Who's in for the Mighty River Power float?

[CJ]

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?Still reading but haven't found any public pool/insto pool breakdown. I did read on the Insto's that their allocation is discretionary with factors including if they represent NZ individuals and how timely they get their applications in <- thought that was interesting.

Given it is likely to end up in the NZX10, there will be a lot of buying pressure on the first day is my guess (top 7 if you only count the 49%, and top 3 if you count the full 100% - not sure how weighting works). Even with Molotovs, I would expect it to go up.

The question for me is if it does go up, is it worth holding onto long term as at the indicative price, it looks fully valued, so add any premium and it would be a 'Reduce' rating??

[The BOWMAN]

Could the final price being outside the indicated range? I haven't read the prospectus yet. Wonder if anyone has the answer.

[Silverlight]

Given it is likely to end up in the NZX10, there will be a lot of buying pressure on the first day is my guess (top 7 if you only count the 49%, and top 3 if you count the full 100% - not sure how weighting works).

Weighting works on free float market cap, so excludes the Govt 51% holding.

In the 50 this is my thoughts on where it will sit as at today.

1 FBU 12%
2 TEL 9%
3 AIA 6.5%
4 RYM 5.5%
5 SKC 5.5%
6 CEN 4.5%
7 TME 4%
8 SKT 4%
9 MRP 3.5%
10 FPH 3%

and IFT out of the top 10.

[CJ]

6 CEN 4.5%
7 TME 4%
8 SKT 4%
9 MRP 3.5%At what shareprice/market cap did you work that out at - the low range or high range.

[bull....]

if you want to work out how mrp might compare to a bond rate investment read this and work it out

http://beginnersinvest.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=beginnersinvest&cdn=money&tm=2359&gps=470_138_1600_817&f=21&su=p284.13.342.ip_&tt=2&bt=7&bts=7&zu=http%3A//www.joshuakennon.com/earnings-yield-as-a-value-investing-strategy/

[CJ]

Could the final price being outside the indicated range? I haven't read the prospectus yet. Wonder if anyone has the answer.A few factual issues but this answers your question: http://www.sharesight.co.nz/2013/04/09/will-mighty-rivers-share-price-sink-or-swim/


Anyone done a "buy the IPO and hold ROI" for CEN? ... Probably better than term rate?I think so - it is only an indication. CEN was 10c above its range.

[percy]

Heartland a far better option, eh Percy :cool:

Right on the money as always SCOTTY.

[troyvdh]

me thinks that ...all this discussion about the value of MRT is basically a battle between stags and those seeking a reliable and predictable return on money invested...It is I believe accepted that those who require/need a return on funds invested are increasingly investing in shares....it is a natural progression....given that historically ...low interest rates...have been responsible for MKT highs...so what am I saying....MRP is a company that owns stuff that makes and sells electricity.....nothing more ...nothing less...many folk will purchase shares in the hope of a good profit....some will hold....expecting a return somewhat better than what the banks are offering...albeit with some risk..but then again what financial institution is guarrented ????? sorry about the spelling

[Zeitgeist]

In my view, Trustpower is the best run energy company in New Zealand. Their "secret" has always been charging a little bit extra and targeting specific segments of the market and maintaining those customers (including through excellent customer service). Many of the other energy companies are "more is better" regardless of cost. Trustpower's generation portfolio is also well managed, including minimal generation costs for their wind and hydro assets and good risk management policies. Don't just take my word for it...check out their graph on p.5 of this presentation: https://nzx.com/files/attachments/172192.pdf (note that MRP has improved dramatically).

I also like Trustpower's plan to build and sell stakes of wind farms in Australia...good IRR prospects. Irrigation projects have potential to add to the bottom line with little cost implications.

Anyone considering MRP should at least consider Trustpower too.

[Vaygor1]

After performing a 1st pass on the Share Offer doc, there appears to be a lot of stuff on history in there but not much on looking forward.

With a 4 year take or pay arrangement by Tiwai point, there is ample time (and not much cost relatively speaking) to fully connect Manapouri and upgrade the Cook Straight link. This in my view, should this occur, it would improve MRP's generating position enormously.

Not sure if these points have/haven't been made earlier as I am yet to read this thread since the Share Offer doc came out.

[skid]

In my view, Trustpower is the best run energy company in New Zealand. Their "secret" has always been charging a little bit extra and targeting specific segments of the market and maintaining those customers (including through excellent customer service). Many of the other energy companies are "more is better" regardless of cost. Trustpower's generation portfolio is also well managed, including minimal generation costs for their wind and hydro assets and good risk management policies. Don't just take my word for it...check out their graph on p.5 of this presentation: https://nzx.com/files/attachments/172192.pdf (note that MRP has improved dramatically).

I also like Trustpower's plan to build and sell stakes of wind farms in Australia...good IRR prospects. Irrigation projects have potential to add to the bottom line with little cost implications.

Anyone considering MRP should at least consider Trustpower too.

So with Trustpower selling at the bottom end of the projected list price of MRP-How do these 2 co. compare?

[percy]

In my view, Trustpower is the best run energy company in New Zealand. Their "secret" has always been charging a little bit extra and targeting specific segments of the market and maintaining those customers (including through excellent customer service). Many of the other energy companies are "more is better" regardless of cost. Trustpower's generation portfolio is also well managed, including minimal generation costs for their wind and hydro assets and good risk management policies. Don't just take my word for it...check out their graph on p.5 of this presentation: https://nzx.com/files/attachments/172192.pdf (note that MRP has improved dramatically).

I also like Trustpower's plan to build and sell stakes of wind farms in Australia...good IRR prospects. Irrigation projects have potential to add to the bottom line with little cost implications.

Anyone considering MRP should at least consider Trustpower too.

Trustpower has the record of being the best.They should continue being the leading power company.
MRP appears to be a long way behind them.

[Zaphod]

With a 4 year take or pay arrangement by Tiwai point, there is ample time (and not much cost relatively speaking) to fully connect Manapouri and upgrade the Cook Straight link. This in my view, should this occur, it would improve MRP's generating position enormously.


That correlates perfectly with what Transpower CEO Dr Patrick Strange said on TV3's The Nation last week; connecting Manapouri to the grid would cost circa $160M and take approximately three summers and his view on the generation issue was that older plant (such as Huntly) would be retired earlier combined with lower levels of investment in new plant.

Although he didn't mention it on the programme, I later remembered that he has held a directorship with MRE in the past.

[CJ]

With a 4 year take or pay arrangement by Tiwai point, there is ample time (and not much cost relatively speaking) to fully connect Manapouri and upgrade the Cook Straight link. This in my view, should this occur, it would improve MRP's generating position enormously.


That correlates perfectly with what Transpower CEO Dr Patrick Strange said on TV3's The Nation last week; connecting Manapouri to the grid would cost circa $160M and take approximately three summers and his view on the generation issue was that older plant (such as Huntly) would be retired earlier combined with lower levels of investment in new plant.

Vaygor - There will be no restraint on using the Manapori electricity if Tiwai closes down as the Cook Straight cable is to be completed this winter (?) and Manapori can be linked to the grid within the close down period for ~$100m (that is the last figure I have seen but have seen as high as $200m so Zaphods $160m maybe about right and will be a Transpower cost anyway shared by all consumers per its pricing methodology).

Question is why would this benefit MRP? Their Southdown plant would probably become surplus to requirements (after Huntly and along with CEN Otahuhu gas plants) and their cheap Hydro power close to the Auckland market will lose alot of its benefit once the cook strait cable is operational.

[Vaygor1]

Vaygor - There will be no restraint on using the Manapori electricity if Tiwai closes down as the Cook Straight cable is to be completed this winter (?) and Manapori can be linked to the grid within the close down period for ~$100m (that is the last figure I have seen but have seen as high as $200m so Zaphods $160m maybe about right and will be a Transpower cost anyway shared by all consumers per its pricing methodology).

Question is why would this benefit MRP? Their Southdown plant would probably become surplus to requirements (after Huntly and along with CEN Otahuhu gas plants) and their cheap Hydro power close to the Auckland market will lose alot of its benefit once the cook strait cable is operational.

Hi CJ

Southdown is 175MW compared to Tiwai Point's usage is 572MW.

From the MRP share offer document: "In HY2015 the operating cost of the hydro power stations averaged less than $5/MWh, and the geothermal power stations averaged less than $10/MWh, compared with an average of $110 to $120/MWh for Southdown, largely due to the cost of gas."

The cost of gas will be roughly the same to all generators. If Manapouri becomes available to feed the North, all Gas fired power stations will, in the short to medium term (unless lake levels are very low) become surplus to requirements. This, overall, would put MRP in a far better position regarding its market share in electricity generation. If all the Southdown plant's generation capacity went hydro, then MRP saves over 95% of its operating costs for that amount of power.

I don't see Joe Averages power bill dropping by 95%.

[CJ]

Except that fact that Southdown will then be surplus to requirements causing a $500m+ (?) writedown.

Otherwise yes - they have low operation costs on hydro and geothermal but so do most of the other providers.

[Vaygor1]

Except that fact that Southdown will then be surplus to requirements causing a $500m+ (?) writedown.

Otherwise yes - they have low operation costs on hydro and geothermal but so do most of the other providers.

If MRP are hurt by this then the vast majority of the others will be hurt a lot more. Some generators may even shut up shop completely. Mothballing Southdown and maintaining it wouldn't pose any huge burdan and keeping it will easily reap rewards in one year of low lake levels assuming Huntly and/or others shut down.

I don't recall the book value of Southdown (is it itemised in the offer document?... I don't have it on me at the minute), but building a power station from scratch is about US$1million a MW. That would make Southdown worth around NZ$200million IF it was new, which it isn't. NZ$500+ million seems way to high.

[CJ]

If MRP are hurt by this then the vast majority of the others will be hurt a lot more. Some generators may even shut up shop completely. Mothballing Southdown and maintaining it wouldn't pose any huge burdan and keeping it will easily reap rewards in one year of low lake levels assuming Huntly and/or others shut down.

I don't recall the book value of Southdown (is it itemised in the offer document?... I don't have it on me at the minute), but building a power station from scratch is about US$1million a MW. That would make Southdown worth around NZ$200million IF it was new, which it isn't. NZ$500+ million seems way to high.I stand corrected on cost.

Agree that Huntly would be most likely to be the first to go and Southdown will most likely work at a reduced capacity. That raises the question, if they have to spread fixed costs over a shorter operation time, it is unlikely they will flip the switch unless the spot price gets exceptionally high.

[Zeitgeist]

I think it's fair to say there is a degree of uncertainty on how Tiwai will impact on the market generally and on each company. It probably depends on whether the company is a net generator or a net retailer i.e., where does the company derive most of its revenue? Don't forget that MRP has to buy power (which might be its own) through the spot market.

The bigger picture though is, if you have decided to pick up some exposure to the electricity industry, which company would you invest in? My ranking at this point is 1. Trustpower 2. Contact 3. MRP

All 3 have decent dividend prospects (though TPW and CEN seem higher than MRP's projections). CENhas a solid business plan to increase profits by keeping a lid on costs. TPW has a solid business plan (and are executing) to maintain quality customer service and to build wind farms in Australia. I'm not sure what MRP's plan is to grow my shareholder funds? No clear plan, no advantage over competitors, full priced offer, lower yield = no thanks to MRP IPO for me**

**I confess I haven't read the offer to see whether MRP has a clear plan...geothermal expansion in NZ seems unlikely in a flat/decreasing demand environment

[Snow Leopard]

As a morning mind bending exercise I have had a look through the last few years accounts for Might River Power. I am unimpressed.

It would seem that it is hitting the market at a sweet spot when they have just finished a major piece of capital expenditure and start to reap the cash flow from it.

I notice that the board, now that they do not need the money are upping the dividend payout from 75% of to 90% of a magical figure.

This magical figure would appear to be NPAT plus "some added back from the one-offs that happen every year".
I guess provided they have the imputation credits to go with it that is all-right, but I am not happy with the idea.

I am guessing that the IPO hand-out will leave the institutions short of what they want, buying on market in the early days will push the price up and then some form of sanity will resume.

I was never going to apply for shares in the IPO, the whole concept of you can only have a few at an unknown price is not for me, but best wishes to do those that do.

Paper Tiger

[iced]

I am guessing that the IPO hand-out will leave the institutions short of what they want, buying on market in the early days will push the price up and then some form of sanity will resume.

Paper Tiger

Likely to be part of the reason for CENs recent run (among other things). I would imagine the price would be on the lower end (government needs this to do well, at least in the short term), but I guess we will find out in a month.

[elZorro]

Maybe this will have some bearing on the MRP shareprice later - data from NZ E&E newsletter yesterday.

Genesis would like to mothball the older Huntly Power Station if given half a chance. So Tiwai going off-line would possibly allow that. On the other side of the coin, Rio would like to sell Tiwai, along with a few other offshore aluminium assets, as a going concern. This puts the costs of eventual closure ($400mill) into the hands of the new owner, not Rio.

The govt topup offer was perhaps for a paltry $30mill, and it was available for just 24 hrs. Rio couldn't accept that, and maybe it was never meant to. Rio might have to look elsewhere to play hardball. Tiwai's problems stem from the age of the plant. Back then, this was all new technology, and Comalco did the best they could. China's new plants are apparently much more efficient.


Much rests in the long term on the price of aluminium, which China is producing in vastly greater quantities than a decade ago, and in far more efficient smelters.

As it turns out, maybe not that much more efficient. 25-40% better?


Aluminium is a 'young' metal. Although it is the third most abundant element in the Earth's crust, it is very difficult to produce in a pure form, a step that was only achieved in the mid-1820s. However, until American chemist Charles Martin Hall and French chemist Paul Héroult independently discovered the process for the industrial production of aluminium by electrochemical reduction of alumina in 1886, the global annual production of the metal amounted to just a few hundred kilograms, making it more valuable than gold at the time.
Now, this once rare metal is used for a broad range of applications in many sectors, including transportation, construction, electrical equipment, packaging, and medicine.
Energy-intensive and costly production

Aluminium is still produced using the Hall-Héroult process. In this, alumina is dissolved into cryolite, a mineral, in 'cells' or 'pots' and pure aluminium is extracted by electrolysis using large carbon blocks as anodes, which allows the smelting process to take place. This procedure is very energy intensive: for older smelters, around 15-16 kWh (kilowatt-hours) of energy is needed per kilogram of aluminium produced; 13 kWh or under is required for more modern installations operating at higher current.
Aluminium production accounts for roughly 3.5% of global electricity consumption. Energy (that is, electricity) costs represent between 30% and 40% of aluminium production expenses. This is the main factor in determining where new smelters can be built: where energy is abundant and relatively inexpensive. Traditionally this is often close to hydroelectric power plants (as in Canada, the US, Norway, or Russia) or sources of natural gas (such as in the United Arab Emirates). Easy access to waterways or ports is also important for bringing in ore or alumina to the plants.

[RTM]

The strength of the dollar is going to further crucify our manufacturing sector. This will further depress demand for electricity. I guess this is part of the reason for the demise of Tiwai point smelter.

[macduffy]

The strength of the dollar is going to further crucify our manufacturing sector. This will further depress demand for electricity. I guess this is part of the reason for the demise of Tiwai point smelter.

I don't think so. The bulk of the output from Tiwai Point has always been exported. The problem is a world-wide glut of aluminium and subsequent low prices.

[Cheese]

Ok I am keen to hear whether this is a stag opportunity, a good piece of a diversified portfolio, or not worth the risk.
I am a self confessed novice but tend to think this is a good opportunity at least as a safe stock in a diversified portfolio, but think it could be better than this.
440K pre-registeree's... any idea on what a typical follow through percentage might be for (what seems like) a reasonably priced offer? And the average spend? If mum and dads can average 5K each and we get 80% follow through that's 1.76 billion. As a complete novice I have no idea if it is even possible to predict/forecast the follow through from pre-registrations and average spend?
Add all the usual chat about buying the queens assets (Peter Lynch's idea), National wanting the first listing to go well, lots of Cullen fund and kiwisaver fund dollars sloshing around (and kiwisaver growing pretty aggressively)... surely these are all big ticks?
Surely kiwisaver and the super fund will be wanting to get in on a good chunk of this given the quality of the NZD based investment opportunity and the market cap.
We also know that mum and dad kiwi's (the target) are fairly amateur investors and have a history of ignoring risks and putting their eggs in the same basket (and some have a lot of eggs!!). And most mums and dads will be thinking this is as safe as houses given government own 51%.
Oh and the government owns 51%...
My train of thought here is that the demand will outstrip supply regardless of the perceived value or risks and I want someone to talk me out of it!

[janner]

Stagging is for making a few dollars quickly.. Nothing wrong with that..

As said in previous post .. I will not be in on this one.. There are far better opportunities going begging as the money goes into MRP..

[fish]

[My train of thought here is that the demand will outstrip supply regardless of the perceived value or risks and I want someone to talk me out of it![/QUOTE]

2/3 of generation is from the waikato
We have a disasterous drought and nobody knows how long it will take for groundwater to be replenished to sustain lake taupo levels
from yesterdays news



Waikato praying for rain


More Sharing ServicesShare |Share on twitterShare on facebookShare on emailShare on print

Waikato praying for rain

By: Sophia Duckor-Jones | Rural News | Monday April 15 2013 15:40






Waikato Regional Council will breathe a sigh of relief if the forecast rain comes this week.

That's because the levels in Lake Taupo and Waikato River are dangerously low because of the drought conditions.

Regional council resource use group manager Chris McLay says water levels for Lake Taupo could decline to 355.85 metres above sea level, the lowest it's ever seen.

He says they have already started to take action against these levels, by reducing the minimum current flow from Karapiro from 148 to 140 cumecs.

He says if the levels get too low, the flow in the Lake Karapiro dam will be effected.

Mr McLay says the levels will be reached in about four to five weeks without any extra tributary input, be it from rainfall or ground water.


What do you think MRP 2nd half results will be like-is it likely to impact the share price or do investors really understand the risks ?

[tosspot]

I think im staying out of this one simply because their will be so many novice investors. I think there are to many people with the mindset that all the hype will cause a rise and sell on day one. With a large number selling on day one may get in on a drop, also not happy to pay not knowing the share price. we essentially have no control in the cause.

[777]

I think im staying out of this one simply because their will be so many novice investors. I think there are to many people with the mindset that all the hype will cause a rise and sell on day one. With a large number selling on day one may get in on a drop, also not happy to pay not knowing the share price. we essentially have no control in the cause.

That sort means you are ruled out of most IPO's then.

[tosspot]

I'd like to think the underlying fundamentals of the business might have more to do with share price performance that the float of individual investors. Value usually catches up with price over the long term.
yea for sure but in terms of when to jump in I think it would be better to wait. simply less risk and I feel that it may initially drop

[CJ]

Prayers answered: Today Rain, Tomorrow Rain, Thurs Rain, Fri Rain........(from MetService)HOw does John Key do it. Who did he sholder tap to arrange this. I see Labour/Greens calling for an enquiry on this issue.

No one has meantioned Labours/Shearers pathetic p0olitical stunt yesterday saying that if Labour is elected, they will reduce power prices. He does not say how and probably doesn't even have an idea how he will do it. Comments:

- our power prices are below OECD average - http://www.med.govt.nz/sectors-industries/energy/energy-modelling/data/international-comparisons
- He has not stated he will reduce prices on the monopolistic milk prices, the supermarket duopoloy or the petrol station oligopoly.
- there is competition in the power industry - just go to whatsmynumber.org.nz . different companies are cheaper in different areas.
- National announced this policy ~18m ago. Labour have opposed it the whole time but choose the day the IPO offer launches to announce this 'policy'. Unbelievably, I have more respect for Winstone on this who said ages ago what he would do. Shearers/Labours timing on this is nothing short of a political stunt.
- Labour is more guilty than national for power price increases (http://www.kiwiblog.co.nz/2013/04/labour_on_power_prices-2.html). Helen loved dividend stripping the power companies for dividends even though we were in a surplus to fund her expansion of the State sector.

Rant over though I am sure I have missed some things.

[stones]

Good point made this morning on TV3 whereas the retail investors will get first crack at the float therefore the institutional investors will only get minimum amount. They will have to wait for more and if this the case SP should rise. Maybe you should get in now!!??

[fungus pudding]

This may have already been discussed, but I haven’t read it so thought I would share:
Just got off the phone with Direct Broking, and amongst other things learnt that if you do an off market transfer of MRP shares you lose the right to the loyalty bonus. Has this been discussed? Seems relevant given many people here were suggesting signing up your wife, sister, mother in law, cat etc and then combining the eventual holdings into the one account. No problem if you are looking to stag the IPO and sell out early but if you were thinking long term holding then my understanding is you would not be eligible for the loyalty bonus shares down the track.

Seems pretty obvious that a loyalty scheme would not follow any transfer of ownership .

[Snoopy]

440K pre-registeree's... any idea on what a typical follow through percentage might be for (what seems like) a reasonably priced offer? And the average spend? If mum and dads can average 5K each and we get 80% follow through that's 1.76 billion. As a complete novice I have no idea if it is even possible to predict/forecast the follow through from pre-registrations and average spend?


Very difficult to forecast something like this. There was no penalty to expressing interest in advance. General market factors and company specific factors, once people read the prospectus, are more likely to drive the outcome than any forecasting rule of thumb.



Add all the usual chat about buying the queens assets (Peter Lynch's idea), National wanting the first listing to go well, lots of Cullen fund and kiwisaver fund dollars sloshing around (and kiwisaver growing pretty aggressively)... surely these are all big ticks?
Surely kiwisaver and the super fund will be wanting to get in on a good chunk of this given the quality of the NZD based investment opportunity and the market cap.


I think in the short term, it would be political suicide if first power company off the block wasn't a successful stag. But from a long term investor perspective that doesn't mean the MRP share price will not be too high on debut.

Key can simply say,

"You had the opportunity to sell out in the first two weeks of trading."

if MRP subsequently tanks.



We also know that mum and dad kiwi's (the target) are fairly amateur investors and have a history of ignoring risks and putting their eggs in the same basket (and some have a lot of eggs!!). And most mums and dads will be thinking this is as safe as houses given government own 51%.
Oh and the government owns 51%...
My train of thought here is that the demand will outstrip supply regardless of the perceived value or risks and I want someone to talk me out of it!

Sorry Cheese. I think you are on to it!

SNOOPY

[iced]

Combine them after the bonus?

[Toasty]

Thank you to all the naysayers! ... I'm in for all I can get. Reasons to come ...

Any more on this Belgarion? I am undecided as to whether or not to participate in this. I actually wish I had put more into SUM now.

But as my policy is to believe and act on the last thing I hear then I would be keen to hear the reasons.

[fungus pudding]

Any more on this Belgarion? I am undecided as to whether or not to participate in this. I actually wish I had put more into SUM now.

But as my policy is to believe and act on the last thing I hear then I would be keen to hear the reasons.

No you won't. It will amount to nothing more than a political rant.

[BWH]

HOw does John Key do it. Who did he sholder tap to arrange this. I see Labour/Greens calling for an enquiry on this issue.

No one has meantioned Labours/Shearers pathetic p0olitical stunt yesterday saying that if Labour is elected, they will reduce power prices. He does not say how and probably doesn't even have an idea how he will do it. Comments:

- our power prices are below OECD average - http://www.med.govt.nz/sectors-industries/energy/energy-modelling/data/international-comparisons
- He has not stated he will reduce prices on the monopolistic milk prices, the supermarket duopoloy or the petrol station oligopoly.
- there is competition in the power industry - just go to whatsmynumber.org.nz . different companies are cheaper in different areas.
- National announced this policy ~18m ago. Labour have opposed it the whole time but choose the day the IPO offer launches to announce this 'policy'. Unbelievably, I have more respect for Winstone on this who said ages ago what he would do. Shearers/Labours timing on this is nothing short of a political stunt.
- Labour is more guilty than national for power price increases (http://www.kiwiblog.co.nz/2013/04/labour_on_power_prices-2.html). Helen loved dividend stripping the power companies for dividends even though we were in a surplus to fund her expansion of the State sector.

Rant over though I am sure I have missed some things.

I also share these concerns. Labour will do anything to derail something that wasn't their idea and the Greens don't appear to want any form of prosperity for anyone. God only knows what will happen if they get in next year.

Another major concern is that Maori already own MRP's storage tank (Taupo) and full and final settlement seems to be something we will never achieve in my lifetime, with claims already underway for the Taupo floodgates and one of the dams according to the prospectus, there are lot of risks involved here. This surely must leave MRP open to being held to ransom? I can't see a Labour/Green/Mana government stepping in to mediate or put a stop to it, as they are more likely to sit back and say "I told you so!" despite their own dividend stream being at risk.

I would like to invest, as I believe in the mixed-ownership model, however the above concerns mean I might just make it a wee dabble and stick to investment with less political interference.

My rant over!

[POSSUM THE CAT]

Tumeric Check further with Direct Broking If you filled in the applications & the expressions of Interest with your joint account details to be forwarded to Broker. It is possible both lots will be registered to your joint account. Otherwise they will have to set up Two new registry accounts as well. Would be interested to here as I entered both myself & my Wife under the one CSN. And one brokers account both in joint names. But entered expresions of interest in single names but with joint account Details. I think at the moment that we will give it a miss

[fish]

Prayers answered: Today Rain, Tomorrow Rain, Thurs Rain, Fri Rain........(from MetService)

not in lake taupo-lake level still dropping.
This is a big drought.
Taupo is at lowest level
Power prices are very high
Massive soil deficit and groundwater extremely low
Its going to take months of heavy rain to refill-and all the time mrp will be draining it to supply increased winter demand.
In all likelyhood mrp will be draining their funding lines to buy and supply power this winter

[craic]

Same here in Napier. Digging postholes have to put water in the holes to get the soil out. Earth is bone dry down to and below one metre. Large and ancient pine tree came down - roots and all - because there is no moisture an no cohesion in the soil. This is our worst drought in 20 years on this property. I had already decided to follow Warren Buffets advice and not invest in Mighty River Power. My great fear at present is a that a major storm, wind and rain, could be a serious disaster for the countrywhile the ground is in this state. Massive costs for power distribution companies.

[Anonymous]

Yes of course and I didn't really think through my post very carefuly.
What I was unaware of was that if my wife and I both purchased shares (seperately under our respective IRD numbers) and then wanted these to be combined in our joint DB account this would mean we are not entitled to the loyalty shares.

Is there a maximum amount you can apply for? I haven't seen it written anywhere so please correct me if I am wrong.

I don't see why you would bother registering in two names in the first place. Surely if you wanted $50k worth of shares there is no benefit of putting two applications in at $25k, especially if you wanted to combine them after. Obviously you have to take a punt on how much it will be scaled but again it is the same punt regardless of how many applications you make (unless you had 25 registrations at $2k each...).

Obviously if there is a maximum I am completely wrong...

[fungus pudding]

Is there a maximum amount you can apply for? I haven't seen it written anywhere so please correct me if I am wrong.

I don't see why you would bother registering in two names in the first place. Surely if you wanted $50k worth of shares there is no benefit of putting two applications in at $25k, especially if you wanted to combine them after. Obviously you have to take a punt on how much it will be scaled but again it is the same punt regardless of how many applications you make (unless you had 25 registrations at $2k each...).

Obviously if there is a maximum I am completely wrong...

Every applicant is guaranteed up to 2000 dollars worth so two names = $4000 guarantee regardless of any scaling.

[Anonymous]

Every applicant is guaranteed up to 2000 dollars worth so two names = $4000 guarantee regardless of any scaling.

Thanks FP, and I also understand that there is some mechanism that people who pre-registered get scaled less. So if you were wanting say only $4 or 5k then it may be better to make multiple applications.

However, personally if I wanted to end up with a $5k position I would apply for $10k and take a punt that the scaling will be less than 50%. If you then ended up with say $7k worth of shares you could stag difference after open. Obviously this assume you have the $10k to spare to begin with.

However I am still interested to know if the application amounts are capped?

[fungus pudding]

Thanks FP, and I also understand that there is some mechanism that people who pre-registered get scaled less. So if you were wanting say only $4 or 5k then it may be better to make multiple applications.

However, personally if I wanted to end up with a $5k position I would apply for $10k and take a punt that the scaling will be less than 50%. If you then ended up with say $7k worth of shares you could stag difference after open. Obviously this assume you have the $10k to spare to begin with.

However I am still interested to know if the application amounts are capped?

Why would they be? I haven't seen any mention of a cap in the offer other than restriction that no buyer can own more than 10% from memory, but that's not going to affect a pvt. buyer. However if you're applying for 5 million worth :eek2:, just be sure you've got a spare 5,000,000 in case they drop when they hit the market. :D

[Anonymous]

Why would they be? I haven't seen any mention of a cap in the offer other than restriction that no buyer can own more than 10% from memory, but that's not going to affect a pvt. buyer. However if you're applying for 5 million worth :eek2:, just be sure you've got a spare 5,000,000 in case they drop when they hit the market. :D

I agree why would they be. It is just that there have been a number of people on here grumbling on here about how it is not worth investing in the IPO for a measly $2k OR registering under multiple names for some reason and I am trying to understand why they would be doing this.

Ahh, the problems of having a spare 5 mil...

[CJ]

It is just that there have been a number of people on here grumbling on here about how it is not worth investing in the IPO for a measly $2k OR registering under multiple names for some reason and I am trying to understand why they would be doing this.While some people deal in big $$, a holding of $10k would be sufficent for some, especially since you dont want to be overweight in it given the negatives some have said above.

So for the average family with 2.4 kids (what is the average now), 4 applications at $2.5k (ie. the $2k guaranteed but 25% registration allowance) is all that is needed with minimal risk of scaling. Logistical nightmare when it comes to sell but if you hold for 2 years, then combine into the family trust, then not such an issue.

Note: I think the family trust also qualified for the loyalty bonus so that would be 5 x $2k applications with zero risk of scaling.

[Winston001]

I consider utility companies such as MRP are sensible long term investments and in a small country like NZ, they are part of an oligarchy which fits Warren Buffet's investment criteria.

However...any company priced above the normal PE for that sector has to be viewed with narrowed eyes.

Yes there will be demand from fund managers who need to maintain their ratio of stocks on the NZX so there is every chance the price will rise on opening. Plus the government will want to see that as vindication of the partial sale.

So a stag will be sensible but if you can only get 800 shares is it worth the effort? Especially if there is a small risk IRD will go through the original shareholders list looking for stags? Does any serious investor really need that problem?

[janner]

I consider utility companies such as MRP are sensible long term investments and in a small country like NZ, they are part of an oligarchy which fits Warren Buffet's investment criteria.

However...any company priced above the normal PE for that sector has to be viewed with narrowed eyes.

Yes there will be demand from fund managers who need to maintain their ratio of stocks on the NZX so there is every chance the price will rise on opening. Plus the government will want to see that as vindication of the partial sale.

So a stag will be sensible but if you can only get 800 shares is it worth the effort? Especially if there is a small risk IRD will go through the original shareholders list looking for stags? Does any serious investor really need that problem?

I think that question should be directed to that complete WALLY.. Peter Dunne.. Or at least his MASTER.. John Key..

National will not endear themselves to Mom and Pop investors if those that buy and sell for what ever reason.

Are hunted down for TAX..

[CJ]

Why not Janner? If you sell over the short term with the intent of making a profit, then you are falling afoul of the tax laws. No one will blame National if the IRD are genuinely investigating short term punting. National can say "we encouraged people to hold on to their shares with bonus shares, so don't blame us for short term thinking".Just want to correct you on one point. You say "falling afoul of the tax laws". Not correct - you are doing nothing wrong if you purchase the shares with the intention of resale and make a profit in doing so.

However, you are caught by the tax laws and have to pay tax on that gain - that is all.

There is nothing wrong with paying tax, it means you are making money!!

I also note that making a short term taxable gain on one share does not taint the rest of your portfolio. Intention at the time of purchase is important.

[CJ]

Can anyone give an indication of what kind of scaling to expect? Or is this just a question impossible to answer?
If I pou an order in for 10k how much $ worth of shares do you htink I would actually get?
CheersI think 440,000 people registered. If 80% apply for an average of $5k, then that is $1.76B. Total proceeds are expected to be about 1.9B from memory and assuming institutions, maori and a few of overseas, then on average, you will get less than $5k on average.

So you would be relying on people to invest less than that for you to get more.

I think there will be a lot of people spreading it around - say $2k for each family member so there should be the ability to get more. The question is will they scale everyone down to a set amount (eg max is $10k) or a % of bid (eg. you only get 20% of what you want over $2k)

[CJ]

And yes, you are also right regarding tainting only affecting the specific share rather than the portfolio. However, I understand it is much more difficult for property developers and builders to avoid tainting. The assertions are much tougher, I understand. Which is why I am very happy to be a commercial property owner rather than a property developer.....Correct. share investing does not have tainting. Property does taint so if you are a builder/developer/etc every property you own (except family home??) is treated as being held on revenue account regardless of your intention (even that family bach you intend to be in the family for generations).

[fungus pudding]

I think 440,000 people registered. If 80% apply for an average of $5k, then that is $1.76B. Total proceeds are expected to be about 1.9B from memory and assuming institutions, maori and a few of overseas, then on average, you will get less than $5k on average.

So you would be relying on people to invest less than that for you to get more.

I think there will be a lot of people spreading it around - say $2k for each family member so there should be the ability to get more. The question is will they scale everyone down to a set amount (eg max is $10k) or a % of bid (eg. you only get 20% of what you want over $2k)

80% of pre-registered enquiries turning into buyers seems most unlikely.

[stanace]

Just want to correct you on one point. You say "falling afoul of the tax laws". Not correct - you are doing nothing wrong if you purchase the shares with the intention of resale and make a profit in doing so.

However, you are caught by the tax laws and have to pay tax on that gain - that is all.

There is nothing wrong with paying tax, it means you are making money!!

I also note that making a short term taxable gain on one share does not taint the rest of your portfolio. Intention at the time of purchase is important.

If that was true, why would you not be able to get a credit if you made a loss? I cannot believe the IRD are the slightest bit interested in people making a grand or 2 from stagging MRP, I think you are crying wolf.

[iced]

IRD will likely only hit up people already on their radar, or people who stag all of the IPOs. Too much effort & time going after everyone..

[CJ]

80% of pre-registered enquiries turning into buyers seems most unlikely.Contract and AIA was up around this level I think. Haven't said that, pre-registration was probably harder back then.


If that was true, why would you not be able to get a credit if you made a loss? I cannot believe the IRD are the slightest bit interested in people making a grand or 2 from stagging MRP, I think you are crying wolf.If you bought with the intention of profit (or whatever the legislation says) and you make a loss then you can claim it.

Where have I cried wolf? At no point have I said the IRD will investigate. I think I have said that their technology to check has improved significantly and they would be able to take a dump of the shareholder register at IPO and (say) day 180 and do a compare and contrast.

To counter that point I will add that IRD has a preference that as few people as possible file tax returns. Therefore if the gain is only a couple of hundy, then they are likely to let it slide. That is why when they did the computer search of the Land Transfer Office, they started with people with the highest turn over of properties. For MRP, they probably would be interest unless you made (say) $20k + which would be a 20% gain on $100k - good luck getting that many in the IPO!

[gv1]

IRD will likely only hit up people already on their radar, or people who stag all of the IPOs. Too much effort & time going after everyone..
IRDcan go for as little as $200. So be careful.

[Zaphod]

Labour promises to cut power prices

Labour is promising to cut the average Kiwi power bill by up to $330 a year if elected to government next year.

It plans to do so by setting up a single buyer, NZ Power, to purchase all electricity generation at a fair price.

Announcing the plan today, leader David Shearer said it would create 5000 jobs.

The Crown would forgo dividends and tax revenue from the power companies at a cost of $60-$90 million a year.

http://www.stuff.co.nz/national/politics/8567284/Labour-promises-to-cut-power-prices

[Banksie]

Is this Labour's way of trying to take some of the appeal out of the IPO?
http://www.stuff.co.nz/national/politics/8567284/Labour-promises-to-cut-power-prices

I have already thrown my bid in for some shares. I guess I should have waited till all the politicking was out of the way.

Oops - sorry Zaphod - didn't see your post before I posted.

[Anonymous]

which would be a 20% gain on $100k - good luck getting that many in the IPO!

CJ, I asked this yesterday but no one had any conclusive answer. But my understanding (and I have read nothing at all to back this up...) is that there has been no mention of a cap of what you can apply for.

So someone wanting $100k and someone wanting $5k would face the same %of scaling. Each investor needs to take a punt on how much it will be scaled and therefore make their application for an amount higher to compensate.

Or do you think differently?

[777]

3% off CEN since announcement.

Looking good now to get as many as one wants. 2-3000 dollar holdings are a pain in the butt.

Did last nights decision in Parliament mean that Labour/Greens can now govern.

[tosspot]

3% off CEN since announcement.

Looking good now to get as many as one wants. 2-3000 dollar holdings are a pain in the butt.

Did last nights decision in Parliament mean that Labour/Greens can now govern.
damn bit of an over reaction I think. elections are not for a while. If it sinks to below 5.40 again I think ill snap some up

[CJ]

CJ, I asked this yesterday but no one had any conclusive answer. But my understanding (and I have read nothing at all to back this up...) is that there has been no mention of a cap of what you can apply for.

So someone wanting $100k and someone wanting $5k would face the same %of scaling. Each investor needs to take a punt on how much it will be scaled and therefore make their application for an amount higher to compensate.

Or do you think differently?There is no cap in the offer document (that I have found) other than the legislated cap of 10%. Re scaling, it depends on the level of demand. They have a few options, they could give everyone (say) 50% of what they applied for above the guaranteed 2000 or they could raise the guaranteed amount and give everyone (say) 25% of what they want above (say) $5000. If I was the government, I would go for the latter as it benefits Mum & Dad investors (ie. small holders). However, I am not the government, or involved in the share industry at all so feel free to ignore all I say.

If you want ~$100k worth, have a talk to your broker about the best strategy but I would suggest applying for a lot more and expect to be scaled.

[Anonymous]

Thanks CJ that is what I thought. Essentially the scaling will apply to everyone on the same basis regardless of how much they request (excluding the minimum guaranteed amount).

From an investor perspective I would have thought the greater the scaling the better as that makes for greater unsatisfied demand (provided your scaled back amount is in the ball park of what you were after). I always have a bad feeling in an IPO when you get your complete fill because it means supply exceeded demand.

[777]

The problem with applying for more than you will get is the money is tied up until they refund the excess.

Unless of course they are only going to debit your bank account with the amount of the final allocation.

[robbo24]

*Facepalm* Gotta love the commies and their wacky ideas. The weekly savings are even less than the 2005 "Block of Cheese Tax Cut" by about 2/3 less.

http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437 (http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437)

Shearer said under the proposal power would be bought at the cost of generation, not the spot market price, through a new state agency.

"Under our plan, the average household's power bill will be cut by between $230 and $330 a year.

[fungus pudding]

*Facepalm* Gotta love the commies and their wacky ideas. The weekly savings are even less than the 2005 "Block of Cheese Tax Cut" by about 2/3 less.

http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437 (http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437)

Shearer said under the proposal power would be bought at the cost of generation, not the spot market price, through a new state agency.

"Under our plan, the average household's power bill will be cut by between $230 and $330 a year.


This will be a field day for economists, analysts and commentators, apart from Rod Oram, Colin James and their ilk. They were more on track when they wanted to take the GST off bananas. :p

[Zaphod]

Oops - sorry Zaphod - didn't see your post before I posted.

Don't worry, as long as the information gets out there, that's all that matters! :)


*Facepalm* Gotta love the commies and their wacky ideas. The weekly savings are even less than the 2005 "Block of Cheese Tax Cut" by about 2/3 less.

http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437 (http://tvnz.co.nz/politics-news/labour-s-new-power-policy-big-kahuna-5410437)

Shearer said under the proposal power would be bought at the cost of generation, not the spot market price, through a new state agency.

"Under our plan, the average household's power bill will be cut by between $230 and $330 a year.

It's just another pathetic line used to reel in the voters using voodoo economics. The problem is, there'll be quite a few who think that it's a fantastic idea!

What's even more worrying is that Labour have proclaimed it their "big Kahuna" policy! So that's all they've got? Savings of $330 PA per household?

[CJ]

"New Zealand residential electricity consumers have suffered from the reliance on an electricity 'market' which has failed to deliver low cost electricity for much too long now," said CTU economist, Bill Rosenberg.NZ power prices may have risen over the last couple of decades (steepest rises under Labour!) but they are still below OECD averages:

http://www.med.govt.nz/sectors-industries/energy/energy-modelling/data/international-comparisons

[iced]

Worthwhile reading:
http://www.parliament.nz/en-NZ/PB/Business/QOA/e/c/b/50HansQ_20130417_00000009-9-Power-Prices-International-Comparisons.htm (http://www.parliament.nz/en-NZ/PB/Business/QOA/e/c/b/50HansQ_20130417_00000009-9-Power-Prices-International-Comparisons.htm)
http://www.parliament.nz/en-NZ/PB/Business/QOA/4/4/0/50HansQ_20130418_00000001-1-Power-Prices-Minister-s-Statements.htm

Also found this interesting. Not to get overly political, but maybe Shearer should focus more on the economy and less on trying to derail National. From 18th July 2012... :
http://www.parliament.nz/en-NZ/PB/Debates/Debates/Daily/5/0/c/50HansD_20120718-Volume-681-Week-16-Wednesday-18-July-2012.htm
"the thing that is coming down faster than a meteorite is the share price of these assets, because I can tell you right now that not many people are lining up to buy these shares when they believe that they are going to actually fall in value.... What is going to happen is that the mums and dads are going to have to put their hands in their pockets to pay for the compensation that this train wreck is going to bring about. It is the people who are not going to buy shares who are actually going to have to fund the compensation and all the damages that are going to result from this flawed policy, this ridiculous policy, of selling off our State-owned assets.... So here we have it: a kahuna of an idea that has just flopped into a train wreck... It has a big idea that has flopped..."

[robbo24]

It is the people who are not going to buy shares who are actually going to have to fund the compensation and all the damages that are going to result from this flawed policy, this ridiculous policy, of selling off our State-owned assets.... So here we have it: a kahuna of an idea that has just flopped into a train wreck... It has a big idea that has flopped...

I'd love to see the legal reasoning behind this compensation/damages claim he refers to...

[iced]

Electricity Authority chief executive Carl Hansen: said the cost of generation had risen substantially. "The price of electricity in NZ in 1985 was insufficient to cover the cost of supply, which means prices had to rise even if costs didn't." A spokesman for the Ministry of Business, Innovation and Employment said there was evidence that competition has increased in New Zealand. Hansen said, "It isn't obvious to the authority that there is any value in comparing NZ electricity prices with other countries. From an electricity perspective, New Zealand is an island."

[iced]

CJ, can you direct me to where the comparison is that your link should show? All I am seeing is what appears to be industry and household elevtricty prices for NZ (no OECD comparison). Am I missing something? Cheers.

His link doesn't have the data, just states "residential electricity prices are generally below the OECD average."

[CJ]

CJ, can you direct me to where the comparison is that your link should show? All I am seeing is what appears to be industry and household elevtricty prices for NZ (no OECD comparison). Am I missing something? Cheers.are you using an iPad by any chance? It neds to be opened in excel - there will be a + on the right hand side between each line which will open up the data sets.

Interestingly, if both the data I linked to and the graph you inserted are correct, NZ must have gone from extremely cheap power, to just below market. I think the data I linked to showed that but I am on an iPad now so it I can't open it to confirm.

At extremely low power prices, no generation would be built unless funded by the taxpayer. To be fair labours/greens policy does appear to address this somewhat in that each generator would be paid a different amount for a unit of electricity depending on the cost of providing (I assume that includes capital and operating costs). So an expensive solar project could be approved as NZPoewertrip would give it a fixed rare of return (look at Vector and other lines companies as an example - they could build a gold plated network and the Comcom would still agree to its set % of return). However generators aren't monopolies so this level of control shouldn't be needed.

[CJ]

And heres a graph showing real end user prices (by user) in 2011 dollars:
4443why has residential increased but commercial decreased.

The zero barriers to switching, probably makes the retail customers expensive to service ( costs to win, maintain and switching costs)

[CJ]

More importantly I suggest looking at the following comparison of NZ's residential electricty prices to other countires from the International Energy Agency:
4444
Another question. How much of power price increases is due to generation, transmission (transpower), transmission (local), retail, GST etc and how does that compare to overseas.

We can continually been told by telecom that our mobile prices are more expensive due to our geography and population density - is it the same for electricity?

[CJ]

So yes it would look like we went from very low prices (by international comparison) and then increased at a very fast rate post de-regulation.Any data from before de-regulation (I would argue) has to be ignored as the government/taxpayers were subsidising the low power prices (they may have covered the low opex costs but not the huge upfront capes cost)

I try reformatting the spreadsheet when I am home if I remember.

[troyvdh]

I honestly have a degree of empathy for those folk contemplating wether or not to buy MRT given the performance of CEN and Shearers announcement...it aint easy

[POSSUM THE CAT]

Returned from Brisbane QLD September 2007 where we were running swimming pool chlorination & filtration12 hours a Day on timer and more when pool was in use. Monthly power bill here in NZ was 20% more than quarterly power bill in Qld. & they were using mainly coal fired power Stations. You dealt with one main power supplier no marketing costs & no other unnecessary advertising costs. Here I average one telemarketer a day & one door knocker a week. Even get them from the power company I am with. It was time they had a bomb put under them. Shifting power from one end of the country to the other rather than using the closest.

[RazorX]

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.

And now the commie left has decided that this is the prime time to launch a policy that goes back to the good ol days. I wonder how many people will realise that this is just a political stunt.. and a bad one at that? I guess the next election is going to tell a story.

[BWH]

This whole announcement today is nothing but a political stunt by an increasingly bitter opposition. Their policy will appeal to those who struggle and is likely to be a big factor in the election next year, unless National can credibly come up with something better or quickly and accurately discredit today's announcement. Unfortunately this is enough to give potential investors (sadly including me) the jitters with this upcoming float. I distrust the current opposition so much, that I fear they may well follow through with this if they get in next year, regardless of whether it's sensible or not, just to spite National and it's partial privatisation agenda.

[The BOWMAN]

This whole announcement today is nothing but a political stunt by an increasingly bitter opposition. Their policy will appeal to those who struggle and is likely to be a big factor in the election next year, unless National can credibly come up with something better or quickly and accurately discredit today's announcement. Unfortunately this is enough to give potential investors (sadly including me) the jitters with this upcoming float. I distrust the current opposition so much, that I fear they may well follow through with this if they get in next year, regardless of whether it's sensible or not, just to spite National and it's partial privatisation agenda.

And leave the majority of shares to overseas investors for a cheaper price!

[CJ]

CJ, can you direct me to where the comparison is that your link should show? All I am seeing is what appears to be industry and household elevtricty prices for NZ (no OECD comparison). Am I missing something? Cheers.


His link doesn't have the data, just states "residential electricity prices are generally below the OECD average."Ye of little faith


Haha, right OK cheers, so the "Data tables for international comparisons [166 KB XLSX]" is not exactly what they suggest they are! I was putting it down to a long day at work, but half thought I was going a bit nuts not being able to find the details.


I try reformatting the spreadsheet when I am home if I remember.Done:

https://dl.dropboxusercontent.com/u/1991119/International-Comparisons.xlsx

[Lawt]

And heres a graph showing real end user prices (by user) in 2011 dollars:
4443
Well ok, but I am paying 22.49 cents/kwhr now and have been offered 20.884 by contact so perhaps the graph needs updating to reflect current pricing.

[fish]

Ye of little faith



Done:

https://dl.dropboxusercontent.com/u/1991119/International-Comparisons.xlsx

Thanks cj
A quick perusal of the fingers shows what i would expect in a normal market .We certainly have good competition for a small country .
Now the regulator with chorus chose sweden as a comparative country . Our electricity bills are significantly cheaper than sweden and many similar countries and more expensive than say australia.
It indicates we are in the right ball park
-a tad more expensive than norway-but they have cheap gas in addition to hydro
I am infuriated at labours tactics-not because i was going to buy mrp-as everybody knows i am biased towards contact -but because the country will now get less per share for mrp . Also state interference will destroy a lot of future investment

[robbo24]

This whole announcement today is nothing but a political stunt by an increasingly bitter opposition.

I would love to see the Trans-Pacific Strategic Economic Partnership completed so as to provide at least some recourse to our welcome international investors:

[In regards to TPP arbitration]...some ask why this is desirable. New Zealand consistently ranks well in international surveys of ease of doing business, investment protection, transparency and corruption. In most cases it will be easier, less time consuming and more cost-effective to bring a claim in the New Zealand courts than it would be through an international tribunal. But in many of the countries that New Zealand investors operate in, this situation does not exist. It is not uncommon for investors to be faced with lengthy delays and bias in domestic proceedings aimed at the protection of their property rights. In extreme cases, corruption or political interference may make it impossible for investors to seek effective remedies through domestic courts. http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/1-TPP-Talk/0-TPP-talk-3a-Dec-2012.php

Certainly, the MRP prospectus mentions regulatory change but seeking to derail the whole thing at the expense of taxpayers and international reputation is appalling. I will be at the front of the line to sue the Crown at the other end of this if the commies get into power.

[robbo24]

Let me guess, you think Pharmac is a bad idea as well?

Pharmac doesn't deal with consumers though.. Stinkin' left trying to impose their communist agenda on us all.

[Dej]

Let me guess, you think Pharmac is a bad idea as well?

Explain to me what you think the pros and cons are of Pharmac, is you would turmeric?

I am quite close with a pharma executive for a big American Co-op and they have nothing but bad things to say about Pharmac. The principle is good though.

[CJ]

Cheers CJ, not sure why it wouldnt work for me yesterday, works fine from your link though.The original link had advanced formatting which I removed.


I don't know enough about electricity markets and the validity of making international comparisons. Im sure others may be able to help out. Obviously cost of generation needs to be taken into account as well (at the very least) in order to make valid comparisons.By the way did you see Geoff on Breakfast this morning? He was commenting on the Labour/Green policy announcement.Its all very complicated and I dont begin to assert that I know the answer. What I do know is that since dereguation, we have had 100% security of supply (ie. no blackouts at the fault of the generators (transmissiona and distribution is another matter)).

Was Geof the left wing lecturer for Vic Uni - if so then yes. I should point out that because his university education was free when he went through, but expensive when I went through university, his wage should reflect that fact and be significantly lower than mine - why is he able to claim a market wage. Him charging a market wage is the reason why university fees have increased at faster than the rate of inflation over the past 20-30 years. Any holes in the argument that he should be paid a lower wage than a younger professor whose education costs were higher?

[stones]

The reality of it all is that the Labour/Green announcement is going to put many off. The power share price yesterday wouldnt have done anything for the confidence of those who a considering buying into the share offer.

[Dej]

Pros: Makes necessary medicines affordable for the general NZ population and allows our health system to operate at the current levels of govt funding - Results in a healthier workforce, less burden on government, higher productivity, increased GDP, lower unemployment....you get my drift.

Cons: It can be a bit subjective which medicines get subsidised and which don't. Has been argued that is a stumbling block for free-trade-agreements (not sure that is very accurate though).

I'm just thinking as I write though, I work in Health Economics but am not all that familiar with Pharmac. In the area I work Pharmac is highly regarded though. Interested to hear your views/your colleagues/friends views.

Will PM you later in the day, better not get the thread off-topic. Some people get mad :p

[fungus pudding]

Let me guess, you think Pharmac is a bad idea as well?

This proposal is nothing like Pharmac, in spite of Shearer's claim that it is.

[CJ]

As for the rest of your comment, I respectfully think it's rubbish.And respectfully, that is what I think of Labours/Greens policy ;)

[POSSUM THE CAT]

I noticed the comparison price table failed to give recent pricing for Australia. Has it been edited to make the comparisons look credible.

[Under Surveillance]

I reckon it is commendable that the Greens and Labour have come out with their electricity policy now, giving clear advance notice (just as National did of its intentions as to partial sales of SOEs).

Consequences related to MRP include IPO investors being better apprised of regulatory risk, and likely to pay less per share. If Kiwis are spooked, a greater percentage of IPO shares is likely to go offshore, adding to upwards pressure on our dollar.

There is ample time for those hostile to the policy, or to socialist intrusions in general, to act to deny Labour and the Greens electoral success.

[bull....]

what will your loyalty shares be worth now if labour wins next election? cen and tpw continue to fall looks like a bigger risk than tewai pt this new development

[Soolaimon]

The way I look at all this is that the Labour/Greens have manufctured a bomb to scuttle the MRP issue and the media are well into bomb mode just now so they have detonated it. My participation in the issue is now in doubt for the moment.

[robbo24]

Ohh goodie I hope the commies decide to do the same thing for petrol too - forget the retirement funds buying into Z Stations, forget the bottom line for NZ to receive much needed foreign investment, forget your domestic investors... Let's save people a hypothetical $6 a week at the cost of the government. Just do a tiny little tax cut and be done with it, or throw some more money at beneficiaries for some cheap votes.

Electricity at cost... The commies will probably beef up the RMA as well, so the cost of setting up any kind of power generation (think of all the nonsense that new wind generation has to go through already) will go up anyway.

[POSSUM THE CAT]

If they stopped all the Marketing by Telephone & Door Knocking & just published price lists. Could they reduce their prices by at least Three Cents A unit.

[CJ]

My sense is though that many are looking at it through a political lens and not actually considering all the facts and information. Just dismissing it because it is a left wing polciy. Not just political.
Disc: Hold CEN, TPW and IFT :(

[Bjauck]

ComCom has frightened investors in several large listed companies recently and that coupled with the specter of Labour/Green intervention in markets in the future will frighten potential investors in various companies. Will the result be to encourage NZers to keep on piling money into their own homes and investment properties? Maybe the political parties pay just lip service to the desire to encourage NZ investment in non-real estate assets. In recent years many non-real estate assets have become less attractive with interest bearing investments becoming subject to what amounts to a capital gains tax under the financial arrangement rules and foreign equity investments being subject to a quasi capital gains tax under the FIF rules. Let's hope all our real estate Castles are not being built on quick-sand.

[CJ]

Sure, I can completely understand the anger from that perspective. These are the risks though I guess with stocks which can be subjected to regulatory pressures. I got a little burned holding CNU so have some sympathy.Not angry, more disappointment.

As you say, with what is happened to TEL, CNU, VCT to a lesser extent and now the power companies, it is no wonder there is little faith in our capital markets.

Might go back to property investing.

[neopoleII]

not only am i out of this ipo now, i am now commited to planning an offgrid power source.
the greenlabs have activated a timebomb that we NZers will see explode in about 10 years.
and all the lefties will gleefully vote for it.
would you invest half a billion (new powerplant) to get a fixed return set by a government? and still carry the business risk??
sad

[CJ]

would you invest half a billion (new powerplant) to get a fixed return set by a government? and still carry the business risk??Ironically Labour/Greens dont support Public Private Partnerships but that is exactly what they are proposing with new generation. Fixed price contract determined at start with all risk falling on the commercial operator.

[Banksie]

the greenlabs have activated a timebomb that we NZers will see explode in about 10 years.

Having recently immigrated from South Africa I can't wait for the rolling blackouts - it will feel just like home ;)

"With the freeze on any new developments being placed on Eskom during the early 1990s, South Africa was faced with a situation where for the next few years the electricity demand kept rising, without any new power stations being built to keep up the necessary supply. By October 2007 the situation had deteriorated to such an extent that Eskom implemented rolling blackouts throughout the country. Blackouts occurred in most suburbs throughout the country for a period of two hours at a time.The situation came to a head on 24 January 2008 when the national grid was brought to near collapse. Multiple trips at a number of different power stations rapidly reduced the available supply, resulting in Eskom declaring force majeure (http://en.wikipedia.org/wiki/Force_majeure)[14] (http://en.wikipedia.org/wiki/Rolling_blackout#cite_note-14) and instructing its largest industrial customers (mainly gold and platinum mining companies) to shut down their operations and reduce consumption to "minimal levels", just sufficient to evacuate workers that were still in the mines"

http://en.wikipedia.org/wiki/Rolling_blackout

[fungus pudding]

I reckon it is commendable that the Greens and Labour have come out with their electricity policy now, giving clear advance notice (just as National did of its intentions as to partial sales of SOEs).

Consequences related to MRP include IPO investors being better apprised of regulatory risk, and likely to pay less per share. If Kiwis are spooked, a greater percentage of IPO shares is likely to go offshore, adding to upwards pressure on our dollar.

There is ample time for those hostile to the policy, or to socialist intrusions in general, to act to deny Labour and the Greens electoral success.

Unfortunately it's one man - one vote, and there are plenty who will only hear the five or six dollars per week gain in their pocket, without realising it will have to come out of the other pocket. I have no doubt it will gain them some votes.

[RTM]

From Post 742
"The way I look at all this is that the Labour/Greens have manufctured a bomb "

Completely disagree. John Key / Nats have manufactured this time bomb. They got in at the last election despite having the unpopular policy of selling our assets. In the absence of a credible opposition. They must have known that NZ'ers by and large were against selling our power generation capacity. The reasons have been detailed extensively elsewhere. John Key / the Nats have upset a cosy relationship with power generation companies ( dividends paid to government = tax) It made no sense to most of us. It was inevitable that the left would react in someway...especially given the steady increase in power costs we have endured over the years.


Don't really think its the right thing to do, will be pretty inefficient I suspect. But John Key and his mates have directly caused this.

[CJ]

They got in at the last election ...That says it all doesn't it.

Plus a bit of misguided conspiracy theory in there. If Key and the poer co's were so cosy, why sell it. It was Helen who was cosy with the PowerCo's. She would ask for a few extra hundred mill in dividends and they would provide. [If you said cosy with investment bankers, the most of the country probably would have believed you ;) ]

[Mumbles]

Can someone explain to me how they see the pricing negotiations working between the government and Generation company's? The government needs all the 5 big generators to play ball or else we wouldn't have enough generation to meet our demand. So each company has huge bargaining power, because we need them.

Also, what about pricing around constraints......there are a lot of things in the electricity market where the market just sorts it out, seems like a nightmare for the system security coordinators to sort out if the government is in there as well.

[fish]

It's essentially the same idea though, making sure consumers don't have to be exorbitant prices for essential "goods".

I understand it is difficult to take personal polictical views out of the equation but for the sake of this thread I am going to suggest we try.

Whatever way you look at it this policy announcement by Labour and the Green throws a big spanner in the works for potential MRP investors. Whether you like the policy or not it really doesnt matter. The facts are that end user household electricity prices have been going up by exorbitant amounts over the last 20 years and at some point some government will do something about it. The very fact that the Greens and Labour have signalled this policy increases the risk in owning MRP and is reflected in the SP drop s of CEN etc yesterday. This policy will gain a lot of traction and there is every chance it will be implemented during the next election cycle.

Short-term gain for long-term pain.
We have a system working well and by average international prices a fair price is being paid for power.
It is an absolute traversty to accuse the power companies of being a cartel-there is intense competition in generation and retail.
What will happen is that investors will see a labour/green government changing the rules of the game to their own immediate gratification and that of their followers .International investors who have brought a lot to nz such as ORIGIN will make big losses and flee our shores never to be seen again .

[robbo24]

I'm an aries, I'm slightly ADD, I thrive on the excitement of risk, I don't like commies and after reading the bits and pieces around the place about the pragmatic reality of the proposed NZ Power idea that it is a half-baked idea mooted with the only intention of jarring the MRP offer - I personally don't see it happening in the way that it has been mooted, if at all.

I doubt Moosie (with his incredible, safe style of investment) would invest in MRP with all this nonsense going on but he keeps saying "when there is blood in the streets buy buy buy" - give me some damn shares at a damn discount!

[CJ]

Mumbles - I assume they would pass a law saying all power must be sold to NZPower. So NZPower has the bargaining power as without them, the generation assets are worthless since they cant sell their power elsewhere.

I assume pricing would work similar to lines companies in that the return would be based on two things:
- capital value of the asset x a set return (note: Labour/Greens are using the original capital value (ie. built 50 years ago) plus inflation I assume, not current market value)
- pass through of operating costs

[robbo24]

Mumbles - I assume they would pass a law saying all power must be sold to NZPower. So NZPower has the bargaining power as without them, the generation assets are worthless since they cant sell their power elsewhere.

Iran did something like this once, with oil, if I recall correctly...

[fungus pudding]

Short-term gain for long-term pain.
We have a system working well and by average international prices a fair price is being paid for power.
It is an absolute traversty to accuse the power companies of being a cartel-there is intense competition in generation and retail.
What will happen is that investors will see a labour/green government changing the rules of the game to their own immediate gratification and that of their followers .International investors who have brought a lot to nz such as ORIGIN will make big losses and flee our shores never to be seen again .

Well I've just bought some. Only applied for $5000 but I'm not a share investor, other than listed property trusts. Hadn't intended to, but there you go.

[POSSUM THE CAT]

Fish I get phoned on average once a day saying they can give me a better deal on power but they will not publish details. All you get is some idiot on the phone that hopes you will just say yes. Even the power company I am with is stupid enough to have its Telemarketers call me, plus all the door knockers. On the amount they are wasting on this marketing I estimate they could reduce the price by about 3cents per unit.

[CJ]

I doubt Moosie (with his incredible, safe style of investment) would invest in MRP with all this nonsense going on but he keeps saying "when there is blood in the streets buy buy buy" - give me some damn shares at a damn discount!Are you doubling down on CEN then. Down 10% in two days so if this all blows over, a nice little return. TPW the same.

[Mumbles]

CJ thanks for the response, it would be interesting to compare the return on assets of the lines companies (Transpower and distributors) are compared to what the average is from the power companies.

In my opinion if you are going to target something like the Electricity Market, you have to review all the perceivably competitive, but not actually competitive markets in New Zealand. Such as the duopoly of Supermarkets, the price matching of petrol stations or Banks.

The generators are just flavor of the month for Greens/Labour so it is all political. If you compare units of energy of transport (driving to work) compared to running your house on electricity, your power bill starts looking cheap.

[fish]

"Intense competition" which has seen how much of a decline in end user household electricity prices?
Intense competition results in the best deal for all of us-which doesnt just mean best prices but security of supply etc.

Contact have come out and said today that they would not have invested 2.5 billion in extra generation in the past 5 years if they had known of such an intent by labour/green
Clearly tumeric you have similar ideas to that proposed.I did when I was young-have voted green and labour more than national-idealistic rather than realistic as to how the world works.
If Helen Clark had enacted the proposed power policies we would not have had the investment we have had and we would have had rolling blackouts this year due to drought and a lack of hydro .
The proposed price control is political opportunism designed to spoil the mrp float and gain votes with the carrot of cheaper powerprices.
It shows the very worse of politics.
There is more competition amongst power retailers than almost any other produce .
The looney left will destroy investment and advancement in this country if this is how they will run things if in power.

[fungus pudding]

Intense competition results in the best deal for all of us-which doesnt just mean best prices but security of supply etc.

Contact have come out and said today that they would not have invested 2.5 billion in extra generation in the past 5 years if they had known of such an intent by labour/green
Clearly tumeric you have similar ideas to that proposed.I did when I was young-have voted green and labour more than national-idealistic rather than realistic as to how the world works.
If Helen Clark had enacted the proposed power policies we would not have had the investment we have had and we would have had rolling blackouts this year due to drought and a lack of hydro .
The proposed price control is political opportunism designed to spoil the mrp float and gain votes with the carrot of cheaper powerprices.
It shows the very worse of politics.
There is more competition amongst power retailers than almost any other produce .
The looney left will destroy investment and advancement in this country if this is how they will run things if in power.

You are so right. The damage they have done so far with this power proposal has wiped billions off the value of the govt. owned generators already - and they grizzled because National wanted to float a portion of them!
They haven't said where the new revenue will come from to replace the 700 million in divs and taxes they are prepared to forego - but we all know. Nor have they said how they propose to fund new infrastructure which Nats. had planned to do with funds from float. I dread the thought of Norman and Labour's leader (Cunliffe?) winning the next election. Our credit rating down - interest rates up ....... business ' employers running scared. I know I'm in the wrong space for a political rant, but too bad.

[CJ]

CJ thanks for the response, it would be interesting to compare the return on assets of the lines companies (Transpower and distributors) are compared to what the average is from the power companies.

In my opinion if you are going to target something like the Electricity Market, you have to review all the perceivably competitive, but not actually competitive markets in New Zealand. Such as the duopoly of Supermarkets, the price matching of petrol stations or Banks.
The NBR today(hard copy - don't think it is online) has lines companies with a higher ROA with less volatility than gentailers. Therefore surprising Simon M (Vector COE) not rubbishing it - playing nice so he doesn't get hit by the same stick?

Yes - why limit to power - banks, petrol, milk, supermarkets, telephone, etc

[fish]

tumeric how can someone honestly say that competition has resulted in high power prices ?
Intense competition results in better service and prices.A lack of competition results in sick economies and bad decisions .
Clearly you have been misled and I would place more reliance on statements from those that actually do useful things rather than your admired left wing academics.
Power prices have increased because of things like inflation,increased population and demand of a growing population .Green/labour policies that have resulted in expensive wind generation . Increased charges from monopolies such as transpower and lines companies .
It is competition that has tempered the rises

[POSSUM THE CAT]

CJ - banks, petrol, milk, supermarkets, telephone, etc Are reasonably comparable with Australia. But power prices are not. They should be far cheaper in NZ as we have lots more Hydro & Geothermal energy than Australia. While I was there power companies did not waste so much money on marketing.

[minimoke]

I’m out.

Kaboom. Labour have lobbed a nuclear device in my plan to stag $50k for a 20% gain.

Not only have they f#cked my CEN holding I reckon they will drive the institutions away from this IPO.

My stagging was purely based on political reasons and disregarded all the TA and FA analysis. It was based on a government with a plan to set itself up for winning votes next year. No better way than selling MRP “cheap” and then having the insto’s clambering for a long term holding.

I can’t see any insto wanting to grab hold of something that could well be gone well before Tiwai closes.

I do admire Labour though – it's a master stroke. They have shown their hand that they are prepared to work very closely with the Greens. National are by no means a dead cert winner next year. So add Labour / Greens (“we tried to save the State asset sale and nearly succeeded”) with other lollies they will throw out; toss in king maker Winnnie, say farewell to Act and Maori. You can see how the next govt is shaping up. We know Labour are semi loony (they bought Kiwirail) and between them and greens totally loony (both support the carbon tax which has caused energy prices to rise. What was it – around 3%?) there is no way I can see why an insto would want to put their money into a long term asset which has a very short profit cycle.

F%ck, F#ck, f*ck!!!!!!!!!!

[CJ]

CJ - banks, petrol, milk, supermarkets, telephone, etc Are reasonably comparable with Australia. But power prices are not.Banks probably rip both countries off equally
Petrol is a cheaper but that is probably is tax
Milk - a lot cheaper over there, though I think that is driven by the supermarkets
Supermarkets - same
Telephone - I was referring to cell phones and they are much cheaper!
Power - from what I have read, we are comparable and they are forecasting increases about the cost of inflation

[fish]

Sorry fish, I guess the intended tone of my comment was lost in translation.
My point is that if there truly has been "intense competition" as you suggest then we wouldn't have experienced a two fold increase in real prices. Therefore I believe it is you that has been misled on this particular issue and there has not in fact been the "intense competition".

Tumeric you are failing to acknowledge that power prices are dictated by numerous factors including those i have mentioned .
a hypothetical example regarding the effect of an increase in population which may affect power prices .Say the population of a country increases from 3 to 4 million over 20 years .Hydro is sufficient to provide power very cheaply-say 1 cent per unit and is sufficient to supply 3 million people only .The increased populatoin demands a 1/3 more generation.This increased generation is a mix of windpower ,geothermal and gas this costs 5 cents average per unit to generate. Hence the average cost of power generation 20 years ago was 1 cent a unit but now the average cost is therefore 2 cents.
Now a similar situation has happened in this country but we have had more thrown into the mix-eg gst at 15%,transmission and lines costs also increased significantly.
It is disingenious ,to say the say the least to suggest i have been misled.I follow no one.
Unlike you i do not listen to left wing economic academics but do my own observations and reasoning in the real world.
You are blind to believe that competition has not been intense.
Unfortunately the majority of generation is by state owned power companies whose main focus has not been cheap prices.Instead 100's millions have been wasted investing in things such as overseas geothermal/travel etc.In contrast contact are providing me with a 22% discount for prompt payment making them the cheapest and the state companies the most expensive.
A successful mrp float could provide a company concentrating more on the customer rather than itself.
Looks like the state will get significantly less for mrp thanks merely to an ill-considered announcement from shearer .

[percy]

The announcement wasn't "ill-considered", IMO. It was deliberate.

Very deliberate.!!!
Not just peeing in the water,but a great big poo.!!!
"No surprises there."!!!!!

[skid]

Tumeric you are failing to acknowledge that power prices are dictated by numerous factors including those i have mentioned .
a hypothetical example regarding the effect of an increase in population which may affect power prices .Say the population of a country increases from 3 to 4 million over 20 years .Hydro is sufficient to provide power very cheaply-say 1 cent per unit and is sufficient to supply 3 million people only .The increased populatoin demands a 1/3 more generation.This increased generation is a mix of windpower ,geothermal and gas this costs 5 cents average per unit to generate. Hence the average cost of power generation 20 years ago was 1 cent a unit but now the average cost is therefore 2 cents.
Now a similar situation has happened in this country but we have had more thrown into the mix-eg gst at 15%,transmission and lines costs also increased significantly.
It is disingenious ,to say the say the least to suggest i have been misled.I follow no one.
Unlike you i do not listen to left wing economic academics but do my own observations and reasoning in the real world.
You are blind to believe that competition has not been intense.
Unfortunately the majority of generation is by state owned power companies whose main focus has not been cheap prices.Instead 100's millions have been wasted investing in things such as overseas geothermal/travel etc.In contrast contact are providing me with a 22% discount for prompt payment making them the cheapest and the state companies the most expensive.
A successful mrp float could provide a company concentrating more on the customer rather than itself.
Looks like the state will get significantly less for mrp thanks merely to an ill-considered announcement from shearer .

Intertesting..
If what you say is true about an increase in customers makes for higher expense per unit--then this is pretty much the opposite of most models where the price comes down with greater numbers.
This is where we ,as a country,normally have to make sacrifices because of our small population[lots to make up for it though IMHO]
Whether you agree with the selling of state assets or not,now that its going ahead ,it does seem criminal to sabotage the operation ,taking value out of our pockets,the countries pockets,for political gain.
There will now be less money to pay the bills-and oversea institutions may get a fire sale--sound familiar?
At this stage I think Im with those that will sit this one out.

[fungus pudding]

The announcement wasn't "ill-considered", IMO. It was deliberate.

Ill considered as to the effect on the economy overall - or if that was deliberate then they are putting their own future ahead of the country's economy - heaven help us if such a bunch of bandits ever gain power.

[Grimy]

I was in, then with all the uncertainties was wavering and then with the NZ Power proposal decided I was out.
However, if this uncertainty does put the institutions and overseas investors off, won't that make the book-build price less? Meaning a cheaper entry point for those who do apply, therefore increasing the dividend yield to the higher end of the range, mitigating somewhat the possible lower dividends later on if the NZ Power idea ever came to anything? And if it doesn't, then you've got a good entry price?
Now I'm back to wavering about a small initial investment and then see what happens to the price after listing.

[Grimy]

Ill considered as to the effect on the economy overall - or if that was deliberate then they are putting their own future ahead of the country's economy - heaven help us if such a bunch of bandits ever gain power.

A novel thought-who would think a politician (of any leaning) would put their own agenda before that of the greater good of the country? Outrageous!

[RTM]

"The announcement wasn't "ill-considered", IMO. It was deliberate. "

Exactly.

Perhaps the best outcome now would be for JK to withdraw the IPO and return to the previous status quo. He has no mandate from the country to sell our power generation. Dividends would again be returned to NZ Inc, And price control via government ownership of the power price. Yes, power prices may have been going up....but by and large the outcome of this was returned to NZ'ers by dividend to government. If he does this, then maybe he stands a chance of being re-elected and saving us from the left.

He just can't charge on as he has with something like this when it was very very clear that the country was not with him. He has brought this on himself.

[fungus pudding]

A novel thought-who would think a politician (of any leaning) would put their own agenda before that of the greater good of the country? Outrageous!

Of course they do - but to come out blatantly with a deliberately destructive policy supported by all their MPs is rare. I don't believe they considered the wider effect.

[mccollr]

Intertesting..

At this stage I think Im with those that will sit this one out.

The more that sit this one out the more shares will be available to overseas investors and institutions. Is that an own goal :-)

[Hoop]

Todays NZ Herald poll result which I found rather astonishing.....I obviously misread public opinion on this one....
The Labour/Greens will be very pleased with this result methinks...Setting future Government policies Left of Centre in NZ just became a lot easier to do.

Investors selling down Power shares tells you the Government Interference risk has increased and they don't like the looks of it..

Hoop suspects Power isn't the only sector L/Galliance have their eyes on ...but hey I'm cynical at the best of times. :)

User groups give power plan thumbs up (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878378)

Poll of the day
11950–12000 votes
Do you support the plan by Labour and the Greens to regulate power prices?


(http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878378)Yes - It's a great idea..................... 37%

Maybe - I want more details first...... 26%

No - It will never take off................ 37%

[fungus pudding]

The more that sit this one out the more shares will be available to overseas investors and institutions. Is that an own goal :-)

You're right, but apart from the emotive clap-trap that simply doesn't matter. We can get even on those nasty foreigners and buy some of their shares. :t_up::t_up:

[G on]

My 2c worth. It's all about the yield from this sort of investment so if the yield halves would that still entice institutions to invest?
Would anyone be enticed with the possibility of zero gain or going negative because no more money will be used to maintain and improve the power stations?
Why would overseas investors look at NZ knowing that there could be a risk of a socialist gov every three years and pulling these sort of stunts in other areas?
Electioneering has begun and the bribe starts at $300.00!!!
I think this disingenuous act will have far more reaching consequences than L/Greens have considered.
I would not be surprised to see capital being withdrawn out of the country over the next 12 months.
Dollar down? At least it will help the exporters!
Just my 2c worth.

[sideline]

How about MRP issuing PUT options with those shares to buy back the shares for say NZ$3 expiring some date after the next election.
If National win the election the shares should be worth more than that and the PUT options will have no effect, if L/Greens win
investors will be protected.

[Aaron]

1/Right or left my main question is do I sell out of Contact and Infratil now or not.
2/If you answered no to question 1 my MRP prospectus arrived in the post do I need to read it or not now there is a massive political risk on top of the fact that CEN looks as good and you know the price you are going to be buying at with CEN. It seems a speculative stag with Moosie might be the only reason to buy into this IPO.

I liked utility companies for their steady dividend and lack of volatility I considered it a good alternative to housing investment. You didn't need to mortgage yourself to the hilt and you can build up your capital in manageable chunks.

I respect national for sticking to their ideological guns and pushing on with the sales in spite of public opposition even though I am not so sure it is a great idea for the country either. Brian Gaynor makes a good point in the Herald this morning that the power price rises have been while the industry was largely government owned anyway (and to me makes Shearer and Norman look like a couple of politicking bell-ends with this new policy)

Will govt appointed commissioner(s) decide what a fair price is for power in NZ. If these individuals are smart enough to know the fair price of power maybe they can confirm that we are paying a fair price for residential rentals, petrol, staple groceries etc. We already have people in the Commerce Commission with intellects massive enough to do this anyway. It is doubling up the bureaucracy and complexity and probably unnecessarily increasing costs for all taxpayers. The promised drop in power bills might be enough to sell this policy though. The comparison with Pharmac as STC pointed out isn't right. Pharmac are negotiating a price with large multi national drug companies not setting the price of the drugs.

I don’t like the me, me self-centred policies of the right but I might have to reluctantly agree with FP that Shearer and Norman are a scary combination.

I motivation for posting is mostly due to the loss I am suffering owning Contact and Infratil.

[sideline]

Todays NZ Herald poll result which I found rather astonishing.....I obviously misread public opinion on this one....
The Labour/Greens will be very pleased with this result methinks...Setting future Government policies Left of Centre in NZ just became a lot easier to do.

Investors selling down Power shares tells you the Government Interference risk has increased and they don't like the looks of it..

Hoop suspects Power isn't the only sector L/Galliance have their eyes on ...but hey I'm cynical at the best of times. :)

User groups give power plan thumbs up (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878378)

Poll of the day
11950–12000 votes
Do you support the plan by Labour and the Greens to regulate power prices?


(http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878378)Yes - It's a great idea..................... 37%

Maybe - I want more details first...... 26%

No - It will never take off................ 37%


I would expect that not all of that 'public' support of L/Greens 'idea' is genuine - they would have lined
up some spin and support for their policy release!

[fungus pudding]

1/Right or left my main question is do I sell out of Contact and Infratil now or not.
2/If you answered no to question 1 my MRP prospectus arrived in the post do I need to read it or not now there is a massive political risk on top of the fact that CEN looks as good and you know the price you are going to be buying at with CEN. It seems a speculative stag with Moosie might be the only reason to buy into this IPO.
I liked utility companies for their steady dividend and lack of volatility I considered it a good alternative to housing investment. You didn't need to mortgage yourself to the hilt and you can build up your capital in manageable chunks.
I respect national for sticking to their ideological guns and pushing on with the sales in spite of public opposition even though I am not so sure it is a great idea for the country either. Brian Gaynor makes a good point in the Herald this morning that the power price rises have been while the industry was largely government owned anyway (and to me makes Shearer and Norman look like a couple of politicking bell-ends with this new policy)
Will govt appointed commissioner(s) decide what a fair price is for power in NZ. If these individuals are smart enough to know the fair price of power maybe they can confirm that we are paying a fair price for residential rentals, petrol, staple groceries etc. We already have people in the Commerce Commission with intellects massive enough to do this anyway. It is doubling up the bureaucracy and complexity and probably unnecessarily increasing costs for all taxpayers. The promised drop in power bills might be enough to sell this policy though.
I don’t like the me, me self-centred policies of the right but I might have to reluctantly agree with FP that Shearer and Norman are a scary combination.

I am largely motivated by the loss I am suffering owning Contact and Infratil.

If you want to know more about how well thought out Labour's proposal isn't, watch The Nation tomorrow morning on TV3 at 8a.m or at 9 a.m on channel 8 . Parker comes across as a clown. Max Bradford puts his points well which I agree with having followed things reasonably closely since his reforms. Pay particular attention to the graph TV 3 showing the massive drop after his reforms - followed by the staggerring rise when Labour started interfering again in 2002. Pretty much matched the findings of Otago university study on the reforms. Interesting program.

[Cheese]

I am out. Took labour/greens to talk me out of it. This is the LAST thing I wanted to be what talked me out of it... but at least the decision is made.

I was in, but how can anyone justify buying this now? The political risk is too great. Most elections are a close run thing in NZ. If Labour/Greens get in then we can kiss goodbye to any certainty on the share price or returns over the next several years/decades.

I actually think this is political suicide for labour/greens, who I didn't give much hope to anyway. But this is such a bad move for our economy and especially our capital markets that this won't go well for them. I know at least 440,000 people who will be right pissed off about this for selfish reasons. Nats will be publishing how close they are to achieving surplus and how labour/green will be sending us back to north korean regimes.

What makes me angry is that I can't now take this otherwise fairly decent investment opportunity with any sense of safety. Well done labour/greens for the stunt, I think it will be very successful in screwing the asset sales. But I think it will be your demise come election time.

Looking forward to hearing Nationals response on what impact this labour/green policy would have on asset values should they get into power.

Likelihood now that the share offer will open towards the bottom of the range but still.... can't justify it. Hopefully it stays low. I will jump in when Shearer gets rolled and Parker/Cunliffe/Whoever takes over the Shearer/Norman circus.

[tim23]

Means they will be cheaper, its a punt on election result, I'm in!

[Zaphod]

If iPredict is a useful barometer, then the next election result is near enough to a coin toss.

National PM after the election - 52%
Labour PM after election - 47%

https://www.ipredict.co.nz/app.php?do=browse&cat=319

If Labour loses the next election, I think they will suffer from several years of internal chaos as leadership coupes are staged. That is of course, unless Cunliffe is summarily ejected.

[ScrappyO]

Ive decided not buy MRP shares. I think MRP would be a good gauge on how the other soe's will do. I would rather watch to see what happens with this first listing.

[neopoleII]

maybe its time for a snap election?
the dim witted bennies and lefties have a chance to vote the greenlabs in, and the outcome will hurt them dearly in 3 years times, which gives the nats a chance to say "i told u so" when the economy and the lights go out.

the biggest problem NZ faces today isn't politics left or right...... its dim witted voters which account for more than 60 percent of citizens.
and the fact that most citizens in this country don't effectively pay tax or are welfare recipients makes the greenlabs job easy.

whats with the statement that if power prices go down an extra 5000 jobs will be created?
if they cut the billion dollar excise tax grab on smoking that would equal 30 to 40,000 jobs.!!
but no....... politics is a game of misdirection and purchasing votes by handouts.

i realize that NZ is still a great place, but the way politics is playing the sheeples in this land is quite sad.
and the goal it seems for some politicians has nothing to do with looking after ones fellow neighbour.

sad sad sad

[Beagle]

I will not be investing.
First up on a fundamental analysis the P.E. ratio is far too demanding even at the bottom of the price range.
I don't see where the growth will come from and Contact's fundamentals are superior.
Power prices have increased at such a dramatic rate in the last decade that we now have demand destruction because of the price.

For this reason the sector can't grow as a whole and simply put most families are finding it a struggle to afford their power bills and to be frank is it any wonder when they've nearly doubled in real terms over the last decade ?

What did Labour do when they were in power for nine years, (power prices increased by 72% according to John Key and I'm inclined to believe him), and then Labour they throw this nuke into the markets...that's reprehensible behaviour in my opinion, they have all the credibility of an alley cat. Meanwhile there's Rio Tinto with their well rehearsed games regarding the smelter.

Why anyone would bother investing in this no growth industry with all these risks on this super high PE ratio is a complete mystery to me. Be intersting to see if they can actually get this float away now...my 2 cents.

[777]

A good article by Brian Gaynor this morning...

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10878593

[CJ]

Ive decided not buy MRP shares. I think MRP would be a good gauge on how the other soe's will do. I would rather watch to see what happens with this first listing.I think the result of this is National will get a low price and they will delay the other IPO's till after then next election. I dont see how they can justify selling them all at a low price.

I will probably through a few grand in but not as much as I was originally planning. I was also going to buy some in my kids name to start a 'college fund' for him - too risky for that now.

[fungus pudding]

So sad. That Labour and Green policy is killing the aspirations and good intentions of so many New Zealanders.

And with any sort of luck, killing their parties.

[boysy]

Killing the aspirations and good intentions of so many New Zealanders

Had a laugh at this one who actually believes anyone buying into mrp with good intentions as Gordon gecko said greed is good apparently. Rather hard to argue the free market power model has helped out the average kiwi at all. In the name of redistribution let the haves take more from the have nots .

[iceman]

And with any sort of luck, killing their parties.

Remember Labor in Australia coming out with their great idea of a mining tax in Australia a couple of years ago. Thought it sounded good to the voters to attack big business. Little did they know that they went a step too far and businesses and media commentators attacked them ferociously and pointed out the negative effects of their dumb and ill thought out idea. Labor is now in internal chaos and will be routed at the next election and kept on the opposition benches for a long time while they rebuild.

We are already seeing moderate and smart commentators in NZ, such as Brian Gaynor (I am sure Rod Oram will be an exeption this morning !!), pointing out how stupid this Green/Labour idea is. Business groups will also attack this (and other Green inspired ideas) ferociously closer to the next election.
Shearer is a blend Leader with no ideas of his own and Labour will suffer the consequences of letting him run amok like this, directed by his Finance Minister in waiting Russel Norman !

[troyvdh]

And NZ'ers are told repeatedly to focus/invest/change there obsession with property..and diversify...into share mkts both local and overseas....both Gareth and Bernard tell us relentlessly that we must change our habits about investments...do not get me wrong I actually value there opinions..but hey here in the real world...

as an aside I believe that what iceman says is more than valid....but (and I hate this as I hold CEN) why do folk in Queensland pay something like 10-12 cents per unit...where we pay....?????

I do not believe that Dave et al has totally thought this through....milk,supermarkets,petrol.....building costs

[fish]

Energy is cheap in australia,no gst,no carbon taxes-just a few possible suggestions.
It simply is not a valid comparison-you have to look at similar countries like sweden-as the commerce commission tell us with chorus.

[winner69]

Good? I think not. Gaynor's article lacks his normal substance and reason ... e.g.

"The best way to create a competitive environment would be to have all of the electricity generation companies listed on the NZX." - a unsunstantited and extremely debatable assertion.

"Prices for government-controlled services, including health, education and electricity, continue to rise at a far more rapid rate than private sector prices." - two issues here; 1) in both health and education the govt is the "provider of last resort" hich means they'll always be left with the hard stuff once the private sector hs cherry picked what they can derive profits from, and 2) electricity? Hang on gaynor, isn't this a public private industry? doesn't that shoot down your argument?

"Labour's proposals will adversely affect the retirement savings of these KiwiSaver members." - no it won't. Once on market the mrkt will set the price and the asset will be marked to mrket. If G&L buy back then ditto and no net differnce.

"The best way to keep prices down is to ensure there is a competitive market" - Yip Gaynor, you may be onto somethig there ... Why not address why the market isn't competitive? Nope - he sticks with the dogma ...

... and I could go on!

Were I more of a cynic I'd suggest that Gaynor's funds are looking for the "sale of the decade" to bolster their Kiwisaver returns.

Probably a good conclusion there belg .....it was 'good' because whoever it was agreed with gaynor

In that context belg your post was not just good, but very good, almost excellent

[ari]

and Bernard Hickey's Herald article this morning........
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10878726

[winner69]

and Bernard Hickey's Herald article this morning........
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10878726



Excellent article by Bernard .....greedy shareholders making management screw the populous is just not on - especially when it comes to the necessities of life

[winner69]

Thanks Ari ... You beat me too it. Hickey has pretty much nailed what the medium-income NZer thinks of the whole thing.

I wonder if the FMA will act shortly? The hole process is going to hell in a hand basket.

No way belg ....John has promised his mates that one day they can own a power company or two in nz ...on the cheap

It's all going to plan this sell off

[winner69]

May as well let Matt have his say as well
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878737

He usually down to earth with a real view of the world ....I love the anti Matt comments in response ..just like sharetrader at times ha ha

[CJ]

May as well let Matt have his say as well
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878737

He usually down to earth with a real view of the world ....I love the anti Matt comments in response ..just like sharetrader at times ha haGood that he brought up Fonterra, a single buyer/seller of NZ milk set up so farmers can earn super profits.

[777]

Probably a good conclusion there belg .....it was 'good' because whoever it was agreed with gaynor

In that context belg your post was not just good, but very good, almost excellent

Instead of "good" I should have said "interesting" article.

[CJ]

as an aside I believe that what iceman says is more than valid....but (and I hate this as I hold CEN) why do folk in Queensland pay something like 10-12 cents per unit...where we pay....?????where do you get this figure from? Looking at switch wise.com.au, Origin charges 25c kwh and 28c per day. About the same as NZ, ignoring the exchange rate!!!

[winner69]

The worlds gone mad
http://www.stuff.co.nz/business/industries/8577036/Power-bosses-1m-plus-salaries-revealed

I'm sure the likes of Molly Mellish would do te job for heaps less. She a pretty clever lady

[troyvdh]

CJ..I could be wrong but I recall reading an article (one of those many that has been published in recent time comparing NZ/OZ blah blah) where it was claimed that the price per unit was roughly half what it was here.
I do have a contact in QUEland and NSW...will get back to you.

[fungus pudding]

CJ..I could be wrong but I recall reading an article (one of those many that has been published in recent time comparing NZ/OZ blah blah) where it was claimed that the price per unit was roughly half what it was here.
I do have a contact in QUEland and NSW...will get back to you.

http://www.euaa.com.au/2012/04/australians-now-paying-near-to-the-highest-electricity-prices-in-the-world-2132012/

[boysy]

Power price rises have occurred under successive governments its not a left or right issue but the sale of assets to those that can afford to buy are stripping the benefits from those who cannot.

[fungus pudding]

Power price rises have occurred under successive governments its not a left or right issue but the sale of assets to those that can afford to buy are stripping the benefits from those who cannot.

The benefit of power to the consumer has nothing to do with who owns the asset. Every dollar we spend gives us some benefit. Some may choose to buy shares and receive a dividend. Others will buy a new car, or something else. Some will not bother earning it in the first place, while others work their guts out to get ahead. A few decide to have large families - fair enough, but they must realise that is a costly choice, their cost. Some through various misfortunes will never acquire wealth, but the world isn't a fair place. Anyone who chooses to provide goods and services or fund them throught the purchase of a share deserves a reward. Go and wander around a communist country for a month or two and see what sort of society you end up with if you try and stop investor profit. So as we cannot all be wealthy the only way to make us all equal is to make us all poor. Having been to the odd place where everyone is poor, I certainly don't want to see that here thanks. Even the very very worst off in NZ are looked after relatively well. We have come through the massive technical revolution extremely well comparatively speaking, and that's due to Labour's reforms for we never would have made it following Muldoon's mad economic controls. NZ has a brilliant future particularly in tourism thanks largely to the current govt. (the best money we can earn, particularly for trade balance is invisibles) and the last thing we need is some silly govt. coming along and undoing 30 odd years of sensible economic development. We are well positioned - embrace it. Labour don't give two hoots about wiping hundreds of million off stocks or threatning our credit rating and all the downsides of that; nope - just as long as they can create the illusion of a six dollar a week gain in the hope of gaining another vote. I don't blame Shearer for I don't think he knows any better. Parker and others do, but have decided votes are more important than our future.

[elZorro]

I'm reposting something from another thread, because it might be useful in this argument. As far as I know, this is correct data. MRP and all of the other electricity SOES have a team of database analysts, doubling up on each other's work no doubt, keeping an eye on the trends in power use, figuring out their power deliveries in the weeks and hours ahead, working out how best to supply the cheapest power to the end-users who are paying at a fixed rate. If we still had ECNZ, there would just be one team doing that work, and it would have saved us all some costs.
Labour's idea is good. I think it's time we had an option like the big power users, to buy on the spot market, or to negotiate a deal (like we think we can with the banks, on interest rates).

By the way, Sparky, there are some charts being pointed at by National, showing that the power prices went up when Labour got in around 1999, just after National's power reform (Max Bradford). The power prices had dropped a bit, and then started climbing. The key bits of information missed out, are that the SOEs probably started figuring out how they could work together after a few years, the new normal. And more importantly, the giant Maui gas field started running down about the same time. In 2003, the take-or-pay contract for Maui ended. This put the price of wholesale gas up (it doubled by 2008) and of course Huntly was always used to set the lowest spot base price, while running on gas/coal. We were using most of the power available back then, and there were rolling blackouts in dry winters. So Huntly often featured in the spot pricing, because it had to run full bore at 1000MW to conserve the hydro lakes.

Nowadays the E3P side is used, and of the four older 250MW turbines in the main structure, one is mothballed at the moment. The other three appear to be getting looked after for longer-term use.

[Zaphod]

where do you get this figure from? Looking at switch wise.com.au, Origin charges 25c kwh and 28c per day. About the same as NZ, ignoring the exchange rate!!!

That sounds about right. Tariff 11 (domestic) power prices have risen very quickly since around 2008/2009 in Queensland and there is another sharp 20% increase expected mid this year, with around half of that increase due to an increase in network charges. These are all approved by the Australian Energy Regulator at a Federal Government level.

[Zaphod]

"Labour's proposals will adversely affect the retirement savings of these KiwiSaver members." - no it won't. Once on market the market will set the price and the asset will be marked to market. If G&L buy back then ditto and no net difference.
.

It already has. Those Kiwisaver funds that were invested in Contact, Trustpower or other investment companies that have either directly invested in generation or that have a significant proportion of their funds in electricity generators (e.g. Infratil) have already seen millions wiped off their savings.




300 saving each year is lot to these people - the majority (the medium income group) of kiwis.

So either give them further tax credits or provide them with direct a power credit? That's much simpler to implement than what is being proposed and won't scare foreign investors away like the current plan will

[fungus pudding]

That sounds about right. Tariff 11 (domestic) power prices have risen very quickly since around 2008/2009 in Queensland and there is another sharp 20% increase expected mid this year, with around half of that increase due to an increase in network charges. These are all approved by the Australian Energy Regulator at a Federal Government level.



http://cleantechnica.com/2013/02/24/australian-electricity-price-increases/

[fungus pudding]

Here is another

http://www.abc.net.au/news/2012-03-21/australians-pay-highest-power-prices-says-study/3904024

[POSSUM THE CAT]

http://www.switchwise.com.au/personalised-search.asp Using this & my Old housing details for locality in QLD. & size which was much bigger than the present house I get a 25% saving by there estimate compared to my actual billing over 12months this is including the discount for prompt payment here. No discounts mentioned in the Australian pricing.

[Major von Tempsky]

I'm out.
Prospective gross dividend yield far too low and too many unquantiable factors (a) variable range buy in price (b) possibility of Tiwai Point shutting down and flooding the market (c) Hugo Chavez/Cristina Kirchner wild eyed socialist noises from the NZ Labour Party and Greens.
I think John Key is right in that the next election will be between the radical extreme left and the centre right. Shearer has vacated the centre.

[Jack]

Get real guys. Teflon John is the biggest populist politician out, leading us down the path of mediocrity. Where are the bold policies ? Flip flopper with a lust for the baubles of power.

[Jack]

Sorry to offend your idol Sparks, only this (boring) thread is "Elections" in drag. I'm off to get on wth my life

[winner69]

Maybe jack was saying "hey my name is John, every one likes me and I have a power company that you can buy. Its not a lemon and its going cheap, so trust me and give me your cash"

Watch John come out this week and reassure the market all is honky dory

[boysy]

Adults of only one persuasion are clearly allowed on this forum jack

[mouse]

My six pennyth. Did I spell that correctly? Anyway.
1/. A lot of the hydro plant on the Waikato River is old. Including the dams. a/. What life is left in the dams, what capability do they have to withstand earthquakes? b/. How much of the generating plant has to be replaced within the next ten years?
2/. Section 4.4 of the Prospectus. Page 80. Go to page 82, Site Reviews. They spent 1 to 3 hours inspecting each site by visiting the sites. They then spent two weeks reading reports on each site. I am amazed they made only a one to three hours inspection for each plant. Which would have told them where the site was. Repeat. I am amazed.
Your comments please?

[elZorro]

My six pennyth. Did I spell that correctly? Anyway.
1/. A lot of the hydro plant on the Waikato River is old. Including the dams. a/. What life is left in the dams, what capability do they have to withstand earthquakes? b/. How much of the generating plant has to be replaced within the next ten years?
2/. Section 4.4 of the Prospectus. Page 80. Go to page 82, Site Reviews. They spent 1 to 3 hours inspecting each site by visiting the sites. They then spent two weeks reading reports on each site. I am amazed they made only a one to three hours inspection for each plant. Which would have told them where the site was. Repeat. I am amazed.
Your comments please? Hi Mouse, your spelling was fine. I saw that the control bridge at Taupo was built in 1946. After that the dams got started. I still feel safe driving over that bridge. As far as I have observed, they've replaced hardware like turbines as needed, all the running gear has electronic telemetry and is monitored by a contracting firm, I don't know anything about the concrete dams. But I guess they were built like a brick you-know-what to the very high and careful standards of the time. Can I also say to Jack - you seem like a very clever person and politically astute, you're more than welcome on the elections thread! Help!

[mouse]

Can't answer part 2 easily, but in regard to part 1, the dams arguably have an extremely long life, arguably 100 years plus. The first dams were constructed circa 1930. It is possible to strengthen the existing structures with steel to improve earthquake resistance.
I just wonder if major engineering work will have to be done on their hydro dams wrt earthquake strengthening within the next ten years.
I am going to get a few shares. On the basis that they have some prospect of rising in price short term.
Also, thanks elZorro

[POSSUM THE CAT]

Sparky The Clown It would be a very small list.The shares on the NZX that are free from government regulation and likely regulation under a change of government. And if you use government pressure it would be even smaller.

[Jay]

I like point 9 of the below, no-one has mentioned this as far as I can see - less profit, less tax collected

http://www.nbr.co.nz/article/open-letter-david-shearer-and-david-parker-ck-138971

[fungus pudding]

I like point 9 of the below, no-one has mentioned this as far as I can see - less profit, less tax collected

http://www.nbr.co.nz/article/open-letter-david-shearer-and-david-parker-ck-138971

No tax collected. According to Shearer they would forego dividends and tax. Parker says Shearer meant they would forgive part of it.

[elZorro]

No tax collected. According to Shearer they would forego dividends and tax. Parker says Shearer meant they would forgive part of it. What about GST? The govt will still get all the GST from end-users, all the way up the chain, with the added value from 0.5c to generate, to 25c sell price on some power units. That should be enough anyway. I think Shearer meant they'll forego dividends for a while. I hope someone is going to start thinking - let's put the electricity parts the nation still owns, back into one business. All this replication of jobs and watchdog work is a pure waste of money, and achieves nothing better overall.

[Aaron]

http://www.sharechat.co.nz/article/1d5693c6/labour-s-parker-recommended-against-power-reforms-in-2006.html

David Parker is a smart guy unfortunately they need to stake out the far left to have any show of competing in the elections. I disagree with the power policies as I am directly(financially) affected and I also don't believe the policies will produce anything positive for NZ except more costs. At least when the Power Co execs are milking it they have to disclose the information and if the company is widely held people will take more interest in what is happening (For example arrogant contact energy had to come back to the market with some good deals to win back customers). Sitting back and letting the govt. take care of everything isn't good for the country in my opinion.
I look forward to a capital gains tax instead of jacking up a regressive tax like GST. Also when will national super be asset and means tested instead of aboliching child rebate and complaining about how much students are borrowing for university. Still don't know the meaning of life but from what I can gather looking after and encouraging the young would be the best way to go.

[Bjauck]

Regulation of monopoly/oligopoly markets is necessary as is the regulation of investment markets. However care is needed to ensure that business entrepreneurship and innovation is still rewarded so that investment takes place and is rewarded. Otherwise you get the situation where a) most people with capital put their money in real estate and foreigners and the state own the productive base of the country and b) mass emigration of people with skills. Oops! the horses have already bolted. It is a question of encouraging them to return to the paddock and drink from the river!
Disc. Own (small holdings in) IFT, SKT, SKC, HNZ, AIA, CNU, TEL, FSF

[craic]

Asset testing of Super would mean that a pensioner in a one-room flat in Auckland would get less pension than I do living in a three-bedroom house on an acerage in rural Hawkes Bay, Simply because their property is worth more than mine? One of the facts people ignore is that the cost of regulation and control more often than not, exceeds the benefit/tax. It works out cheaper to pay all in a group $10 than to employ a collection of pen pushers, enforcer and advisors to reduce the amount to an average of $8. If you start making a list of exemptions, you still finish up in the same hole - In some places it's called throwing good money after bad, as with the power company proposals.

[iced]

Worth reading:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878895

[winner69]

Wont be because it is 'akin to purchasing stolen property' and 'I couldn't live with my conscience' .... but some are going to take the FREE money on offer

http://www.stuff.co.nz/stuff-nation/assignments/are-you-buying-mighty-river-power-shares

[winner69]

Sort of a shambles now

Get you money back if you worried .... new apps suspended for a while

Prob bad vibes now .... admission that Labour/Greens are a 'risk'

Jack - John will sort it out .... he always does

[Xerof]

Snap election will sort it....one way or the other, but unsatisfactory position to leave the country in now.

Probably won't happen of course, but it's enough to go to the electors over - this is a sharp shift to the left, which needs to be tested for bluff

JMO

[thedigger]

No matter what Labour/Greens have to say !! always remember MRP are the Crown Jewels of Noth Island power "buy as many as you can get".

One other tip Meridian are the Crown Jewels with regards to South Island power "full your boots they are never to be had again".
IMO don't bother with Genesis and Soft Coal Lol....

[winner69]

Snap election will sort it....one way or the other, but unsatisfactory position to leave the country in now.

Probably won't happen of course, but it's enough to go to the electors over - this is a sharp shift to the left, which needs to be tested for bluff

JMO

GOOD IDEA ,,,, fix the high dollar problem (if it is a problem) as well

[Hoop]

Supplimentary document to be released tomorrow.....Hmmmm ...will I get interested????

[Minerbarejet]

As an interested bystander watching the politics of this Mighty Power Debacle several words keep springing into my mind (such as it is). Fiasco. Dunkirk. Oneupmanship. 40 foot pole. Wahine. Rainbow Warrior.
IMHO they should pull the whole thing and hold a Snap Election as suggested by others and get it SORTED. Its turning into a dogs breakfast.
woof:)

[janner]

Interesting concept ..

It will not happen.. ( the snap election ).. The die has been cast.. It is now over to the " Right ".. to convince their supporters to support.. MRP and all it stands for..

Or to alter the mind set of the so " MANY ".. sucking on the welfare TIT..

Cheaper Electricity .. With you man !!.. Will create " MORE ".. Jobs.. With you Man.. !!..

Cost you more in Taxes !!.. Eh !!.. Why ??..

[buns]

We don’t want to turn this thread political as I’m picking lots of lost MRP investors are checking this thread. However, its hard not to. This power policy is a blow your socks off type announcement, the kind of thing one could look back on for many years.

It’s just hard to understand, even from Labour’s side. I felt Labour were gaining some real traction (dam it..) with the house campaign and working away at the edges of National on the current sore points in the economy but this spray of communism makes that look like chicken feed. Most know Norman’s a nutter and Shearer, well who knows, but following this policy, a good portion of NZ’s will be legitimately fearful. Also, its kind of ironic, this coming out so close to the passing of Thatcher.

I actually doubt if Labour really believe in this, if another govt had this policy in place they would probably be wanting to reverse it and go for a (improved) regulated approach like we have today, i.e. anything which would buy votes. The policy is nothing but politics/election driven, but I’m picking this is going to shoot them in the foot, shotgun style. Those on the fence labour voters will be rethinking due to the radical nature of it, those labour voters who do end out holding MRP or any of the current listed infrastructure stocks will jump, those working in related industries will jump. Those who don’t like the sore loser will jump.

So in amongst the carnage, this may be of benefit to National. In the short term, the insto’s involved in pulling this together just got another mill here or there.. What a debacle..

[buns]

By comparison, not even the ruthlessly brilliant manager in Helen Clark tried to destroy the 1999 float of Contact Energy.

Mind you, she had already worked out she would probably win the 1999 election. She didn't need to threaten scorched earth. Shearer doesn't have that comfort I guess.

You're right, the 3-year election term does have perverse incentives but for the reasons I mentioned above plus many more have me thinking Labour have just ran out of patience. Unemployment, poor short term economics and the common JK blunder here and there would have seen Labour through.

[Minerbarejet]

What I get out of that is that National MUST go ahead with this because to do otherwise will look as if Labour has won (something?) I am a National supporter and always have been in case anyone thinks I'm some leftie. Have always supported business as being the only viable alternative to a welfare state.
I get the impression this pantomime is due to the initial hooha with water rights, etc and now a spanner in the works with Labour to Nationalise (a misnomer) with NZ Power if they got in, a drought and no water, retractions and now rights to cancel. What else is there? Too many eels in the turbines, boat people blocking the spillway. Its a flipping mess - think I'll put what was earmarked into NTL and PEB - have more of a chance of making something there perhaps.:)

[buns]

MR will go ahead, no doubt about that.

Some of the more so-so sales coming up later on now be harder to move, especially given moms and dads have given any investment savings, risk and energy they had into the MRP offer. Also, I doubt the IPO enviroment can stay as good as it is now over this whole programme. Meaning these sales could be heavily owned offshore and or at lower prices. With this in mind, National may put out a review.

You raise a good point though, if this is plan B, what's plan C, Nuclear power?

[Hoop]

MR will go ahead, no doubt about that.

You raise a good point though, if this is plan B, what's plan C, Nuclear power?

"Green Power" farms (http://www.core77.com/blog/object_culture/diy_green_power_bike_pedal_power_generator_6913.as p)...we all do our little bit for the common good.... pedal to keep NZ's future bright :D

http://s3files.core77.com/blog/images/1diybikecharge.jpg

[stones]

Good post Sparky especially the whaleoil blog and we hav ethe privilege of this idiot being and MP (list). This system of government is so bad

[Blendy]

i'm wondering whether this will scare away a lot of people and then the initial price will be lower than expected - so potentially could work out better??

[fungus pudding]

i'm wondering whether this will scare away a lot of people and then the initial price will be lower than expected - so potentially could work out better??

It certainly won't be at the top end, so you can stop wondering.

[brettdale]

Now that we've had a few days to cogitate over the Labour/Green hand grenade that has been lobbed into this country's energy policy, I think the likely outcome will be:

1. A reasonably, but not hugely successful float of MRP
2. The pricing will be at the lower end of the indicated band.
3. NZers will react with increasing suspicion towards the NZ Power policy.

For all that, my position remains the same since March, I have other investments I prefer than the energy sector (like my retirement sector shares)

I had to laugh at the Green MP humiliated on the news last night. There is a replay on the Whaleoil blog for those who are interested.

http://www.whaleoil.co.nz/2013/04/shhh-dont-appear-too-pleased-with-your-economic-sabotage/

LOL sums up the Greens.

[iced]

http://media.nzherald.co.nz/webcontent/document/pdf/201317/Morningsta1.pdf report from morningstar

[Hoop]

http://media.nzherald.co.nz/webcontent/document/pdf/201317/Morningsta1.pdf report from morningstar

Lost interest..gone back to sleep:sleep:

[Billy Boy]

LOL sums up the Greens.
I dont think the "Greens" can do sums !!!.
Re the vid,..... is he really in parliament ?
What a plonker, are the rest like that ???
God help NZ
BB

[GTM 3442]

Now that the dust has settled, and the knees have stopped jerking. . .

So we're going to have price control for electricity. Oh happy day ! !

And not just common or garden price control, but price control based on cost-plus pricing. Oh happy day ! !

Guaranteed profits ! ! Oh happy day ! !

Guaranteed dividends ! ! Oh happy day ! !

And a real limit to the downside risk on the share price ! ! Oh happy day ! !

Who possibly could ask for more ?

Oh happy day ! ! !

[iced]

Mark Warminger, Milford:

"In conclusion, to save $700m per annum from our total electricity bill the direct and indirect costs of such a scheme would be in the order of the following; $2.5bn in additional debt servicing costs, $450m reduction in dividends, $4.5bn asset write-downs from State owned enterprises, $1bn of capital destruction of the listed power companies and a reduction of $100m of dividends per annum to New Zealand shareholders. In addition, there will be highly skilled jobs lost as power companies reduce capital expenditure and development. In the short term this will not be an issue whilst demand catches up with supply but by the time supply and demand are in balance it will be too late to add additional capacity in a timely manner."

http://www.whaleoil.co.nz/2013/04/what-the-kiwisaver-fund-managers-are-saying-about-the-labourgreen-economic-terrorism/
http://www.milfordasset.com/rolling-blackouts-could-be-our-future/

[GTM 3442]

So we're going to have price control for electricity.

First up, I suppose we'll need an Electricity Price Commission.

This should provide a nice little earner for some rejected politicians.

And of course they'll need a CEO.

And the CEO will need a Senior Management Team.

And the Senior Management Team will need a team of Market Analysts.

And the Senior Management Team will need a team of Policy Analysts.

And the team of Market Analysts and the team of Policy Analysts will each need a team of Researchers.

And each team of Researchers will need a team of Research Assistants.

And the CEO and the Senior Management Team and the Market Analysts and the Policy Analysts and the Researchers and the Research Assistants will each need a team of Support Staff.

They will, of course, need suitable eco-friendly green office space as well. So I suppose we'd better add in a Property Management team.

So - now that we've got the structure sorted out, each layer of the cake will need to Keep Abreast of International Trends, and to Keep up with International Best Practice, so there will be the need for frequent Fact Finding Missions to all sorts of lovely places.

Then, of course, we'll need a Electricity Price Commission Review Board to keep an eye on the Electricity Price Commission .

And I suppose that there'll be a requirement for an Electricity Price Commission Appeals Authority as well.

With a little luck, ands some good management, his shouldn't cost too much more than $500 per household per year . . .

[Snow Leopard]

You might find this from Business Spectator (http://www.businessspectator.com.au/article/2013/4/22/resources-and-energy/and-down-power-price-merry-go-round) about the regulated energy market in Oz interesting.

Best Wishes
Paper Tiger

[Minerbarejet]

So we're going to have price control for electricity.

First up, I suppose we'll need an Electricity Price Commission.

This should provide a nice little earner for some rejected politicians.

And of course they'll need a CEO.

And the CEO will need a Senior Management Team.

And the Senior Management Team will need a team of Market Analysts.

And the Senior Management Team will need a team of Policy Analysts.

And the team of Market Analysts and the team of Policy Analysts will each need a team of Researchers.

And each team of Researchers will need a team of Research Assistants.

And the CEO and the Senior Management Team and the Market Analysts and the Policy Analysts and the Researchers and the Research Assistants will each need a team of Support Staff.

They will, of course, need suitable eco-friendly green office space as well. So I suppose we'd better add in a Property Management team.

So - now that we've got the structure sorted out, each layer of the cake will need to Keep Abreast of International Trends, and to Keep up with International Best Practice, so there will be the need for frequent Fact Finding Missions to all sorts of lovely places.

Then, of course, we'll need a Electricity Price Commission Review Board to keep an eye on the Electricity Price Commission .

And I suppose that there'll be a requirement for an Electricity Price Commission Appeals Authority as well.

With a little luck, ands some good management, his shouldn't cost too much more than $500 per household per year . . .
Brilliant.

[Jim]

I think for yield CNU is a better bet and the pe is only 10

[Hoop]

Awesome post GTM

With a little luck, ands some good management, his shouldn't cost too much more than $500 per household per year . . .
GTM you forget to add that bonus you would receive for that $500 extra..............the return of those healthy invigorating heart pumping cold showers in the wintertime.

[troyvdh]

What really should be of concern is that again the SM is seen as "the wild west"....

And why folk like my self buy a house and rent it out for 30 years...and wonder what the fuss is all about....

[percy]

Looking more and more like MPR,Mighty Polluted River.

[mouse]

Looking more and more like MPR,Mighty Polluted River.

Yes, but it should be cheap!

[Fudosan]

With a little luck, ands some good management, his shouldn't cost too much more than $500 per household per year . . .Wow, fantastic observation! So much truth in it! Thanks.

[robbo24]

I found a video posted to YouTube in October 2006 which predicts the the Labour and Greens future of electricity generation in NZ: http://www.youtube.com/watch?v=BvnJS_zkaMY

[Microsloth]

From stuff reader report

Mighty River Power shares 'too much risk

http://www.stuff.co.nz/stuff-nation/assignments/are-you-buying-mighty-river-power-shares/8585688/Mighty-River-Power-shares-too-much-risk

Discl; Now not intending to buy

[robbo24]

From stuff reader report

Mighty River Power shares 'too much risk

http://www.stuff.co.nz/stuff-nation/assignments/are-you-buying-mighty-river-power-shares/8585688/Mighty-River-Power-shares-too-much-risk

Discl; Now not intending to buy

Not sure if sarcastic... or...

[Aaron]

maybe there is some good value here after all.....

How can you work out value if you don't know the price you are going to pay.

[J R Ewing]

so the comments of an amateur poster on an Internet website has compelled you to not buy?

maybe there is some good value here after all.....

I think what the poster says is quite revealing, "I need the money to retire on". He is correct in that it is not sensible to put your life savings into the MRP float! That's not to say it won't be a good investment of course.

[POSSUM THE CAT]

Should the buyers then be able to say what price they were willing to pay. Rather than going in blind not knowing which end of such a broad range of prices even if it is set in the range. The Govt. reserve the right to set any price they like.

[CJ]

Should the buyers then be able to say what price they were willing to pay. Rather than going in blind not knowing which end of such a broad range of prices even if it is set in the range. The Govt. reserve the right to set any price they like.The institutions get to do this and the Retail investors get the benefit of their work. I assume it would be two difficult if 100000s of retail investors were allowed to put in multi bids at different price points.

In theory the Institutions shouldn't bid more than it is worth so they can be trusted but they also need to ensure they get the allocation they need re index weightings so can we really??

[J R Ewing]

I'm taking some comfort from a couple of factors:

1. If this float goes down over the first few days of trading, no way will the us Mum's and Dad's be supporting the rest of the floats - either financially or politically!
2. It would be a political disaster for the price to come in above the indicative range, especially now that the Greens and Labour have done their bit to ensure the price isn't too high :)

[POSSUM THE CAT]

Well surely a fixed price offer then would be the best for all purchasers. they could then analyze the value & make an informed decision, as to whether to buy or not.

[brettdale]

Cant believe the reason that i didnt buy in, turned out to be right. I told a mate months ago, "No, because Labour and The Greens will do something to F it up"

[Aaron]

I have finally skim read the prospectus and due to my limited abilities my focus is on dividends.

2010 2011 2012 2013FY 2014FY
EPS(cents per share) 6.04 9.08 4.84 6.77 11.46
Dividends (cps)* 8.24 10.52 11.41 16.8 18.0
*note I have grossed up the page 99 divs as I assume they are net as the forecast divs differ to page 9.

I am struggling to work out what a reasonable growth rate is as the two forecast years show considerable increases and averaging between 2010 and 2014 gives me an average increase over five years of 17%(eps) and 23%(dps). I suspect the forecasts will turn out to be optimistic and that in light of recent interest in the setting of power prices growth will be minimal.

Continued growth in dividends unlikely after big jumps in 2013 and 2014 by then maybe a labour govt and a big drop in capital value and dividend.

Some growth would make my dividend model work with a required yield of 10% and a dividend of 17cents a growth rate of 3% would just do it. .17/(.1-.03)=$2.42 share price.
That is how I get my valuation many variables and guesses so who knows.

I tried STC’s back of envelope calculation but the big jump in eps between 2012 and 2013 affects this. E.g.
Trailing eps = 4.84 ;Future eps = 6.77 ; P/E = 38 ; growth = 40%; div = 6.5% ; G +D = 46.5%
38/46.5 = .817 anything under one is good but it is pointless as 2012 was such a **** year.

Is 3% annually a reasonable expectation? the drought might knock eps a bit. Anyway need to decide by Monday. Reading through this thread the weight of negative opinion from posters might sway me against investing.

p.s. wrote this in word and copied and pasted to ST formatting is a problem re dates etc sorry if this impinges on your reading enjoyment.
In answer to MVT's very first question I personally would like 10% or more for a yield investment but see above how I will accept less if there is some growth.

[RTM]

Thanks Aaron. My paper copy of the offer document arrived yesterday, and I to am trying to make sense of it. A concern I have is the "Selected Financial Information Table" page 9 which states:
2010 2011 2012 2013 2014
EBITDAF $327.8 $443.1 $461.5 $382.6 $497.9
etc.

How do they get to $497.9 for 2014....especially given the NZ consumption is at best flat (see graph NZ Electricity Consumption Page 36) , and likely to be impacted by Tiwai Point slowdown or closure, not to mention NZ Industries shutting down due to crippling exchange rate.

Is there anywhere in the document which describes how they get to $497.9 does anyone know ?

I to have limited abilities from an accounting / financial sense,

[fungus pudding]

Cant believe the reason that i didnt buy in, turned out to be right. I told a mate months ago, "No, because Labour and The Greens will do something to F it up"

Or to make it a better buy ......

[troyvdh]

Did anyone else read Espinor's (?) column today in the herald where he said that in Sydney he was paying 27-8 cents per unit for power ..but for heating he was paying 8 cents...i.e. non electrically sourced.He went on to that NZ is unusual in that we source most/all of our power for res heating from electricity.?????...I did not know that NZ (if indeed that is true) was somewhat unique in that way....I have never heard that before...to the best of my recollection no "commentator" has said that before.
Am I the only one.
Is Colin accurate ???.Cheers

[Grimy]

Most of my family living in Palmerston North only use electricity for lighting. Hot water and general heating is gas.

[lou]

If the price of the shares fall to the lower end of the price range there is obviously less demand. Does that mean there would be no scaling?

[fungus pudding]

If the price of the shares fall to the lower end of the price range there is obviously less demand. Does that mean there would be no scaling?

Not necessarily, but the lower the demand the lower the possibility of scaling; or the lower the level of scaling. It all depends on the final numbers.

[CJ]

Did anyone else read Espinor's (?) column today in the herald where he said that in Sydney he was paying 27-8 cents per unit for power ..but for heating he was paying 8 cents...i.e. non electrically sourced.He went on to that NZ is unusual in that we source most/all of our power for res heating from electricity.?????...I did not know that NZ (if indeed that is true) was somewhat unique in that way....I have never heard that before...to the best of my recollection no "commentator" has said that before.
Am I the only one.
Is Colin accurate ???.CheersI use reticulated gas for hot water, heating and cook top but dont beleive it is any cheaper.

I have been to one town in Russia that has reticulated hot water (for hot water and heating). Why build a cooling tower for your power/industrial plant when you can supply the whole town with free hot water. My guess is Australia has access to a lot of cheap gas. NZ power prices use to be lower as well because of cheap and plentiful supply of Gas from Maui.

Cheap gas is one of the reasons US power prices have come down recently. Do the Greens support Fracking as that also reduces power prices ;)

[TimmyTP]

I have been to one town in Russia that has reticulated hot water (for hot water and heating). Why build a cooling tower for your power/industrial plant when you can supply the whole town with free hot water.
I can't vouch for Russia, but in Romania a few years ago and reticulated hot water was one of the reasons Very Thick Coats were so popular. The apartment blocks got some hot water/heating when there was some spare, which was "rarely if ever". This was a good few years ago mind - perhaps there is now less corruption, more choice and more money to pay for it.

We would use wood burners for heating more in NZ than some countries, wouldn't we? Not sure about the country as a whole, but where I am in the north, solar hot water seems to be becoming more popular finally. Genesis (maybe others) and the government promote it actively.
I suppose that reduces demand for generation, but I wonder if that will be balanced by all the electric cars, trains and buses we'll be travelling around in 10 years from now? And the electric jet packs obviously.

[CJ]

I can't vouch for Russia, but in Romania a few years ago and reticulated hot water was one of the reasons Very Thick Coats were so popular. The apartment blocks got some hot water/heating when there was some spare, which was "rarely if ever". This was a good few years ago mind - perhaps there is now less corruption, more choice and more money to pay for it.

We would use wood burners for heating more in NZ than some countries, wouldn't we? Not sure about the country as a whole, but where I am in the north, solar hot water seems to be becoming more popular finally. Genesis (maybe others) and the government promote it actively.
I suppose that reduces demand for generation, but I wonder if that will be balanced by all the electric cars, trains and buses we'll be travelling around in 10 years from now? And the electric jet packs obviously.I never said it was reliable.

One think about solar hot water that many probably haven't thought about. Electric hot water is great for load shedding (ie. the distribution company can turn of your hot water very quickly if their is supply of electricity concerns, whether due to generation failure, lines failure, or a spike in demand). If everyone moves to solar, this option will no longer be avaliable.

Going forward, electric car power points may be on the same type of circuit, enabling lines companies to turn of your charger and/or even take your batteries power should it be necessary for the network.

Back to MRP - I have nearly decided how much I will invest. Once decided, I will let you know, compared to what I was thinking pre Greens announcement.

[POSSUM THE CAT]

Solar water heating highly uneconomic in Queensland Australia when compared with a heat pump system. So would it be any more economic here?

[Snoopy]

My paper copy of the offer document arrived yesterday, and I to am trying to make sense of it. A concern I have is the "Selected Financial Information Table" page 9 which states:
2010 2011 2012 2013 2014
EBITDAF $327.8 $443.1 $461.5 $382.6 $497.9
etc.

How do they get to $497.9 for 2014....especially given the NZ consumption is at best flat (see graph NZ Electricity Consumption Page 36) , and likely to be impacted by Tiwai Point slowdown or closure, not to mention NZ Industries shutting down due to crippling exchange rate.

Is there anywhere in the document which describes how they get to $497.9 does anyone know ?

I to have limited abilities from an accounting / financial sense


Hi RTM. Good question regarding where the EBITDAF growth for MRP is coming from. I would first direct you to page 111 of the prospectus. There you will see sales rising from $1,766.4m to $1834.1m in the coming year. Of course $45m may not look like a big rise on base numbers as large as those. But if you don't have to pay for the input fuel (hydro/geothermal) then such 'small' increases can all flow through to the bottom line.

Your comment that the overall market is not growing is very valid though.

If you now go to page 117 you will see this quote:

"The growth in FY2013F reflects an assumed increase in contracted sales to the business customer segment following a Mighty River Power marketing campaign in FY2012. The increase in FY2014F compared with FY2013F is due to an expected increase in market acquisition activity."

Since the financial year ends on 30th June, only a couple of months away, you would have to assume that the marketing department are not full of hot air and most of these forecast gains are already in the bag. As for FY2014, you might interpret that MRP are to buy out one of the smaller minnow retailers to gain market share (?)

SNOOPY

[Snoopy]

Good question regarding where the EBITDAF growth for MRP is coming from.


The other factor I didn't address in the post I just made was the significant decrease in expenses forecast. If you look on prospectus page 121, the projected fall in expenses amounts to some $75m. That $75m saving is significantly more than the parallel maximum $45m revenue gain projected.

Most of the expense saving is because the $35m spent to buy MRP out from under the management contract of their overseas operational managers will not be repeated. There is a planned trimming of the maintenance budget and sales and marketing and less paid to those external consultants too.

So to answer your original question RTM, the EBITDAF forecast does look attainable, provided you believe those underlying assumptions.

SNOOPY

[Aaron]

Thanks for that Snoopy.

Much appreciated it's great to have someone like yourself who can make your way through the prospectus who doesn't mind sharing your knowledge.

Do you believe the forecasts and are you buying into the IPO. If so how significant an investment would/did you make.

Actually the last part of that question might be hard to answer without giving away too much. I mean like less than or more than 10% of your sharemarket portfolio.

[Snoopy]

I will not be investing.
First up on a fundamental analysis the P.E. ratio is far too demanding even at the bottom of the price range.
I don't see where the growth will come from and Contact's fundamentals are superior.


There is one more comparison with Contact that hasn't been made yet, and that is the 'asset revaluation reserve'. If you go to p144 of the prospectus you will see that this was $2,296.8m as at HY2013 compared to $1,363.1m as at FY2008 (the earliest figure given).

I have gone through the Contact accounts back to FY2008 and the adjustment to revaluation reserve is minimal. Actually in the case of CEN it is a (relatively) small negative amount (-$22.5m) and that was largely due to $19.889m of 'generation' assets being reclassified as 'property' assets in FY2009.

I find it very curious that Contact has made only a tiny adjustment in asset values since FY2008, yet MRP have increased their asset values by some $933m over that same period.

Anyone care to suggest an explanation? Or is this a $933m balloon just waiting to be popped by the Labour/Green coalition?

SNOOPY

[Snoopy]

Do you believe the forecasts


Short term (FY2014F) , I don't have a reason to doubt the forecasts. Longer term, I want one more night to sleep on it. Cutting things fine I know, but I don't want to make a big mistake here! Would be interested in other views of the MRP forecasts.



and are you buying into the IPO. If so how significant an investment would/did you make.

Actually the last part of that question might be hard to answer without giving away too much. I mean like less than or more than 10% of your share market portfolio.


I have been under invested in the power sector for some time Aaron. So I am slightly biased towards putting a few dollars into MRP. But I wouldn't want MRP to be more that 10% of my portfolio even if all the forecasts turn out to be right. My feeling is that there are more downside risks to the forecasts than upside though!

SNOOPY

[winner69]

Snoopy - good to see you doing your 'homework'

[Snoopy]

Snoopy - good to see you doing your 'homework'


I have one more ingredient to throw into the MRP pot Winner.

If MRP have an asset revaluation reserve of $2,296m (p144 of prospectus) and there are 1,400m shares on issue, that represents a NTR (net tangible revaluation) of:

$2,296m/ 1,400m = $1.64 per share

OK this is a back of the envelope quick calculation. But lookiing at the worst possible scenario, and for MRP that represents a Greens/Labour government, are we not looking at a capital write off of $1.64 per share should the government change? If the float share price comes in at $2.30 that represents around 70% of the capital which new shareholders put into this could evaporate.

OK I know the share price actually depends on future earnings. But is not the G/L plan to have future earnings tied to 'historical book value' costs and not 'historical book value +asset revaluation' cost? Will that not mean future earnings reducing in proportion to the capital value reduction, and allowing for certain fixed costs in the MRP business structure, possibly even more?

SNOOPY

[QOH]

If you have preregistered for shares, are you able to complete the whole purchase process online?

[fungus pudding]

If you have preregistered for shares, are you able to complete the whole purchase process online?

They do not give that option so I just printed off application to sign and provide account no. and mailed in. They provide address and fax no. but no email for scanned forms, although I'm sure if you just email it to MRP it will get to the right place. I've done similar before when no email address given - after all your dough is more important to them than their protocol. :t_up:

[Doyle]

They do not give that option so I just printed off application to sign and provide account no. and mailed in. They provide address and fax no. but no email for scanned forms, although I'm sure if you just email it to MRP it will get to the right place. I've done similar before when no email address given - after all your dough is more important to them than their protocol. :t_up:

Hmmn I have just completed the process online myself, and it asked for the registration code from my pre-registration. So I would have to say the whole process has been completed online as far as I can tell.

Would hate to be wrong but was told the money will leave my account tommorrow.