have more portion of geothermal generation) , I think Contact should be valued at premium rather than at discount.

[karen1]

From Brian Gaynor this morning:

http://www.nzherald.co.nz/brian-gaynor/news/article.cfm?a_id=14&objectid=10873028

..."As the domestic economy improves, and dividends increase, the investment deficit is likely to increase. This is why the sale of any Mighty River Power shares to foreign investors is not in the country's best interests.

The payment of dividends by the electricity generator to overseas shareholders will have a negative effect on the investments category of the current account.

The Mighty River Power share sale will have no effect on the current account balance if all of the shares are distributed to New Zealanders."

[Fudosan]

Lease,

Thank you for the excellent analysis of MRP. Very helpful to my understanding of this asset sale. Are you a stock analyst by trade?



The payment of dividends by the electricity generator to overseas shareholders will have a negative effect on the investments category of the current account.The two biggest contributors to our chronic current account deficit are interest and dividend payments to overseas investors, as I understand.

[fish]

This paints a more cheerful picture of MRP based on its half year results.

http://www.mightyriver.co.nz/PDFs/PDFs/Mighty-River-Power-Media-Release-HY2013.aspx

http://www.stuff.co.nz/business/industries/financial-results/8333004/Robust-underlying-earnings-for-Mighty-River

To me that is remiscent of so many companies that eventually struggle-such as solid energy .
In their wisdom politicians have created a company that generates apprx 2/3 of its power from one source-the waikato .
Surely its more important to look forward at risk and forecast 2nd half earnings.
With inflows at a historic low will there be a loss for the second 1/2-no dividend and increasing borrrowing,increased power prices and loss of customers ?

Sure its too big too fail but will future profits continue as before?

[Lease]

Lease,

Thank you for the excellent analysis of MRP. Very helpful to my understanding of this asset sale. Are you a stock analyst by trade?


The two biggest contributors to our chronic current account deficit are interest and dividend payments to overseas investors, as I understand.

No, I'm not stock analyst but a lover of long-term value investor.

[Fudosan]

No, I'm not stock analyst but a lover of long-term value investor.Long-term value investors are in the minority, as most people lack patience.

[Joshuatree]

Just received 3 emails from MRP and have "Set My Preference" for the next stage. Share offer to open mid April.

[BIRMANBOY]

And money! Nice thing about trading/stagging is you can work off same money. Long term investing requires ability to ignore all the "non-active" money and just let it ride. Thats very hard for most people to do.
Long-term value investors are in the minority, as most people lack patience.

[CJ]

Just received 3 emails from MRP and have "Set My Preference" for the next stage. Share offer to open mid April.
Will be interesting to see if forwarding your details to your broker gives you any preference.

[BIRMANBOY]

What makes you think this is going to be better than lots of other good dividend producers. Theres no guaranteed dividend here thats going to make me interested. There will be a reasonable dividend to satisfy all the politicians, analysts and "Joe Blows" but doubtfull if it will outperform already established yielders.
To be honest I would be keener to hold it as a long term dividend paying company if it is fairly priced. Stagging is pure speculation. If I thought stagging was going to be a sure bet for a quick 10%+ gain I might give it a go. Profits on stagging would be taxable and losses deductible but a one off punt would hopefully not change your tax status if you hold a portfolio that doesn't include much buying and selling except to rebalance. I think it was Martin Hawes that suggested two entities to separate the trading from the long term investing. Tax free capital gains is one of the greatest gifts the people of NZ give investors so why ruin it with too much trading and speculation. Anyway my understanding is the govt will want $1.8-$1.9Billion 1,900,000,000/400,000pre registrations is only about $4,750 each on average. 400,000 would include a lot of staggers(is that a word) so a lot of downward pressure on the price unless institutions and index funds need to top up. There were some price graphs in the herald a while back showing prices for Contact, Auckland Airport and Vector. Contact dropped soon after listing and it looked like it was about two years to get back to the lPO price. Airport not so bad and I think Vector went badly but that was probably govt regulating prices.

[CJ]

Profits on stagging would be taxable and losses deductible but a one off punt would hopefully not change your tax status if you hold a portfolio that doesn't include much buying and selling except to rebalance. I think it was Martin Hawes that suggested two entities to separate the trading from the long term investing. Each trade is reviewed separately - there is not tainting.

Hawes suggests separate entities/portfolios, just to make it clear which is which. Otherwise, if you buy for long term but end up selling quickly, when viewed objectively, it could be interpreted as trading but having it the long term portfolio would clear up that misconception.

[Joshuatree]

Yes dont know if im a buyer atp.

MRP will be a top 10 stock so institutes, funds as well as Acc etc will require weighting, exposure. Are they being allocated anything as tthese will be the price drivers on listing.?

[CJ]

Yes dont know if im a buyer atp.

MRP will be a top 10 stock so institutes, funds as well as Acc etc will require weighting, exposure. Are they being allocated anything as these will be the price drivers on listing.?They may get some but no where near enough I would have thought. Depends how harshly they scale M&D investors to ensure insto's get a decent allocation.

[Aaron]

What makes you think this is going to be better than lots of other good dividend producers. Theres no guaranteed dividend here thats going to make me interested. There will be a reasonable dividend to satisfy all the politicians, analysts and "Joe Blows" but doubtfull if it will outperform already established yielders.
Will hold all speculation on the offer until the prospectus comes out. As a yield investment I would have thought Vector has a better monopoly with less earnings volatility and possibly a better yield. Lease has also made comparisons with Contact which aren't too favourable for MRP. Looking at broker valuations in the Herald the other day can't really remember the exact figures but dividend yields on their valuations weren't very exciting at 4-5% I suppose you could add imputation credits onto that for a gross yield maybe.
I will wait and see.

[Arbitrage]

As with Vector, I am sure that the future of Mighty River Power will be influenced by the government wanting to regulate if the profits get too great.

[POSSUM THE CAT]

It would be nice if their email link worked.

[fish]

Normalised EPS is what we want, taking out any one-time benefits/negatives (usually around tax)

We really need a five year horizon for average earnings growth. If you knew 3 years worth of normalised EPS, you could simply apply a terminal rate of 2 or 3% for outlying years (playing it conservative), but that's not particularly robust.
I think that could be very misleading.they are higher risk than needed-too many eggs in one basket and bad investment decisions overseas
MRP depends on waikato hydro for most of their generation .
Currently this looks abysmal .

What little rain we are getting is falling in meridian and contact territory .
Contact has a range of flexible generation and gas storage that will be able to take advantage of hydro inflows at an all time low-the lowest on record!
We have global climte change and for what its worth if the predictions of dry summers in the north island come true MRP are a potentially bad investment.

[Fudosan]

No idea yet but underlying earnings was up 31% to Dec 2012 on the previous year. Does that give us one data point? I am still a bit confused as to what "earnings" figures to actually use.31% earning growth! I'm always concerned companies try to present a pretty picture through creative accounting right before IPO. Can you trust MRP's last year financial performance?

[macduffy]

MRP's website still seems to be having problems.

Although inviting me - by email - to " set my preferences", the link refuses to work. Mind you, my computer, in its wisdom, treated the message as Junk Mail. Does it know something that we don't?

:D

[Sideshow Bob]

Speculation on returns is a little difficult until they come up a prospectus, but would imagine would have to price at the cheaper end of the spectrum, as need it to be a success. 440,000 pee'ed off share investors aren't what National will need to get the other SOE's away, or at the next ballot box.....

[Arbitrage]

My taxi driver said he was buying in, without having seen the prospectus....

[skid]

My taxi driver said he was buying in, without having seen the prospectus....
Did he give you any other tips on where I can invest my life savings LOL

[Arbitrage]

Plus the CEO is leaving.

[karen1]

MRP's website still seems to be having problems.

Although inviting me - by email - to " set my preferences", the link refuses to work. Mind you, my computer, in its wisdom, treated the message as Junk Mail. Does it know something that we don't?

:D

Website still appears to be having problems, but if you have recently upgraded to IE10, you might need to try compatibility view - small jagged/split logo next to refresh button right hand end of address bar.

And you're a step ahead of me, the email I received yesterday titled "Next Phase" told me nothing new and certainly didn't invite me to set my preferences. One long drawn out saga this is turning out to be!

[macduffy]

Website still appears to be having problems, but if you have recently upgraded to IE10, you might need to try compatibility view - small jagged/split logo next to refresh button right hand end of address bar.

And you're a step ahead of me, the email I received yesterday titled "Next Phase" told me nothing new and certainly didn't invite me to set my preferences. One long drawn out saga this is turning out to be!

It worked, at last!

Setting preferences turned out to be nothing more than authorising info to be sent on to my nominated adviser - who, of course, I'd already told!

Doesn't change anything until the prospectus arrives.

[CJ]

Tiwai smelter bombshell. Will this upset the IPO

[fungus pudding]

Most definitely if RIO continues with its new policy of shedding excess baggage from the company as well as no buyer being found. Remember that they are locked into the first 3 years of an 18 year agreement with Meridian that began 1 January 2013, so they will not just throw that away. If aluminum prices pick up you can expect them to want to keep Tiwai. Here's to hoping...

This doesn't make sense to me. It's either an 18 year agreement or it's not. If they are only locked in for 3 years, then it's a 3 year agreement, possibly with rights (to extend or renew) for 15 more years. Sloppy journalism has crept in somewhere.

[Vaygor1]

Tiwai smelter bombshell. Will this upseteasierPO


It might affect the IPO issue price by bringing it down due to public sentiment, but it won't affect MRP's bottom line any more than any other Gentailer on the generation side of the equation.

The general press cannot grasp the concept of generation vs retailing. This is a retail issue.

In my view, less retailing makes MRP a safer bet. Will make it easier for them to supply their own customers.

[fish]

It might affect the IPO issue price by bringing it down due to public sentiment, but it won't affect MRP's bottom line any more than any other Gentailer on the generation side of the equation.

The general press cannot grasp the concept of generation vs retailing. This is a retail issue.

In my view, less retailing makes MRP a safer bet. Will make it easier for them to supply their own customers.

Isn't that only the case if they have more customers using more power than they can generate-such as now with Taupo about to reach its minimum level-just 0.2 metres away .
By my biased estimates mrp are going to be in real strife by mid -april-next week we have another big high pressure drifting over the north island.

[CJ]

It might affect the IPO issue price by bringing it down due to public sentiment, but it won't affect MRP's bottom line any more than any other Gentailer on the generation side of the equation.

The general press cannot grasp the concept of generation vs retailing. This is a retail issue.

In my view, less retailing makes MRP a safer bet. Will make it easier for them to supply their own customers.?? Isn't this a generation issue. Their will be excess power which will push the price down so expensive power (ie. gas) will shut down or only operate at peak times.

Retail - there is exactly the same amount of customers as before using exactly the same amount of power.

Wholesale - there is one less customer than before though they are a biggy. More Milk plants in the south island will fill some of the void.

[Vaygor1]

?? Isn't this a generation issue. Their will be excess power which will push the price down so expensive power (ie. gas) will shut down or only operate at peak times.

Retail - there is exactly the same amount of customers as before using exactly the same amount of power.

Wholesale - there is one less customer than before though they are a biggy. More Milk plants in the south island will fill some of the void.

Yes it is a generation issue so will not impact MRP any differently from any other generator.

Clarification. It is a retail issue in terms of selling power to Tiwai Point. But in terms of overall NZ electricity use the above statement applies (ie a generation issue).

[Vaygor1]

Isn't that only the case if they have more customers using more power than they can generate-such as now with Taupo about to reach its minimum level-just 0.2 metres away .
By my biased estimates mrp are going to be in real strife by mid -april-next week we have another big high pressure drifting over the north island.

All the more reason to have less customers. If lake levels are low then forward hedging and spot prices go through the roof. Becomes irrelevant if you can supply your own customers. Even better if you can sell power at huge prices to those who cant.

[Lease]

Hi Lease,

Thank you very much for all that useful information. I have a rookie question though, could you tell me where you got the Earnings figure from to calculate EPS for the results to Dec 31? I'm new to this and am trying to work through the figures for myself but can't seem to figure that bit out. If I multiply your EPS figure (5.39) by the share count (1,400,000,092) I get a figure of roughly $75.5m is that correct?

Cheers

hi, turmeric

Yes, you are right, the interim profit up to 31/12/12 is $75m. You can find the result at MRP website which is under "Results" section.

[janner]

Then I'm calling a market top within 6 months with a correction coming afterwards. When the taxi driver starts giving share advice....

In my early days it was " the office boy ".. Lesson is still the same..

As said .. will not be buying the IPO.. In the dips .. MAYBE.. looking less likely :-)

[sharer]

Tiwai smelter bombshell. Will this upset the IPO[s]

You are right CJ.
Actually i don't think it need make much difference to Meridian itself. My reasoning would guess: Meridian can produce electrons in vast amounts & at the cheapest cost in NZ. With a surplus available after Tiwai is downsized or closed, the surplus supply will drive other expensive generators to the wall. Most expensive generation must be from gas or coal perhaps, so this looks like a very damaging blow most of all to Genesis. Govt may react by taking Genesis off their privatisation agenda (& probably ~ 5 years before they could put it back on). Probably bad news also for fully privatised Contact. The only serious problems i see for Meridian are in distribution - getting their electrons to market. The biggest obstacle was Cook Strait - but a big new link is completed already & currently undergoing testing & should be available quite soon. Another southern link will probably be needed to boost their ability to send power up to the Benmore end of the link to the national grid (some links already exist, but will constrain any new bulk transfers). So i think Meridian could come out of this, sans Comalco, making even bigger profits, bearing in mind the ridiculously low price paid by Rio et alia ever since Muldoon's days. Other interesting projects could be available to Meridian closer to home in Southland. Recall years ago a proposal to build a smelter to make pure silicon from local SiO2 deposits?

[CJ]

Agree there is probably upside for meridian and downside for genius is (as the producer of the most expensive power at Huntly). Trams power may have to change its pricing model. Should contact pay the same amount considering it has plants close to market (ie. Auckland) whereas meridian would have to ship it's power the length of the country - not to meantion the $200m+ to connect it to the grid in the first place.

[CMo]

"Other interesting projects could be available to Meridian closer to home in Southland".

I know it's a little off topic, but i'd love to see someone develop a massive server farm down South, utilising the cheap power and perhaps tying in to the idea of another high speed internet cable to US /Australia.

[CJ]

I know it's a little off topic, but i'd love to see someone develop a massive server farm down South, utilising the cheap power and perhaps tying in to the idea of another high speed internet cable to US /Australia.I saw this mentioned on Twitter. Lance Wigg (he was part of the Pacific Fibre founders) responded that the state of the art IBM server farm in Auckland has back up generators that would only power 200-300 homes. They dont use as much power as you think unless you are meaning a Google/Apple sized server farm - that isn't viable for NZ due to latency from our distance to main markets.

I would say more dairy but they are already ruining the environment.

Personally I dont see it closing. They cant mothball, they have to fully remediate the site. Therefore, they would prefer to pay someone to take it off their hands rather than have to do that. Maybe Shareholder.co.nz members could form a consortium and put in a offer at $1 plus a 5 year interest free loan for working capital purposes of $50m. If it turns pear shape, we will just have to declare bankruptcy and live of our trust funds like all great Auckland property developers are now doing.

[macduffy]

I agree, CJ. The Tiwai smelter is an integral part of Rio's aluminium assets and closing it down would make the sale of the package more difficult, particularly as, despite its age, we're told that its costs are at the lower end of such plants and its product at the top end for purity/quality. Just to be expected that they will use the current "delicate" time to exert maximum pressure for a price reduction. I wouldn't be surprised to see a deal emerge which ties power prices to aluminium prices in some way, at least for an interim period.

[CJ]

The government has Rio by the short and danglies and they know it.i wouldn't quite go this far but hopefully the government/Meridian stay strong and call their bluff.

[macduffy]

We need to read Rio's moves in the wider context of what they are looking to do with their aluminium assets portfolio, ie Pacific Aluminium - is that the correct name? As Moosie has noted, they have wrung major concessions out of Australian govts to keep the Gove bauxite and Bell Bay refinery operations viable in order to keep Pacific Aluminium attractive to potential buyers. It would make no sense to jeopardise a sale of PA through closing down an important part of that company although I wouldn't go so far as to say that the NZ govt holds all the cards in this game. Some further concessions are more likely, IMO.

[CJ]

Lance has now posted on this issue: http://lancewiggs.com/2013/04/03/can-we-replace-the-tiwai-smelter-with-a-data-center/

A lot of great insights from someone who has worked in the industry.

[macduffy]

Thanks, CJ.

I have this nagging feeling that somewhere along the way we've lost sight of the fact that the Tiwai Point smelter wouldn't be there at all if it wasn't for the fact that cheap hydro electricity was made available by building the Manapouri station - and what a saga that was! Aluminium smelters don't operate in isolation - they're smelting alumina produced from mining bauxite - and the finished product then needs to be marketed to the world's aluminium fabricators/users, ie part of a chain. It's unrealistic to imagine that NZ Inc could successfully operate such a business, assuming that a reliable supply of alumina could be sourced to start with, and then sell aluminium on world markets in competition with the industry majors. For Tiwai Point to continue it needs to be owned by Pacific Aluminium (Rio Tinto) or one of the other big players - and it needs to be cost competitive.

[gv1]

- and it needs to be cost competitive.[/QUOTE]
Very true, no matter how much subsidy they get, they can fold unless they restructure.

[NZSilver]

prospectus and listing price aside,

I am finding conflicting results and veiws as I do research on if MRP is this good buy in terms of share price appreciation from IPO price (capital return) over say a 1 year+ period, not so worried about the DIV yeild as i see that as a bonus, I would say it will be relatively small. I am trying to decide what risks their are and decide how big these risks are and how they would weigh on the shareprice.

The main issues/risk I have.... Negative on share price.
1. Tiwai Aluminium Smelter Closing (some say it will be fine/others say prices will drop).
2. Drought resulting in low dam levels - reduced ability to use dams to generate power.
3. Electricity generation growing faster than consumption.
4. Goverment owning 51% of the company, will investors including overseas be put off by this
5. Realisitc growth prospects
6. Possible Maori Rights issue (may be over now)
7. Only getting $2000 worth of shares
8. Better to buy post IPO or at IPO?, (look what happeend to fonterra this year, 25% increase in share price in the first day)

Why I think this could be a good buy on the other hand;
1. It will likely go cheap.
2. A lot of long term holders who might wont sell, reducing shares on market therefore increasing price. supply/demand
3. Overseas interest once it has been listed.
4. Relatively safe as huge asset backing, power company, safe industry, power always required in near future ect
5. Increase interest in share market therfore increase in price.

[Lease]

prospectus and listing price aside,

I am finding conflicting results and veiws as I do research on if MRP is this good buy in terms of share price appreciation from IPO price (capital return) over say a 1 year+ period, not so worried about the DIV yeild as i see that as a bonus, I would say it will be relatively small. I am trying to decide what risks their are and decide how big these risks are and how they would weigh on the shareprice.

The main issues/risk I have.... Negative on share price.
1. Tiwai Aluminium Smelter Closing (some say it will be fine/others say prices will drop).
2. Drought resulting in low dam levels - reduced ability to use dams to generate power.
3. Electricity generation growing faster than consumption.
4. Goverment owning 51% of the company, will investors including overseas be put off by this
5. Realisitc growth prospects
6. Possible Maori Rights issue (may be over now)
7. Only getting $2000 worth of shares
8. Better to buy post IPO or at IPO?, (look what happeend to fonterra this year, 25% increase in share price in the first day)

Why I think this could be a good buy on the other hand;
1. It will likely go cheap.
2. A lot of long term holders who might wont sell, reducing shares on market therefore increasing price. supply/demand
3. Overseas interest once it has been listed.
4. Relatively safe as huge asset backing, power company, safe industry, power always required in near future ect
5. Increase interest in share market therfore increase in price.

If you have a look my reply on page 30, you may have a 2nd thought.

[janner]

Has Manapouri been paid for ??? If so when !!.. If not .. How much I still owing ??..

[CJ]

1. Tiwai Aluminium Smelter Closing (some say it will be fine/others say prices will drop)..The likely outcome is the most expensive producer (Huntly?? - genesis owned) will close so electricity supply will be priced based on the next most expensive producer. A small drop but not significant unless it is your plant that has to shut down.


2. Drought resulting in low dam levels - reduced ability to use dams to generate power.A risk, but whos to say this years drought will be repeated, or that next year the SI wont be in full drought (I was up at Twizel earlier this week and Tekapo seemed full to the brim but lake Pukaki looked very low - not sure if this was due to one of the canel systems being lined (ie. out of action)).


3. Electricity generation growing faster than consumption.Given Tiwai, and stagnant consumption growth, it is probably safe to say there will be no new generation in NZ for 5+ years. CEN has already stated that it has stopped investing and will now reap the benefits. It is likely new generatin will only be sought where it is cheaper to invest in new plant than upgrade/maintain existing plan.


If you have a look my reply on page 30, you may have a 2nd thought.I've changed the settings so am only upto page 13. What post number are you refering too?

[troyvdh]

...gee I cannot believe whats going on...do folk not have an investment horizon more than just a few weeks and months...here is my take...

Numerous folk are saying (again) that power rises around the world will go up...

Tiwai will not close.

Why all this panic...CEN south by 4-5 % ????????????

[Lease]

T
I've changed the settings so am only upto page 13. What post number are you refering too?

No.444, not a good number but have a look.

[troyvdh]

Giday T.....Some commentators have said for Rio to close would cost about $400m....also Tiwai produces the best Aluminium...something about 99 % purity....
Rio historically play hard ball in negotiations...

re MRP IPO price being lower...quite right ...OK say the IPO price is say 30-50 cents cheaper blah blah...this amount could be made irrelavent should folk decide to focus ..say on the long term prospects...and decide that the IPO price was/is cheap.....NOW that would be a surprise...would it not.....cheers

[Guild]

I have a couple of questions about Tiwai, I hear in the Media that they use 14% of the power does anyone know what % of the gross that they pay for it, I assume a lot less than 14%.
My next question from a subsidy point of view, is the subsidy worth more than the economy of Southland.
Perhaps it would be worth more to the country to not provide cheap power to an overseas company.

[macduffy]

Has Manapouri been paid for ??? If so when !!.. If not .. How much I still owing ??..

Manapouri was built by the govt (NZED) in the 70's. So in that sense it had been well and truly "paid for"!

Whether or not it appears in MRP's accounts with any debt attached will no doubt be disclosed in the investment statement due out on Friday.

[CJ]

Giday T.....Some commentators have said for Rio to close would cost about $400m....also Tiwai produces the best Aluminium...something about 99 % all correct from what I've read but quality does fetch much more. More importantly, apparently around middle in terms of cost so in theory should stay open unless those bottom half all get subsidies.


I have a couple of questions about Tiwai, I hear in the Media that they use 14% of the power does anyone know what % of the gross that they pay for it, I assume a lot less than 14%.
They pay about a third what large commercials pay.

They subsidy currently (in ghw short term atleast) costs them nothing as there is no market for that power as it is not connected to the grid. That power is very cheap to product but could earn a lot more one connected.

[minimoke]

Tiwai will not close.

Tiwai will close.
It is not a matter of if but when.
Smelters do not last for ever, nor do they close down overnight.
Once news of closure is affirmed it will take years to build transmission lines to get the power north. The lines will only be built if there is a return on investment.

Tiwai is not an issue for today though it may be in 5 yeas

[GTM 3442]

I seem to recall reading recently that it would take about three years to connect Manapouri to the grid. So any "surplus" will take a while to arrive.

I also seem to recall the CEO/CFO (?) of Contact saying recently that power prices would need to rise to allow/encourage new generation capacity.

As I understand it, NZ power pricing (possibly only the spot market) is based on the most expensive form of generation used in any giiven half-hour period.

So many factors to consider. Makes it so hard.

So I think what I'll do is just buy the whole market - individual companies in direct relationship to their generation capacity. My own personal index fund !

[robbo24]

Numerous folk are saying (again) that power [prices] (sic) around the world will go up...

It's too hard to import a chart that I found but look:

"Over the past 20 years, New Zealand's average annual power prices have increased more than 15c per kilowatt hour (kwh), from 9.2c per kwh in 1990 to 25.5 at the end of 2010. That's compared with an increase of less than 2c per kwh in Australia and about 3c per kwh in the United States." http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10780269

Roughly 3x increase in price over 20 years.

If we presume demand increases at a linear rate (growth of population, industry, houses, etc.. 40% increase over the same 20 year period according to MFE http://www.mfe.govt.nz/environmental-reporting/report-cards/energy-supply-and-demand/2009/images/figure8-e-new.jpg) then surely the long term for this stock is going to be excellent.

You don't even need to grow money on trees, it just falls from the sky in the form of rain.

And, correct me if I am wrong, if hydro levels become too low due to drought then the price just goes up anyway... (or rolling black outs!)

[fish]

I agree with your philosophy Robbo .
Your last point needs expansion from someone capable of more expert aanalyst than you or me.
Sure power prices go up in a drought as more expensive thermal generation is used and supply/demand market pressures inflate prices.
This will have varying effects on different power companies.
CEN have stated in the past that a north island drought -such as we are having-will have the potential to increase their profits massively.In contrast it would appear that TPW and MRP will suffer-possible big losses if their customers consume more power than these companies generate .
It wil have a flow on effect that should last longer than the drought-not only will lake levels soil moisture and water tables take a long time to recover but future power prices will have upward pressure to take account of more frequent risks of drought.

[Fuger]

It's too hard to import a chart that I found but look:

"Over the past 20 years, New Zealand's average annual power prices have increased more than 15c per kilowatt hour (kwh), from 9.2c per kwh in 1990 to 25.5 at the end of 2010. That's compared with an increase of less than 2c per kwh in Australia and about 3c per kwh in the United States." http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10780269

Roughly 3x increase in price over 20 years.

If we presume demand increases at a linear rate (growth of population, industry, houses, etc.. 40% increase over the same 20 year period according to MFE http://www.mfe.govt.nz/environmental-reporting/report-cards/energy-supply-and-demand/2009/images/figure8-e-new.jpg) then surely the long term for this stock is going to be excellent.

You don't even need to grow money on trees, it just falls from the sky in the form of rain.

And, correct me if I am wrong, if hydro levels become too low due to drought then the price just goes up anyway... (or rolling black outs!)

Robbo24 you have largely, but incompletely covered what I registered to say. There is still something to be added to cover the way that power companies
make profits in New Zealand, and to cover potential events such as droughts and the potential closing of Tiwhai point, that needs to be said,
that I feel has not beeen delt with adequately on this thread and that would make animpact on any decision t invest so, I will say it.
It seems to me that there is a large misunderstanding about the way the wholesale electricity market works in NZ and subsequently
this extends to the discussion of investing in the electricity sector, which might lead to a misallocation of investment funds
I draw your attention to this article published not too long ago on the s tuff website

http://static.stuff.co.nz/1347771012/331/7687331.jpg http://www.stuff.co.nz/business/opinion-analysis/8466937/Electricity-market-ripping-off-consumers Electricity market ripping off consumers

BRYAN LEYLAND



Last updated 05:00 25/03/2013


OPINION: Electricity prices are too high. Even though most of our electricity is generated by old hydropower stations the price has escalated at 4 per cent above inflation since about 2002 when the market first started to function effectively.
The electricity reforms that led to the setting up of the ECNZ and reduced the number of Electric Power Boards were a move in the right direction. Unfortunately, people who did not understand electricity systems then gained the upper hand and insisted that electricity was "a commodity like any other".
Not so. If we take a market commodity like baked beans, then, if the price goes up people switch to spaghetti. So baked beans has the essential market characteristics of price elasticity and the availability of an alternative. There is no alternative to electricity and the value is much greater than the price.
The Electricity Authority have calculated that the cost of losing a supply of electricity is more than $10 per kWh. But if we all paid $10/ kWh, the economy would collapse. Electricity is as vital to our economy as roads, water and sewage and, I argue, should be treated as such. Consumers should be able to purchase it at the cost of production plus a reasonable margin to fund future development and to ensure that there is sufficient capacity for dry years.
The Wholesale Electricity Market Development Group (WEMDG) was set up to give New Zealand a competitive market. In the end, they had to choose between two options. One was a "single buyer" system where each power station would contract to supply electricity at its cost of generation over a period of 20 years or more. With this option most of our electricity would have been purchased at a very low price because our hydro stations were old and generated at a very low cost. If a new station was needed, the single buyer would look for the station with the lowest overall cost of electricity. He would get offers from a genuinely competitive market in the business of building and operating power stations. Consumers would get electricity at the optimised average cost of generation.
Although WEMDG were advised that a single buyer market was the lowest risk option they chose an option based on selling kWh. To an experienced engineer, the shortcomings were obvious. For instance the stations all get paid at the price bid in by the highest bidder. So when an expensive station is needed the low-cost stations make huge windfall profits. During a shortage, the generators have market power and can - and do - push the price up. Stations only earn income if they are actually called upon to generate so there is little inducement to provide the reserve stations that the system needs for dry years. There are many other similar perverse outcomes.

As a result of this flawed market and the associated "reforms" I - and others - have calculated that consumers have paid more than $4 billion more for electricity. On several occasions it has been demonstrated that the generators have manipulated the market without breaking the rules.
As a result, the market is seriously flawed and rips off the consumer.
Many of the rules and regulations governing the industry have perverse outcomes.
As just one example, because the market fails to co-ordinate the power system for the benefit of the consumer, the industry can no longer use ripple control to switch off water heaters when demand peaks. If the market and regulations were rationalised, the price of electricity would drop and the only price rises would be a small increase in the average cost of electricity as a result of putting new generating plant on the system.
What is needed is an objective and independent examination of the market and the regulations. As lots of people are profiting from it, don't hold your breath.
Bryan Leyland is a power industry consultant and part-owner of a hydropower station that profits whenever the generators manipulate the market.
- © Fairfax NZ News

In particular I draw your attention to this phraise

". For instance the stations all get paid at the price bid in by the highest bidder. So when an expensive station is needed the low-cost stations make huge windfall profits."

I suggest if this phrase is coorrect and my preliminary investigations suggest that it is, then the consequence is that during a draught low cost producers (presumably hydro) must make large profits, in spite of any drop in production, and that,
a closure of Tiwhai point, if it reduced the operation of higher clost producers would have a substantial impact across the whole power industry.

[robbo24]

I suggest if this phrase is coorrect and my preliminary investigations suggest that it is, then the consequence is that during a draught low cost producers (presumably hydro) must make large profits, in spite of any drop in production, and that,
a closure of Tiwhai point, if it reduced the operation of higher clost producers would have a substantial impact across the whole power industry

Tiwai gets a cheaper bulk deal though - you've said there would be a "substantial impact", but upwards or downwards? Why so?

[CJ]

I suggest if this phrase is coorrect and my preliminary investigations suggest that it is, then the consequence is that during a draught low cost producers (presumably hydro) must make large profits, in spite of any drop in production, and that,
a closure of Tiwhai point, if it reduced the operation of higher clost producers would have a substantial impact across the whole power industry.It depends on if the increase in price is not enough to offset the decrease in supply. That's why lake levels and forecast rain are so important - they can't drain the lakes to their limits as off they have to replace all their electricity on market which would be very expensive.

If Tiwai shuts, the most expensive power plant will close. However the price will be held up by the next most expensive. Is isn't as significant as you make out.

Both contact and genisis are looking to close their expensive plants in the mid term so this will just bring that forward a few years.

[macduffy]

Thanks, Fuger.

My memory of the sequence of events is hazy but I seem to remember that the commercialisation of the old NZED involved the creation of a state-owned "peaking" station, Whirinaki, from memory, to provide a degree of stability to the market. The theory was that as NZ's power requirements grew, that station would be sold off to one of the generating companies and a new station built. Somewhere along the way the policy changed, Whirinaki got sold off but nothing new got built to replace it to provide the market discipline.

Assuming that's what happened, what was the rationale behind the change?

:confused:

[Fuger]

it is in the article, the price paid for the most expensive unit of power becomes the market clearing price for the whole market.
". For instance the stations all get paid at the price bid in by the highest bidder. So when an expensive station is needed the low-cost stations make huge windfall profits."

[Fuger]

My researrches haven't extended to why the market is set up this way so far my focus has been on the profitability of the market and its impact on an investment. I agree that why the market is set up this way is of interest.

[stones]

Well the pay rises for the directors are out!!! I am struggling for any justification

[Banksie]

Their interim report is out http://www.mightyriver.co.nz/PDFs/Mighty-River-Power-Interim-Report-for-the-Six-Mont.aspx.

I like the infographic style summary for dummies like me :).

[NZSilver]

Does anyone have a good understanding or carried out research regarding MRP international investments.

It seems they have carried out drilling in Chile and started a project in Germany which has had a few issues. There is also mention of a possible lack of capital with these projects. I always get a bit nervous with international investments as companies often invest overseas with little knowledge, with a poor results at the end of the day.

[macduffy]

Personally I think in general Directors get paid way too much for what they do (or dont do) on average, BUT, the justification is that they are upping the pay at MRP to bring things in line with other comparable listed companies.

Yes, that's the usual line, along with "You pay peanuts and get monkeys". On the other hand it's also been noted that if you then pay those monkeys more, you just get wealthy monkeys! I would have preferred that the present board demonstrate that they're up to the bigger job before getting the bigger pack packet. OK, I know it doesn't work like that!

[bung5]

Does not look as cheap as I thought. Might as well buy contact energy

[fish]

Does not look as cheap as I thought. Might as well buy contact energy

Agree CEN is very cheap-payed 6% in a bad year-currently making windfall profits and this is likely to continue for some time with megaprofits -contact hydrolakes good storage and MRP rapidly depleting

[The BOWMAN]

How does the pricing compare to FSF IPO price? It is too high for me. So many cheaper options on the market right now. Price it so high would only attract overseas investors.

[noodles]

FY13 forecast They are paying a dividend of 12c per share on eps of 6.77. Sound like the same dodgy business going on at PGW.

FY14 forecast They are paying a dividend of 13c per share on eps of 11.46.

This seems rather dodgy. And it makes FY13 pe between 41 and 34. This is no growth stock!
FY13 pe between 24 and 20.

At least the tax payer is getting a good deal.

[CJ]

I haven't had a chance to read yet but just a few comments so far:

- Dividends should be based on fre cash flows, not eps.
- 2012 eps included write offs so hopefully will not repeat (unlike FBU's annual one off impairments/restructures)
- Dividend yield and P/E doesn't sound as good as CEN which arguably has better generation assets

[Lease]

- Dividends should be based on fre cash flows, not eps.


Free Cash Flow is negative as per prospective cash flow statement.

My conclusion hasn't changed. CEN is better and cheaper, why buy MRP?

[fish]

Free Cash Flow is negative as per prospective cash flow statement.

My conclusion hasn't changed. CEN is better and cheaper, why buy MRP?

Precisely-mrp have too much risk-67% of generation is hydro from the waikato/taupo catchment.
Current spot prices are multiples of normal and it wont be mrp making windfall profits from them

[peat]

Very weird being asked to apply with a dollar value - odd lots everywhere

[Grimy]

Very weird being asked to apply with a dollar value - odd lots everywhere

A lot of IPOs do it that way. I guess its easier as they haven't set a price and they want the money up front, so applying for a certain number of shares would be messy. Having said that I hate having a random number of shares in a company-my tag maybe Grimy, but I like a bit of order to things!

[macduffy]

Odd lots aren't the hassle that they used to be though when the odd number attracted a bigger brokerage - and at one stage were traded through the "odd lots broker". Nowadays, it's usually just as easy to sell an odd lot as a rounded parcel, provided, of course, that there are buyers for the shares! In any case, dividend reinvestment schemes soon take care of those nice orderly parcels, for those who participate!

:cool:

[Zaphod]

Very weird being asked to apply with a dollar value - odd lots everywhere

Conversely, being asked to specify the number of shares without any idea of the total dollar value would seem odd to me. Normally, investors have a fair idea of the maximum dollar amount they could put into the investment.

Of course ideally, it'd be nice to know both the values of both variables upfront.

[noodles]

A good article in the NBR

http://www.nbr.co.nz/article/risk-v-reward-mighty-river-v-contact-weekend-review-db-138232

I think it is way over priced. Jon Key is playing with his political future if it is a failure. I thought it would be better value than contact energy so a nice gain would be had by punters.

I'm starting to doubt the easy money trade now. I guess there will still be demand post ipo from index trackers, but the value gap with CEN must eventually close.

Maybe it could be a good pairs trade: Short MRP / long CEN.

What is really striking about the prospectus is how hard it is to find forecast EPS. Usually this is an investment highlight.

[Lease]

A good article in the NBR

http://www.nbr.co.nz/article/risk-v-reward-mighty-river-v-contact-weekend-review-db-138232



The article has pointed exactly what I thought.

[noodles]

Use find and replace on the PDF version - nice and easy!

page 102 says thus:

basic and diluted EPS

2010 6.04
2011 9.08
2012 4.84
2013E 6.77
2014E 11.46

Sparky, yes i had found them. Read my earlier post. My point is you do need to search for it.

I am also dubious they can make those 2014 estimates given their recent track record.

[Winston001]

Well time moves on and I doubt most voters would give a tinkers cuss for the "filthy rich" (probably their neighbours) who face a drop in the MRP share price. Its the kind of thing which engages public attention but is disinteresting afterwards.

I recall instructing my children years ago about their Contact shares bought by me when they were born. The price in 2007ish was $7 and trending up so that was a useful lesson on how sharemarkets work. Today however the price is $5.40 and the kids can't understand that - and I struggle to explain it. So far as they are concerned Dad's showed us how to lose money.

Why bother?!

[skid]

Maybe it was a more valuable lesson than you think

[Fudosan]

very sneaky to get mum and dad investors to apply for $ value of shares they want before setting the final price.

The goverment is no different from anyone else that wants to take their company public.

Would you apply to any other public float that took your money then decided on what price to set the shares at.

Offering free shares at a future date as an incentive to play thier game.
Bit of a gimic really and I for one will not be buying into there game.Very much agreed. Mark Twain said "Whenever you find yourself on the side of the majority, it is time to pause and reflect." Based on what I've read on this forum, I'm not too keen to buy this time. Just hope the hype will be gone when the next one comes.

[G on]

When I go online to read the prospectus it is so out of focus to render it unreadable. Does anyone else have this problem? Is there any other site to get a readable copy. Have tried on tablet (android) and comp (xp) with the same result. I don't want it mailed to me.

[fredsmith]

Download the PDF version, Bottom left from memory

[CJ]

very sneaky to get mum and dad investors to apply for $ value of shares they want before setting the final price.

Would you apply to any other public float that took your money then decided on what price to set the shares at.Most IPO's are run this way. CEN ws done this way and even listed outside (above) the indicative range) as did Facebook.


When I go online to read the prospectus it is so out of focus to render it unreadable. Does anyone else have this problem? Is there any other site to get a readable copy. Have tried on tablet (android) and comp (xp) with the same result. I don't want it mailed to me.YOu can download a PDF from that viewer - pdf is very clear and works fine in iPad - slowly making my way through it.

[RTM]

Yes. I have the same issue. I wondered if it was a ploy to make us disinterested in examining the whole document.

[macduffy]

Yes. I have the same issue. I wondered if it was a ploy to make us disinterested in examining the whole document.

I think it's more because the boffins who design these online docs don't realise that most of us don't have the latest gear, or the knowhow, perhaps, to handle these systems.

I'm waiting for the movie to come out!

;)

[Doggog]

How interested is the Government in wanting people to hold these shares? I can just see John Key overpricing these things so they tank on day one. You will get a classic Key statement - "These shares are a long term investment and we want people to hold them, that is why we put in place the bonus share scheme"

He gets the maximum money for the Government, locks in all the buyers and screws over any flippers. He can then demonise the flippers and win public favour. The man made millions wheeling and dealing so I am beginning to think his side will win.

[CJ]

How interested is the Government in wanting people to hold these shares? I can just see John Key overpricing these things so they tank on day one. You will get a classic Key statement - "These shares are a long term investment and we want people to hold them, that is why we put in place the bonus share scheme"

He gets the maximum money for the Government, locks in all the buyers and screws over any flippers. He can then demonise the flippers and win public favour. The man made millions wheeling and dealing so I am beginning to think his side will win.But he wants to sell 2 more - I would expect him to do that on the last one only.

[Hoop]

I think it's more because the boffins who design these online docs don't realise that most of us don't have the latest gear, or the knowhow, perhaps, to handle these systems.

I'm waiting for the movie to come out!

;)

Yatta! Irrational Exuberance (2001?) (http://69-195-120-38.bluehost.com/view.php?video=8ljsPqIfPD0&feature=youtube_gdata_player&title=Yatta!+Irrational+Exuberance)...Caution:.. the song is catchy....
Gotta love the psycho bear....:cool:

Note the video date....at the end of the Wall St bull market cycle before the big downturn..... Timely huh ?
Anything in the video sound familiar at the moment....eh?

[bung5]

IMO it looks like its setup to go good for two years then tank. Just enough time to get national past another election?

[CJ]

IMO it looks like its setup to go good for two years then tank. Just enough time to get national past another election?Why would it tank? My guess is it will be priced to give a nice pop for the IPO (first year), loyalty bonus for the second year, and after than, just normal returns along the lines of CEN.

If there is any weakness in CEN in the lead up to the MRP IPO, it may be the better investment.

Droughts/floods/tiwai may have some effect but that applies equally to CEN (though obviously has different catchments etc)

[bung5]

a P/E Ratio that is already very high. Any gains will see it overpriced. Most smart retail investors would get out after the bonus shares . Supplementing dividends with debt. You think EPS will be 12cps in FY15??

[CJ]

you should be more worried about iwi claims,My understanding is the Treaty claims can only effect Government, not private individuals, hence the Maori Council wanting to stop the SOE IPO's.

Any concession to Maori in relation to water rights would have to apply to everyone, including CEN/Farmers etc.

[macduffy]

This deal is totally set up too look good then flop after 2 years making it look like the government got a great deal.


I think that overestimates John Key's ability to time the markets but I've concluded that CEN is a better bet at current prices. I havn't entirely discarded the MRP business but have bought a few more CEN today.

[CJ]

I am part way through the 239 page document and all teh BS they have to put in annoys me:


As at the date of this Offer Document, there is no established market for the Shares. However, in the opinion of Mighty River Power and the Crown, a market for the Shares is likely to develop on completion of the Offer.

Do they really need to say this? Far to much BS to wade through to find anything interesting.

[bung5]

I think that overestimates John Key's ability to time the markets but I've concluded that CEN is a better bet at current prices. I havn't entirely discarded the MRP business but have bought a few more CEN today.


Doesn't need to time the market too much. Just needs to make sure they don't tank before the next election. 4% bonus return after 2 years will help that along with topping up dividends with debt to bump up the dividend yield

[fungus pudding]

a P/E Ratio that is already very high. Any gains will see it overpriced. Most smart retail investors would get out after the bonus shares . Supplementing dividends with debt. You think EPS will be 12cps in FY15??


In which case they are not investors. They would be traders.

[bung5]

In which case they are not investors. They would be traders.

I do not know any traders who have a trade going for 2 years

[sharer]

you might want to talk to the owners of businesses that have already been directly effected by past treaty settlements.
There are hundreds of privately owned businesses that due to treaty settlements have to pay locail iwi for usage of a range of things

In the extremely unlikely event those statements were true, we might wonder if those merchants using other people's properties for their own enrichment should have been paying up much earlier. Generally, Treaty settlements result only after proving longstanding injustices, and they never seem to amount to more than a tiny fraction of what would be regarded as just or reasonable compensation for past crimes and injuries.

[fungus pudding]

I do not know any traders who have a trade going for 2 years

So what length of time distinguises a trader from an investor?

[Snow Leopard]

I do not know any traders who have a trade going for 2 years

Hi, I am the Paper Tiger, pleased to meet you.

[bung5]

Is a good question, I don't think you can put an exact time on it. But I would of thought 2 years is by no means trading.

[bung5]

Hi, I am the Paper Tiger, pleased to meet you.

You are paying tax on shares bought and held for over 2 years??!

[Jay]

Is a good question, I don't think you can put an exact time on it. But I would of thought 2 years is by no means trading.

If the share in your "trading" portfolio and not your long term one - could under a different account or entity to distinguish

[Snow Leopard]

You are paying tax on shares bought and held for over 2 years??!
In New Zealand trading or investing (and the taxation of gains etc) is really about intent at the time of purchase and has absolutely nothing to do with the time-frame.

Trades end when they meet their exit conditions and sometimes they just keep going up.

Best Wishes
Paper Tiger

[bung5]

Well the point is most of the retail "investors" selling after two years will not be classified as traders.

[POSSUM THE CAT]

bung5 The onus of proof is on you not the IRD so be very care full documentation of all decisions could be very beneficial

[fungus pudding]

Well the point is most of the retail "investors" selling after two years will not be classified as traders.

Not by IRD, but I would consider them traders. True investors only sell on rare occasions, or never.

[Silverlight]

EPS vs DPS...




EPS
DPS


2010
6.04
6.18


2011
9.08
7.89


2012
4.84
8.56


2013 Forecast
6.77
12.00


2014 Forecast
11.46
13.00


Clearly I am ignoring the fact that EPS has been driven by abnormal items, but paying out more than you earn... great business model.

[Fudosan]

EPS vs DPS...




EPS
DPS


2010
6.04
6.18


2011
9.08
7.89


2012
4.84
8.56


2013 Forecast
6.77
12.00


2014 Forecast
11.46
13.00



Clearly I am ignoring the fact that EPS has been driven by abnormal items, but paying out more than you earn... great business model.Paying more than you earn? I just don't like this trend.

[Zaphod]

Dont forget tiwai point is the least of investors worries, you should be more worried about iwi claims, especailly if national have to jump into bed once again with the maori party soon after the next election. big big polictical risk in this stock suckers if you cant see that.

It has always been a given that Iwi would make a claim of that type. If they can make a claim against sporting events using the lake, then claims against power generators will most certainly follow.

[RazorX]

Dont forget tiwai point is the least of investors worries, you should be more worried about iwi claims, especailly if national have to jump into bed once again with the maori party soon after the next election. big big polictical risk in this stock suckers if you cant see that.

I'm inclined to agree snapiti. Most of the risk factors associated with MRP can be defined or estimated in some way or another. Trying to factor in treaty claims is next to impossible. Nothing may happen, or all the land gets given back, or MRP has to pay a % for every cubic meter of water it uses.

Zaphod mention an example of what can happen, though in saying that the Iwi at Taupo already own the lake bed and space the water takes up, and the air above it (I believe - I could be wrong) Funny thing is that they get a fee for every fishing licence... from a resource that was introduced by settlors. Anyway my point here is that to my knowledge the Iwi who would be interested in claims that would affect MRP don't actually own the land etc yet - thats whats so hard to factor in. Crystal ball anyone?

[percy]

My crystal Ball is giving clear signals of darkness and murkie waters.The alumination is fading. Looks as though Maori ,policticians and IRD are peeing in the water.Everything getting very polluted.
Best to avoid.

[Winston001]

On a straight analysis basis MRP doesn't look attractive. A company which expects to pay out 90 - 110% of profit each year. That implies MRP has no capital projects and no forward expansion. That might be entirely rational and there is nothing wrong with a company which simply sits and makes solid profits.

However the intention to increase borrowing simply to pay dividends, when interest rates are at an historic low suggests vulnerability and very short term thinking. Futhermore the PE is much higher than expected.

Certainly the government want this partial privatisation to be taken up by as many Kiwis as possible because that translates into political approval and continued support. But my take on it is this issue is over-priced.

[iced]

MRP is at the end of a geothermal expansion period, so expect high payouts for a few years (especially with tiwai lingering) before the next round of capital projects begin.

[CJ]

MRP is at the end of a geothermal expansion period, so expect high payouts for a few years (especially with tiwai lingering) before the next round of capital projects begin.yip. CENhas said it is doing the same as its capital investment program finishes.

Prospectus does state however that MRPs capital maintenance program over the next 10 years will be a lot more than the last 10 years as the hydro network is of that age. Still working my way through.

[SCOTTY]

My crystal Ball is giving clear signals of darkness and murkie waters.The alumination is fading. Looks as though Maori ,policticians and IRD are peeing in the water.Everything getting very polluted.
Best to avoid.
Heartland a far better option, eh Percy :cool:

[bull....]

mighty river comparisons can be made with trustpower and contact

http://www.reuters.com/finance/stocks/financialHighlights?symbol=TPW.NZ

http://www.reuters.com/finance/stocks/financialHighlights?symbol=CEN.NZ

quick pe comparison has trustpower on a pe of 18 for 2013 and 19 for 2014 based on current share price and analysts mean est of earnings for those yrs

contact pe 22 for 2013 and pe 19 for 2014

mighty river you can work out pe based on the different share prices of 2.35 - 2.80 dividing by their eps for each yr

[Joshuatree]

So far from what ive looked at ;there is no indication of what % Institutes etc will be allocated; whereas we are guaranteed a minimum paltry $2000. One would think these(institutes etc) will be the price makers; friction to build positions , which would drive demand. So what % will they get, and they have to be in. And with re a 50c spread or more on indicative s/p and folks here generally thinking its expensive are we heading for a major lead balloon on this mispriced offer?

Does anyone have an argument re buying on market on listing?