MCY Mercury NZ ( MRP Mighty River Power)

[Snoopy]

Great run on the stock recently grats to all the winners.

Put my name down to get a hard copy of the MRP Annual Report (not the Annual Review glossy sent to all shareholders). However the AGM has come and gone and still no annual report in the mail. Has anyone who didn't attend the AGM got hold of one?

SNOOPY

[OldRider]

Snoopy

Hi, yes received my copy back in October, didn't attend meeting.

[sb9]

Having strong run since new year, up to $3.25 now...

[sb9]

Looks likely to cross $3.50 soon the way things are going...:)

[couta1]

I have a small parcel from IPO and have moved a few bigger parcels around but my gut feeling tells me GNE has more upside from its current price so i have pigged out on them Instead:cool:

[theace]

.... GNE has more upside from its current price so i have pigged out on them Instead:cool:

Appreciate your thoughts on this

[robbo24]

Appreciate your thoughts on this

Couta1, please disclose your track record. :D:D:D:D

[couta1]

Couta1, please disclose your track record. :D:D:D:D
My track record on power companies is pretty good, ive made a good amount of dosh:D Disc-Hold 80k shares of these puppies at $1.80 average.

[Snow Leopard]

I have a small parcel from IPO and have moved a few bigger parcels around but my gut feeling tells me GNE has more upside from its current price so i have pigged out on them Instead:cool:

Gut feelings are usually related to pigging out and often lead to long periods of contemplation on the folly of your ways in a small porcelain furnished room.

Probably best to do some research instead.

Best Wishes
Paper Tiger

Disc: 71% total profit (dividends + unrealised gains) on MRP since 10-Mar-14 :).

[couta1]

Gut feelings are usually related to pigging out and often lead to long periods of contemplation on the folly of your ways in a small porcelain furnished room.

Probably best to do some research instead.

Best Wishes
Paper Tiger

Disc: 71% total profit (dividends + unrealised gains) on MRP since 10-Mar-14 :).
Research done before gut feeling kicked in,regards:cool: PS-Porcelain furnished room can also be used after much celebration.

[Harvey Specter]

My track record on power companies is pretty good,
Whose isnt??

[couta1]

Whose isnt??
Going back a year I'd say many peoples wasn't, shame about the underlying sarcasm which shows its ugly head too often on this forum.

[Baa_Baa]

Going back a year I'd say many peoples wasn't, shame about the underlying sarcasm which shows its ugly head too often on this forum.

Don't be too hard couta, Harvey's right. Anyone who bought the ipo's and held on, as many would because, in the main these are earners, they would have been disappointed but not devastated to see the prices leaking capital after the ipo, and begin a crawl back up after that. It became apparent as the election loomed that the political risk to the sector was reducing, and even if one waited until after the election, when the prices all broke up, buying then for growth as well as earnings came into play. Sure, we're probably all enjoying a bit of levity having these companies appreciate so much in a short time, but sarcasm, I don't think so, it's a plain fact.

disc: overweight in MRP and MELCA, had GNE but sold for a nice profit. On balance, they're up significantly and there's no prowess involved at all, just wanted some nice solid earners from the ipo.

[robbo24]

Disc: 71% total profit (dividends + unrealised gains) on MRP since 10-Mar-14 :).

Out of that shoebox under your bed and onto the mantlepiece now eh Paper Tiger? :D:D:D:D

[robbo24]

Intraday high of 349... I was calling 350 before Xmas but this is close enough for my liking. :D:D:D

[Snow Leopard]

Out of that shoebox under your bed and onto the mantlepiece now eh Paper Tiger? :D:D:D:D

You have to think that it is an interesting market when a boring utility stock can move so much in such a short space of time.

And to think that some people waste their money on speculative stocks. :D

Best Wishes
Paper Tiger

[robbo24]

And to think that some people waste their money on speculative stocks. :D

Taking into account the bond issue and sale of overseas assets, MRP has a fair bit of capital to do something with :D

Who knows, maybe it's time for MRP SaaS subsidiary...

[IAK]

Also MRP are well balanced with geothermal power now making a significant contribution. http://www.nbr.co.nz/article/geothermal-overtakes-gas-nz%E2%80%99s-second-electricity-source-db-167504

[rbel038]

Just waiting for MRP to start selling EV's and open up fast charging stations along sh1 :D , then lets see how many powerplants we can crank out each year

They have actually installed quite a few along at the waikato stations for the company fleet, its quite cool apart from having to make some detours to get from hamilton to taupo and back lol

[Baa_Baa]

Looking forward to MRP announcing HY results tomorrow, 24 February. Recent sp action has settled the past four weeks after a stellar run over the past year, particularly since the election Sept'14. Short term indicators are positive though medium term have softened. MRP aim to pay distributions with a pay-out ratio of 70% to 85% of free cash flow on average over time, with 40% paid interim in March.

7118
Weekly chart

[Hawkeye]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11406854

https://www.nzx.com/companies/MRP/announcements/261039

[Snow Leopard]

Very quickly:

Profit from the normal everyday business down about 13% on previous year;

Full year assumptions include hydro production based on average inflows for the rest of the financial year - not convinced about that.

Giving themselves the option to buy back 15m shares this year.

Best Wishes
Paper Tiger

[Snow Leopard]

MRP dropping out of the ASX All Ordinaries (http://www.asx.com.au/asxpdf/20150306/pdf/42x38tdm05cv94.pdf)

Whether that will have any effect I know not.

Best Wishes
Paper Tiger

[robbo24]

MRP dropping out of the ASX All Ordinaries (http://www.asx.com.au/asxpdf/20150306/pdf/42x38tdm05cv94.pdf)

Whether that will have any effect I know not.

Best Wishes
Paper Tiger

XRO is out too... Man... What did MRP do to deserve this, being tarred with the same brush as XRO!

:D:D:D:D

[robbo24]

can anyone explain to me why MRP pay a special dividend when they have plenty of debt to repay..... is it to balance the government books or just to artificially lift the share price or both.

Because they like to give me money and they like to listen to you and your ilk call talkback radio.

[Aaron]

can anyone explain to me why MRP pay a special dividend when they have plenty of debt to repay..... is it to balance the government books or just to artificially lift the share price or both.
Hard to say in todays world debt is good saving is bad. I also wondered about Auckland Airports capital repayment of $450mill in 2014 looking at the Cashflow statement it looks like they borrowed $450mill to repay the capital because the increase in capital was a 734mill non-cash revaluation of Airport assets(I wonder if this is because capitalisation rates must be crazy low in a zirp environment). Great for current shareholders but an additional $450mill debt must make the company weaker.

[Harvey Specter]

Debt is cheap so shareholders get a higher return.

I thought MRP is bigger than genesis - why is MRP out of the oz index and gen in?

[couta1]

Debt is cheap so shareholders get a higher return.

I thought MRP is bigger than genesis - why is MRP out of the oz index and gen in?
Not sure if its all about size only? Noticed IQE had also been added to the index so there must be other criteria other than just the size of a company.

[Snow Leopard]

Liquidity issues........not enough average daily/weekly volumes on the ASX....same for XRO

from the Methodology document (http://au.spindices.com/documents/methodologies/methodology-sp-australian-indices.pdf):


All Ordinaries. The All Ordinaries index is considered the total market indicator for the Australian equity market. The index is comprised of the 500 largest securities listed on the ASX and the constituents are not screened for liquidity. It is the only index that is not float-adjusted.

I really do not understand why Mighty River Power is going to be dropped and I have read the whole document...

Best Wishes
Paper Tiger

[macduffy]

So not a matter of liquidity.

But presumably some other companies have become "larger", or been recently listed - such as Medibank - and have shouldered those at the bottom of the pecking order out of the mighty 500?

[iceman]

But GNE, with just over half of MRPs capitalisation, is being added while MRP drops. It must be liquidity related.


So not a matter of liquidity.

But presumably some other companies have become "larger", or been recently listed - such as Medibank - and have shouldered those at the bottom of the pecking order out of the mighty 500?

[couta1]

despite what this says it is diffidently for reasons of liquidity
Not because of liquidity as MRP has been more liquid than GNE to date, I read this morning that MRP is being included in another international index ( Probably a step up from the one it has just exited)

[couta1]

is that MYT that has been listed in an international index(aussie listing for Might river) or MRP listed in NZ.
It is MYT that officially come out of the all ords.
MRP NZ is entering the FTSE index an index a number of global funds track closely. Meridian was expected to enter this index but will not be included at this stage(Probably explains the recent price drop)

[dingoNZ]

Everyone is chasing yield currently too, I'm surprised MELCA has fallen back lately, looks like the best buying of the generators to me

[Snow Leopard]

So with regard to the recent debate about why Mighty River Behemoth is being dropped from and Genesis Energy Upstart is being included in the ASX All Ordinaries I now have The Answer...




...and it is not 42...




The size determination for a company is based on the six month average of the number of securities held in Australian.


Brockian Ultra Cricket anyone ?

Best Wishes
Paper Tiger

PS: http://www.asx.com.au/products/foreign-entity-data.htm

[Bobdn]

So with regard to the recent debate about why Mighty River Behemoth is being dropped from and Genesis Energy Upstart is being included in the ASX All Ordinaries I now have The Answer...




...and it is not 42...




The size determination for a company is based on the six month average of the number of securities held in Australian.


Brockian Ultra Cricket anyone ?

Best Wishes
Paper Tiger

PS: http://www.asx.com.au/products/foreign-entity-data.htm

http://hitchhikers.wikia.com/wiki/Brockian_Ultra-Cricket to save other people looking this up.

[couta1]

MRP exits ASX All Ordinaries today and finishes down on big volume but of course the good news is that sometime soon it will be entering the FTSE index which should give the share price a kick in the pants:cool:

[Snow Leopard]

MRP exits ASX All Ordinaries today and finishes down on big volume...

Today was big-boys re-balancing day for the NZX as well


...but of course the good news is that sometime soon it will be entering the FTSE index which should give the share price a kick in the pants:cool:

Which one(s)? (http://www.ftse.com/products/indexmenu)

Best Wishes
Paper Tiger

[couta1]

Not sure which one at this point PT just know its heading for one of the FTSE indices:cool:

[winner69]

From a broker review on March 9th

Increased volumes were seen in a few stocks that were included in the FTSE All World Index. Mighty River Power was added to the index and saw its share price increase by 3.9% after the announcement.

Might have seen the favourable impact already?

[couta1]

From a broker review on March 9th

Increased volumes were seen in a few stocks that were included in the FTSE All World Index. Mighty River Power was added to the index and saw its share price increase by 3.9% after the announcement.

Might have seen the favourable impact already?
You could be right winner (The price hit $3.44 the day after it was announced it was to enter the FTSE) but the price is being suppressed at the moment with all the big boys playing their ball games just like over at SPK.

[Baa_Baa]

MRP daily chart looking vulnerable crossing under the 50EMA and closing below support of the high 12 Nov. Indicators descending but still not over sold. Money flow broken down. This is bringing the 200EMA into play around $2.90. Slim support at $3.13 from the 11 Nov closing price.

For whatever reason MRP is getting beaten up, it's still frustrating. Dividend due 31 Mar is small solace, already lost 10x more capital (from the high) than the dividend will compensate for. A bounce here would cheer me up.

7217

BAA

[couta1]

BaaBaa I reckon once the big boys stop their antics( Who knows yesterday could have been the worst over) it should bounce it wants to but every time it has moved toward the mid $3.20s of late big volume arrives and drives it down( Exactly the opposite of a few weeks ago when big volume drove it up regularly at days end) :cool:

[fish]

BaaBaa I reckon once the big boys stop their antics( Who knows yesterday could have been the worst over) it should bounce it wants to but every time it has moved toward the mid $3.20s of late big volume arrives and drives it down( Exactly the opposite of a few weeks ago when big volume drove it up regularly at days end) :cool:
Low lake lake Taupo levels and inflows don't help.

[robbo24]

MRP closing down some stupid gas station... Does anyone care?

https://nzx.com/companies/MRP/announcements/262195

[Master98]

MRP closing down some stupid gas station... Does anyone care?

https://nzx.com/companies/MRP/announcements/262195
will write off 50m book value? how about the 17 employees?

[robbo24]

will write off 50m book value? how about the 17 employees?

Yeah, got to feel for the employees but with any luck they will find new and better jobs within the organisation :t_up:

[winner69]

will write off 50m book value? how about the 17 employees?

The 17 are just a commodity really ....a resource and nothing else

Human Resources has nothing to do with people

You should know that by now

[couta1]

A good move getting rid of a dinosaur and long term liability at the same time, the 50 mill write off will be offset to some degree by the sale of plant to overseas interests.

[Master98]

The 17 are just a commodity really ....a resource and nothing else

Human Resources has nothing to do with people

You should know that by now

Japanese call those people "ma lu da" means a piece of wood, sad isn't it?

[mouse]

Japanese call those people "ma lu da" means a piece of wood, sad isn't it?

It is a valuable piece of plant, which will be sold overseas for a song and probably dismantled with imported overseas labour. Under old-fashioned generation it would have been kept operational against a catastrophy, until it could not be kept working. Costs of keeping it going would have been absorbed by the rest of the generation system. But today there is less emphasis on a secure supply and more emphasis on profit.

[horus1]

Could not agree more with you . The generator/ retailers are rorting the system . Transmission and distribution charges are about 35% and regulated but the generator /retailers add on 16% as they pass them on. Nobody in the electricity Industry is allowed to talk otherwise the Electricity Authority will regulate them A threat.

[Master98]

Nobody in the electricity Industry is allowed to talk otherwise the Electricity Authority will regulate them A threat.

lol they must belong to Communist Party.

[PSE]

It is a valuable piece of plant, which will be sold overseas for a song and probably dismantled with imported overseas labour. Under old-fashioned generation it would have been kept operational against a catastrophy, until it could not be kept working. Costs of keeping it going would have been absorbed by the rest of the generation system. But today there is less emphasis on a secure supply and more emphasis on profit.
Sounds like someone who has worked in the industry and knows how inefficient it now is relative to the NZED and its predecessors. This plant wasn't that old, Todd are putting in brand new Gas Turbines of the same type into Taranaki (LM6000).
One of southdown's GTs was installed in 2007 according to Wikipedia, hardly a dinosaur compared to the likes of Manapouri or the 30% efficient Rankine units at Huntly.

[PSE]

lol they must belong to Communist Party.
No actually the electricity authority has an extreme right wing mandate to try to prop up/encourage competition in the electricity market. We never needed a trading function when the stations where run according to the merit order.
The right wing mandate is very similar to the communist politburo so I understand your confusion. A handful of grumpy old men in tall towers who think they know how everything should be run, what I don't understand is why we still listen to them.

[Traderx]

Sounds like someone who has worked in the industry and knows how inefficient it now is relative to the NZED and its predecessors. This plant wasn't that old, Todd are putting in brand new Gas Turbines of the same type into Taranaki (LM6000).
One of southdown's GTs was installed in 2007 according to Wikipedia, hardly a dinosaur compared to the likes of Manapouri or the 30% efficient Rankine units at Huntly.

What is right for MRP and Todd are quite different. The cost of operation in the two locations are quite diff, Southdown on the end of a long pipeline. Todd seeking a short for their long Gas position. Apples and oranges and all that. hydro assets never really are a dinosaur, Gravity tends to drive a turbine rather similarly as it did 10 or twenty years ago! Limited efficiency improvements available for hydro turbine. Thermal kit on the other hand has improved as has Geo etc.

[sb9]

Divvy in the bank today :t_up:

[robbo24]

Divvy in the bank today :t_up:

Same, lovin' it.

:D:D:D:D

[Baa_Baa]

Not long now, May 13th (lucky for some), 1 for 25 bonus issue, a reward for 2 year anniversary IPO holders. Share price has taken a beating lately, though everything says well and truly oversold and looks like good buying now.
7266

BAA

[777]

Anyone want to speculate as to how many bonus shares will be issued?

Any of the original IPO shares sold won't qualify and on a FIFO basis a lot of holders will dip out and probably don't realise that.

[robbo24]

Anyone want to speculate as to how many bonus shares will be issued?

Any of the original IPO shares sold won't qualify and on a FIFO basis a lot of holders will dip out and probably don't realise that.

The last report said something like 90% of IPO shares are still held by the buyers.

A lot of these would be institutions that would not get the bonus shares.

Albeit, perhaps a good guess would be: [Number of shares put aside by the Crown for bonus shares] x 0.9.

:D

[robbo24]

considering the shares are currently overvalued I would expect weakness once the new shares are issued.

What's the dividend yield on MRP at the moment? What is a "good" dividend yield? On the basis of dividend yield, at what point does MRP become undervalued? :D

[couta1]

considering the shares are currently overvalued I would expect weakness once the new shares are issued.
I'd say fairly valued at current levels remember it hit $3.56 a while back and the big boys were happy to snap them up at $3.40 and over on good volumes for a period of time. Looking at the change in weather patterns recently I'd say water levels are in for a good boost over the next few months.

[bull....]

im out of all gentailers now - next 3 mths big risks bonus shares released , te wai point can be announced it is closing I may re-enter after these events pass

[robbo24]

snaps has done much research on this one
The dividend yield has been skewed by a special one off divi that the company did not have the earnings to justify paying....just simply paid to help the government balance the books.

...sure that's technically correct because they will pay it from borrowings but I assure you it will have a big effect on EPS.

Where did the money from the bond issue go snaps? :D

[couta1]

lol........easy for the big boys to buy when they are using other people's money.
What fundamentals are you using to come up with your current fair value couta.
Yes weather patterns have changed but flows are still below normal.
Analysts consenses low target of $2.97 and high of $3.52 so at the moment we are at the bottom end ( I know its only a guide) I reckon were in for a good winter snow wise so come spring those water levels will get a good boost.

[Baa_Baa]

Morningstar (argh them!) value $2.90 HOLD 10 Mar 2015. Current SP under the 200EMA and indicators oversold, I think it's looking like good value, whether that's fair value or not?
:)


Analysts consenses low target of $2.97 and high of $3.52 so at the moment we are at the bottom end ( I know its only a guide) I reckon were in for a good winter snow wise so come spring those water levels will get a good boost.

[ratkin]

Good news for original holders that plenty of others have been shaken out by the price weakness, will cause less dilution when the free shares are dished out

[couta1]

Good news for original holders that plenty of others have been shaken out by the price weakness, will cause less dilution when the free shares are dished out
There should be no dilution as my understanding is that the free shares will come out of crown stock so already accounted for if you get my drift.

[Snow Leopard]

Lake Taupo levels and flows starting to look better (http://www.mightyriver.co.nz/Our-Business/Generation/Lake-Levels.aspx) - I hope it continues - maybe the SP is coupled to the lake level?

Also it has been interesting to note that the North Island has been a lot more self-sufficient (that is generating their own electric) than I would have thought for the last few weeks.

Best Wishes
Paper Tiger

[Baa_Baa]

I don't think they have anything to hide, why would they? The Waikato river does not drive the turbines per se, it is the controlled spill from the dams on the lakes that drive the turbines that generate the power (hence controlled lake levels). The river tops up the big lake and then they control how much water is in each lake, and therefore each downstream section of the river, by spilling from each subsequent lake at varying rates until there are no more dams. There is take off along the river/lakes say for irrigation, but there is also inflow from tributary streams and springs.


I think you will find this information is a classic case of smoke in mirrors.
I note the charts both short and long term only relate to the level of the lake when the real measure for MRP is water flow down the Waikato river.
You would think they would correlate quite nicely but as there are many other users of the water from the river they often do not.
Whilst the long term water levels of lake Taupo show in 2013 and in 2014 the level was lower than now the river flow charts show the current river flow levels are as low if not lower than those years.
my post 579 has the link to these figures.
More intensive farm irrigation maybe the cause.
Levels of lake Taupo mean F all to MRP.....it's the river flow for driving the turbines that matter and the fact that they choose to cover the lake levels more thoroughly than the water flow levels means they have something to hide........smoke and mirrors stuff PT.

[Snow Leopard]

I think you will find this information is a classic case of smoke in mirrors.
I note the charts both short and long term only relate to the level of the lake when the real measure for MRP is water flow down the Waikato river.
You would think they would correlate quite nicely but as there are many other users of the water from the river they often do not.
Whilst the long term water levels of lake Taupo show in 2013 and in 2014 the level was lower than now the river flow charts show the current river flow levels are as low if not lower than those years.
my post 579 has the link to these figures.
More intensive farm irrigation maybe the cause.
Levels of lake Taupo mean F all to MRP.....it's the river flow for driving the turbines that matter and the fact that they choose to cover the lake levels more thoroughly than the water flow levels means they have something to hide........smoke and mirrors stuff PT.

All I said was:

Lake Taupo levels and flows starting to look better (http://www.mightyriver.co.nz/Our-Business/Generation/Lake-Levels.aspx) - I hope it continues...

BTW: They very kindly do provide the flow information for you.

Best Wishes
Paper Tiger

[Jantar]

I think you will find this information is a classic case of smoke in mirrors.
I note the charts both short and long term only relate to the level of the lake when the real measure for MRP is water flow down the Waikato river.
You would think they would correlate quite nicely but as there are many other users of the water from the river they often do not.
.....
You would expect very little correlation between the lake level and river flow. MRP control the gates at the Taupo outflow, and hence the river flow. The correlation is between inflows and lake level, with the level lagging the inflows. The outflow from the lake will correlate directly with electricity demand and inversely with thermal generation.


I don't think they have anything to hide, why would they? The Waikato river does not drive the turbines per se, it is the controlled spill from the dams on the lakes that drive the turbines that generate the power ....
The spill from the dams down the river chain is water that has bypassed the turbines. Water passes from one dam to next either via the turbines, or via controlled spill, or both.

Water held in Lake Taupo is like money in the bank. Its available but not yet utilised. Once water has been released from Lake Taupo its like drawing money via an ATM; its now in your pocket, but not yet used. When the water has flowed out from Karapiro (the last dam in the chain), then it is gone (spent), and is now back in general circulation for the water cycle to eventually dump it back on Ruapehu where it can be used again.

[Jantar]

Saying MRP control the flow is technically correct but that control is governed by a very strict set of resource consent rules that they must adhere too and have very little control over.
They must abide by minimum and maximum levels in Lake Taupo, and minimum flows in the Waikato river measured just below the control gates and at the outflow of Karapiro. Outside of those parameters they have very little restriction. Deciding the timing and quantity of the water release was my job in a previous position I held.

[Snow Leopard]

thanks Janter.....do you think the latest lower than normal river flow levels (about 4-5 months worth) will hit their bottom line materially.
I believe it has and that's why you are seeing a sell down in SP.
Interested to here any other idea's why MRP has sold off in SP more than it's rivals.

Last financial year they had an EBITDAF of $504M and forecast for this (2015) FY a range of $495M - $520M.

With the Half Year ann they revised down the EBITDAF guidance to the $480M - $500M range.

For whatever reason they did not draw down Lake Taupo as much as they have done in previous years, but how much effect this has had on the river flow I do not know (but if you wanted to you could do a little research and work it out).

Anyway that guidance currently still stands.

Best Wishes
Paper Tiger

[Jantar]

thanks Janter.....do you think the latest lower than normal river flow levels (about 4-5 months worth) will hit their bottom line materially.
I believe it has and that's why you are seeing a sell down in SP.
Interested to here any other idea's why MRP has sold off in SP more than it's rivals.
Unlike the South Island lakes, Taupo gets most of its inflows during the winter. On that basis I don't believe MRP will be at all woriied by bthe present levels. In fact I believe they will be quite pleased with where they are. Meridian is the company that will be most likely to suufer slightly if Manapouri doesn't get some decent inflows over the next 6 weeks.
Contact and Genesis are insulated from the effects of low lake levels due to having standby thermal generation, and I notice that Contact is still actively dropping the level of Hawea much earlier than in most other years.

[Snow Leopard]

MRP pushing hard up from oversold, back above the 200EMA and positive money flow. Bonus shares for IPO holders just around the corner.
7281
BAA

I see that sideline as pointed out that the Yahoo data for GNE is incorrect.
This chart is based on imaginary data as well.

Best Wishes
Paper Tiger

[Baa_Baa]

Thanks, I'll remove my post.


I see that sideline as pointed out that the Yahoo data for GNE is incorrect.
This chart is based on imaginary data as well.

Best Wishes
Paper Tiger

[Snow Leopard]

7285

50 & 200 day Exponential Moving Averages for the fun of it.

Some will attach significance to the price 'bouncing' off the 200 EMA - diversity is to be welcomed.

Best Wishes
Paper Tiger

[Snow Leopard]

Could you please explain the PE of 43.6 seems high to me? appreciate your insight.

In a word - No.

FY14 (30-Jun-14) EPS was $0.153 (PE=20 @ SP of $3.05)

HY15 (31-Dec-14) EPS was $0.006

But we pay little attention IFRS NPAT for any company and read the detail of the accounts.

Best Wishes
Paper Tiger

[Snow Leopard]

In a word - No.

FY14 (30-Jun-14) EPS was $0.153 (PE=20 @ SP of $3.05)

HY15 (31-Dec-14) EPS was $0.006

But we pay little attention IFRS NPAT for any company and read the detail of the accounts.

Best Wishes
Paper Tiger


Is that HY15 EPS correct, seems very low in comparison?


This is from the:
7286
7288
7287


Thanks…..HY EPS of $0.05 is an improvement on $0.006? but still well below FY14 levels?

Stop it guys, this is just too much :lol: :lol: :lol:.

Best Wishes
Paper Tiger

[Snow Leopard]

7289

In a word - No.

FY14 (30-Jun-14) EPS was $0.153 (PE=20 @ SP of $3.05)

HY15 (31-Dec-14) EPS was $0.006

But we pay little attention IFRS NPAT for any company and read the detail of the accounts.

Best Wishes
Paper Tiger

Best Wishes - as always
Paper Tiger

[Baa_Baa]

Well it could be that I posted a Meridian report on a MRP thread ... yo ho ho ha ha ha. Silly me. I get it.
I've deleted my posts, apologies to anyone who got a gut ache from laughing too hard.
:D


I could never be embarrassed being compared to famous comedians…..I have far to much fun and laughter on here…..have a look at the reaction since I posted the same question on the GNE Genesis thread yesterday……now they all seem to think very differently! hilarious……:)

[xafalcon]

Keep in mind that hydro power is considerably more valuable in winter than in summer, but it's generation cost is identical. Wind (when it blows) is deferring some hydro generation, and that deferred hydro can replace some thermal in winter which increases profit. I believe this is MRP's strategy as they wind down Huntly. But water reserves must be built up in anticipation due to projected faster drawoff and lake water level management rules

This is just my take on the situation, interpreting the data and information.

[Aaron]

I believe this is MRP's strategy as they wind down Huntly. But water reserves must be built up in anticipation due to projected faster drawoff and lake water level management rules
I am an investor in MRP but don't know nothing about NZ power generation or demand but isn't Huntly power station owned by Genesis.

[macduffy]

I am an investor in MRP but don't know nothing about NZ power generation or demand but isn't Huntly power station owned by Genesis.

Yes, that's what the Genesis investment statement told us last year.

[Jantar]

I am an investor in MRP but don't know nothing about NZ power generation or demand but isn't Huntly power station owned by Genesis.
MRP own the Southdown gas fired plant in Auckland. That is what they are referring to. However they are decommissioning in later this year.

[Baa_Baa]

Tomorrow Monday 11th May is the last day for MRP IPO holders to qualify for Loyalty shares 1:25 which are issued 21st May. Loyalty is a strange description, it has felt more like a noose. Energy companies taking a beating lately.

[robbo24]

Tomorrow Monday 11th May is the last day for MRP IPO holders to qualify for Loyalty shares 1:25 which are issued 21st May. Loyalty is a strange description, it has felt more like a noose. Energy companies taking a beating lately.

Long term holders won't care.

Traders won't get them anyway.

If long term holders who are also traders exist then they would have sold and bought back more than the 4% bonus shares :D

Happy holder right here, will enjoy my noose shares :D

[Baa_Baa]

Agree (for a change), us longs won't care too much, we've already weathered a few storms. Not sure what you mean by "Traders won't get them anyway". I'm glad I accumulated a few more below IPO and pre-election so still nicely ahead overall. Just punishing myself that I didn't trade out of my non-IPO holdings when the price was screaming 'get out', a missed opportunity. We'll see how the longs feel if the price continues down to the election breakout, or below, it may present a nice accumulation opportunity again, unless Snaps is correct on his EPS projections, though I think we're below his fair valuation already? The chart, fwiw says oversold on a number of indicators, but they've been stubbornly oversold for some time now. I'll stick with my weekly chart for an uptick before getting too much more into MRP.


Long term holders won't care.

Traders won't get them anyway.

If long term holders who are also traders exist then they would have sold and bought back more than the 4% bonus shares :D

Happy holder right here, will enjoy my noose shares :D

[robbo24]

Agree (for a change), us longs won't care too much, we've already weathered a few storms. Not sure what you mean by "Traders won't get them anyway". I'm glad I accumulated a few more below IPO and pre-election so still nicely ahead overall. Just punishing myself that I didn't trade out of my non-IPO holdings when the price was screaming 'get out', a missed opportunity. We'll see how the longs feel if the price continues down to the election breakout, or below, it may present a nice accumulation opportunity again, unless Snaps is correct on his EPS projections, though I think we're below his fair valuation already? The chart, fwiw says oversold on a number of indicators, but they've been stubbornly oversold for some time now. I'll stick with my weekly chart for an uptick before getting too much more into MRP.

Different portfolio, different behaviour - why buy and sell it is my view. Traders won't get bonus shares because they won't have held them for 2 years from IPO :D

[sb9]

Got my bonus shares allocated today :t_up:

[Baa_Baa]

Got my bonus shares allocated today :t_up:

How were you notified of the bonus allocation? Tks

[sb9]

How were you notified of the bonus allocation? Tks

Checked on line through computer share website...

[robbo24]

How were you notified of the bonus allocation? Tks

Let's Ask Robbo24 - Sharemarket Tip #64

Robbo24 recommends setting up an online calendar shared between your phone and other devices that allows you to easily enter important upcoming dates/events for your stocks. That way you can easily track what's coming up next and other important things like bonus share issue dates.

For instance, I added 21 May 2015 to my calendar when I read this reminder https://www.anzsecurities.co.nz/DirectTrade/dynamic/announcement.aspx?id=3842108

This has been another helpful sharemarket tip by Let's Ask Robbo24.

:D

[trader_jackson]

Has anyone else noticed that Might River Power gone from being the best performer on the NZX 50, to one of the worst? Surely with this winter weather and rain you would think the lakes would start to fill, and therefore MRP to improve, yet investors continue to sell.

Can anyone explain why it has fallen from over $3.50 in very late January to $2.76 (or about 21%!)? I know it probably wasn't worth $3.50 (at that time), but is the company really doing that badly for it to go back down to the $2.70's? (I would have thought low $3's would have been more appropriate)

[couta1]

Trader_Jackson you can't explain a schizophrenic market you just accept it like you would any person with a mental illness.

[sb9]

Looking at the volume, me thinks its just the retail investors selling out. As the saying goes, "sell in May and go away".

[couta1]

Looking at the volume, me thinks its just the retail investors selling out. As the saying goes, "sell in May and go away".
I wonder how many of them are selling for a profit or are many just following a sheeple mentality with a good dose of panic selling chucked in? In future I will be selling some stock in February and buying in May now that makes more sense to me having done the calculations and takes advantage of the sheeple effect.

[mouse]

Looking at the volume, me thinks its just the retail investors selling out. As the saying goes, "sell in May and go away".

Quite possibly its the small investors who were waiting for the Bonus Shares before they sold. Hence, now, a bit of a rush. But MRP seems ok as an income hold to me.

[emveha]

Quite possibly its the small investors who were waiting for the Bonus Shares before they sold. Hence, now, a bit of a rush. But MRP seems ok as an income hold to me.
That would only explain a drop of 4% though.

[Aaron]

That would only explain a drop of 4% though.
My guess which isn't worth much is that prior to the bonus share allocation some traders were selling out in expectation that some Mums & Dads would sell down after receiving the bonus shares and that they were right.
I don't know of anything fundamental that has changed. Maybe Elon Musks new battery making solar power more viable. I see in the paper that Vector was getting excited about it.
People will follow a trend and I guess it’s down for now. I’m holding but on no other basis than at IPO at $2.50 a share I was getting a 6-7% gross yield and I don’t think that’s changed.

[workingdad]

I'm no expert and have sat back for the last couple of years reading posts and learning from those in the know. It has been very informative so thank you all for that.

Not that its much consolation I kept 2/3rds of my holdings in MRP (sold 1/3 when the price was higher) and looking at buying back in with replacing the ones sold when the trend turns around. I dont understand why they have been sold off as much as they have and to me with the returns and energy use increasing year on year and whats shaping up to be a cold winter its a reasonably solid performer worth keeping tucked away.

[axe]

I'm no expert and have sat back for the last couple of years reading posts and learning from those in the know. It has been very informative so thank you all for that.

Not that its much consolation I kept 2/3rds of my holdings in MRP (sold 1/3 when the price was higher) and looking at buying back in with replacing the ones sold when the trend turns around. I dont understand why they have been sold off as much as they have and to me with the returns and energy use increasing year on year and whats shaping up to be a cold winter its a reasonably solid performer worth keeping tucked away.

The market knew there would be some price weakness as people who had held for two years got their bonus shares and sold.
So if you were looking to buy, you would wait until the price settles after the bonus shares selloff.

[workingdad]

The market knew there would be some price weakness as people who had held for two years got their bonus shares and sold.
So if you were looking to buy, you would wait until the price settles after the bonus shares selloff.

Yep and I was expecting some weakness too, not to the degree it has or I would have sold more than 1/3.

And yes, I will be waiting until the sell off settles thanks :)

[trader_jackson]

Retail investors still selling out?

Don't know why the share price is continuing to decrease, is it really that bad that winter is here? I thought this would have helped, not caused another 10% of market cap to get wiped out...

Hopefully reserve bank will cut interest rates tomorrow... that would surely give a welcome boost

[workingdad]

I was planning to buy back in when the sell off settles and each day find myself wondering how much lower it could go....

[Jantar]

I think the entire electricity sector is on a downward path until the Tiwai decision is known.

[Joshuatree]

Agree.Opportunity to top up on the uncertainty if one believes in a positive Tiwai future.

[trader_jackson]

Surely with an interest rate cut (and signs of more to come apparently) people will pour back into the electricity sector and stop the 'senseless selloff'

[PSE]

My view has been that the gentailers were overvalued and I have been generally criticized for expressing it. I now think the gentailers are back to something like fair value, I won't be interested unless they fall further and become cheap.
I can't see it happening but the future is unpredictable and to the extent it is known, included in share prices by professional analysts. Maybe I will be "lucky" again.

[mouse]

I was standing in the stock exchange, years ago, in Christchurch. You could pop over in the lunch time. The attractive girl wrote prices on the white board for all the stocks. Chap turns to me and says, 'it cant fall any lower, can it?' I mumbled hope not. But knew it must. Market Forces you know. Amusing if you know the drill. DONT PANIC!

[trader_jackson]

With a great (or what I think is great) monthly operating report out from Meridian about lake levels, intakes etc, hopefully MRP will be reporting the same... also mentioned that electricity demand is higher than last year.

I thought winter would have helped, and it looks like it has helped Meridian, hoping the same for MRP...

[Aaron]

No useful information in this post, just don't have anyone else to talk to re dividend yields.

Well 2015 was good, just doing my tax return and I calculate a 10.5% gross yield on initial investment cost of $2.50. Admittedly special dividends won't be coming annually but yippee, something making me money at long last.

Makes you wonder if NZers are paying too much for their power.

Look at me an investor with a conscience or should I say thank you John Key for you neo-liberal ideas and diverting this income stream from the people of NZ to private investors. I'll make sure it trickles down after I have saved enough to be financially comfortable(could be a long way off). Good idea bumping up GST to reduce income taxes. As long as I keep reinvesting/saving I won't be paying any GST. Another fine example of the general population getting screwed over for the benefit of the more well off. Well done NZ it seems the last election showed how selfish and stupid the (disappearing) middle class can be. We get what we vote for.

Sorry last paragraph was added in as I am still angry with the result of the last election.

[artemis]

............ Look at me an investor with a conscience or should I say thank you John Key for you neo-liberal ideas and diverting this income stream from the people of NZ to private investors. I'll make sure it trickles down after I have saved enough to be financially comfortable(could be a long way off). Good idea bumping up GST to reduce income taxes. As long as I keep reinvesting/saving I won't be paying any GST. Another fine example of the general population getting screwed over for the benefit of the more well off. Well done NZ it seems the last election showed how selfish and stupid the (disappearing) middle class can be. We get what we vote for.

Sorry last paragraph was added in as I am still angry with the result of the last election.

I thought the middle class was growing, not shrinking.

On neo-liberal as an epithet - "Neoliberalism" has become a jargon word. It communicates very little other than to signify that the speaker holds a certain political view and might not be very fun to talk to."

http://www.stuff.co.nz/manawatu-standard/opinion/69177332/what-went-wrong-for-labour

[robbo24]

Look at me an investor with a conscience or should I say thank you John Key for you neo-liberal ideas and diverting this income stream from the people of NZ to private investors. I'll make sure it trickles down after I have saved enough to be financially comfortable(could be a long way off). Good idea bumping up GST to reduce income taxes. As long as I keep reinvesting/saving I won't be paying any GST. Another fine example of the general population getting screwed over for the benefit of the more well off. Well done NZ it seems the last election showed how selfish and stupid the (disappearing) middle class can be. We get what we vote for.

Hey man, be careful you nearly broke my computer. My screen and keyboard almost become waterlogged with your tears :D

Anyway, you may find solace in the fact that at a fundamental level the Government still retains through tax a 28% share of all profits made by MRP. 100% of 51% plus 28% of 49% plus freeing up capital and not needing to borrow to pay for things... I wish I could keep 28% of the profits of anything I sold :D

[Zaphod]

Hey man, be careful you nearly broke my computer. My screen and keyboard almost become waterlogged with your tears :D

Anyway, you may find solace in the fact that at a fundamental level the Government still retains through tax a 28% share of all profits made by MRP. 100% of 51% plus 28% of 49% plus freeing up capital and not needing to borrow to pay for things... I wish I could keep 28% of the profits of anything I sold :D

And to add to this, as a bonus, far less risk exposure to the tax-payer.

On a general note, the whole public v private debate is far more complicated than either side cares to admit.

[workingdad]

Agree.Opportunity to top up on the uncertainty if one believes in a positive Tiwai future.

Aluminium prices arent helping much with the speculation on Tiwai. Havent bought back into yet, the downward trend hasnt exactly settled but I did get some additional CEN last week so have a bit riding on Tiwai

[Hoop]

I went for a night time drive down a new large subdivision. The street lighting was LED..impressive.
It seems only a matter of time when replacements will be with LED's.
Googled it and it seems LED lights use 40%-80% less power than Sodium lamps...
Hmmm..... there's an awful lot of roadside lighting in NZ

[Antipodean]

I went for a night time drive down a new large subdivision. The street lighting was LED..impressive.
It seems only a matter of time when replacements will be with LED's.
Googled it and it seems LED lights use 40%-80% less power than Sodium lamps...
Hmmm..... there's an awful lot of roadside lighting in NZ

All great for new builds, however driving along the highways in the north island it seems we can barely keep up with basic maintenance, let alone a complete refit in the near future. Not sure if roadside lighting consumes a large amount of power relative to other usages like industrial or household.

In saying that, sooner or later if the cost differential is large enough (and the relevant barriers to change aren't too high) it will happen.

[Hoop]

.....Not sure if roadside lighting consumes a large amount of power relative to other usages like industrial or household.
......


I found a paper (PDF File) (http://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CDMQFjAE&url=http%3A%2F%2Fwww.nzta.govt.nz%2Fresources%2Fsp ecification-and-guidelines-for-road-lighting-design%2Fdocs%2Freview-on-the-likely-impact-of-an-uptake-in-led-road-lighting.pdf&ei=cDqLVcygMZC5ogSqnJLwBQ&usg=AFQjCNGJJA-EwHglDhdgzeCMq1a2pOyAiw) that shows all street lighting in NZ amounts to less than 1% of various distribution companies revenues (page 21/25)..... and most accounts a high % of the bill is fixed so I now understand the slow uptake to LED street lighting...and what you say Antipodean about refits.

The paper also shows some insight into the NZ Power Market structure and how future technology may inpact on this structure, especially when it comes to methods of billing major customers...interesting reading to fill in ones time

[robbo24]

You know, if the sky doesn't fall there is some pretty good yield on MRP and other power companies :D

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11470604

[Xerof]

Exactly, and hasn't the market moved to price in this uncertainty already. Some think the market is about to go to hell in a hand basket. Reminds me of the markets reaction to Labour electricity policy. Nibbling still (on one of them)

[couta1]

Exactly, and hasn't the market moved to price in this uncertainty already. Some think the market is about to go to hell in a hand basket. Reminds me of the markets reaction to Labour electricity policy. Nibbling still (on one of them)
As you say just a repeat of the pre election nervous Nellie's selling out and if nothing happens its fireworks time:cool: Disc- Holding quite a few of these at a significantly higher price than the current one.

[mouse]

I am freezing down here in Christchurch. Heaters running flat out. A small fin heater tucked under the desk between my legs. Winter is sure good for increasing electricity demand. With most of the NZ electricity being supplied by renewable generation. Generators look after the maintenance of the generators too.
A major point to remember is that high efficiency normally comes at a higher maintenance cost. Heat Pumps are a good example of this. They need maintenance.
Log Burners need Logs. Which need to be found. And sawn. And stored.
My beef is how I am being charged, in Christchurch, 18 cents a unit for the wire from Twizel to Christchurch. It would almost be cheaper to drive up there and fill the car up with the stuff, batteries you know, and drive back. It cannot cost that much for the wire from Twizel.

[waddis]

I am freezing down here in Christchurch. Heaters running flat out. A small fin heater tucked under the desk between my legs. Winter is sure good for increasing electricity demand. With most of the NZ electricity being supplied by renewable generation. Generators look after the maintenance of the generators too.
A major point to remember is that high efficiency normally comes at a higher maintenance cost. Heat Pumps are a good example of this. They need maintenance.
Log Burners need Logs. Which need to be found. And sawn. And stored.
My beef is how I am being charged, in Christchurch, 18 cents a unit for the wire from Twizel to Christchurch. It would almost be cheaper to drive up there and fill the car up with the stuff, batteries you know, and drive back. It cannot cost that much for the wire from Twizel.


Can sympathies with that in CHC 9Kw heat pump running 16Kw keeping the spa warm.....6Kw underfloor heating element overnight....I'm sure my MRP divi's are not quite keeping up with my usage!! somehow think solar wouldn't cut it either.......for now I think the electricity demand will rule

[mouse]

Can sympathies with that in CHC 9Kw heat pump running 16Kw keeping the spa warm.....6Kw underfloor heating element overnight....I'm sure my MRP divi's are not quite keeping up with my usage!! somehow think solar wouldn't cut it either.......for now I think the electricity demand will rule

Bed, with a hottie, is the only solution.

[robbo24]

Bed, with a hottie, is the only solution.

Or two hotties, is better.

[mouse]

Or two hotties, is better.

Hail now, snow soon. It must boost electricity demand. Solar Energy is a bit of cold comfort at the moment.
Plus talk of Greenhouse Gas Reduction means using Hydro generation.

[mattwanz]

Bloody freezing this morning - must be good for business though :)

[fish]

Hail now, snow soon. It must boost electricity demand. Solar Energy is a bit of cold comfort at the moment.
Plus talk of Greenhouse Gas Reduction means using Hydro generation.
Demand hasn't caught up with the extra geothermal and rain this winter.
Looks like prices are lowish this winter

[couta1]

So the general consensus on here is that Tiwai won't close otherwise why the extension? I see this stock heading back to $3 once this is confirmed. I'm thinking of doing a serious averaging down as my current average is $3.24, risky if Tiwai closed but upside more likely plus a good divvie coming up:cool:

[rbel038]

So the general consensus on here is that Tiwai won't close otherwise why the extension? I see this stock heading back to $3 once this is confirmed. I'm thinking of doing a serious averaging down as my current average is $3.24, risky if Tiwai closed but upside more likely plus a good divvie coming up:cool:

from what I understand the contract allows the smelter to reduce the take to 400MW. I suspect they are trying to get the best deal for the remaining MW they need. I doubt this has anything to do with MRP though, being north island generation.

[Crackity]

So the general consensus on here is that Tiwai won't close otherwise why the extension? I see this stock heading back to $3 once this is confirmed. I'm thinking of doing a serious averaging down as my current average is $3.24, risky if Tiwai closed but upside more likely plus a good divvie coming up:cool:

I'm confident Tiwai ain't closing anytime soon!

[trader_jackson]

I am very confident in MRP long term, I am looking forward to August 3 when they announce they are not closing and send all the gentailers on a steady upwards march, with this in mind, no reason why this shouldn't be a $3.50+ share by the year's end. (all this rain must be good for generation! all this cold must be increasing power usage! - wonder when market will catch on to this?)

[Baa_Baa]

I'm confident Tiwai ain't closing anytime soon!

I'm not as supremely confident as you Crackity, but it seems less likely than more likely at the moment, albeit keeping the whole energy sector on tenterhooks.

It's interesting to me though that MRP has sold off virtually the entire 'election premium' which began around the IPO price (after being sold down about 20% from IPO!) and has found renewed buyer support back around the IPO price! What a rollercoaster ride for a boring utility eh?

Indicators have ticked upwards and the price has ranged this week right in between my fav 10/14 weekly EMA's. MRP has been just a bit too volatile for me so I sold my IPO holding recently to at least book a modest capital gain + dividends = 17.4% (still holding MEL though).

A move through my EMA's and a solid close above $2.93 resistance with a rising trend would have me back in, but closely watching. My concern is that MRP along with the other power company's, post a Tiwai decision, and pending the next election, is that they will find a fair value range .. and for MRP that could well be in the $2.61-$2.93 band. We need to keep in mind these gentailers aren't growth companies (imho).

Which would mean, goodbye capital gains and hello boredom, which could only be offset by consistent profits and returns to shareholders. Careful what we wish for.

7481

[troyvdh]

dear long road home...with all due respect ..it will be...me..all of us have made mistakes...but honestly how can you ave at 3.24...did you look at the 2 year chart...were you there at 1.80....again go well mate...your posts are quite depressing.....cheers mate

[couta1]

dear long road home...with all due respect ..it will be...me..all of us have made mistakes...but honestly how can you ave at 3.24...did you look at the 2 year chart...were you there at 1.80....again go well mate...your posts are quite depressing.....cheers mate
Troyvdh MRP traded for quite a while in the $3.00-$3.56 range so what is so unusual at holding at a $3.24 average? My above post is just an honest expression of what I'm planning on doing in the coming week and seeing what others thoughts are re MRP at the moment, if you find my posts depressing perhaps that's more a reflection of your own state of mind? Cheers. PS-The day I have to be a pretender or game player to please others on here will be the day I leave this forum.

[xafalcon]

I believe that periods of volatility in all the generator shares will be the norm while Rio Tinto are involved. Their brinkmanship/bully-boy negotiating style keeps certainty a short-range luxury. Their electricity contract periods seem very short duration. All generator stocks are effected because power that is no longer sold to Tiwai Pt can be sold elsewhere, but some generator(s) will miss out due to current over-capacity. The HVDC link constraint exposes MEL to this more than others.

I do not expect the smelter to close, in fact I believe the main part of the deal has already been agreed back when manapouri transformers were purchased 12 months ago.

But I don't think MRP will become the boring utility stock until new smelter owners are found and they agree to some longer duration electricity supply contracts (whoever they are with)

Personally I prefer GNE over MRP

[trader_jackson]

As I like to say: "GNE or MRP?" ... "Why not both?" (... Followed by numerous cheers)

[couta1]

As I like to say: "GNE or MRP?" ... "Why not both?" (... Followed by numerous cheers)
That's the one(Whoops I mean two) I hold both.

[BIRMANBOY]

What sort of BS post is that? What's the point of it....highlighting another investors supposed mistakes. You may well think about taking your own advice to "go well", however when you get to where ever you are going perhaps you could consider just keep going, preferably in the other direction than us, and refrain from making disparaging comments about other investors. And what's this about signing off with "cheers mate". PS if this gets me banned so be it but what a nasty little post that was.:mad ;: Where is your sense of common good manners?
dear long road home...with all due respect ..it will be...me..all of us have made mistakes...but honestly how can you ave at 3.24...did you look at the 2 year chart...were you there at 1.80....again go well mate...your posts are quite depressing.....cheers mate

[trader_jackson]

I am not sure if this is good, bad, or just ok... Looks just ok for me, but unsure how the share price will react...

Thoughts?

https://www.nzx.com/companies/MRP/announcements/267129 (https://www.nzx.com/companies/MRP/announcements/267129)

[Snoopy]

1/ Significant Business Scale (Top 3 in chosen market)

Mighty River Power is one of the 'big five' gentailers in the New Zealand Electricity market. They are currently (31st December 2014 figures) number three in terms of customers with 19% market share (behind Genesis with 26% and Contact with 22%). They are also number three in terms of GWh of power sold with 18% market share (behind Meridian on 33% and Contact on 23%).

Following the decommissioning of the Southdown gas power station on 31-12-2015, MRP will have a strong line up of 5 geothermal power stations in the central North Island and 8 hydro stations on the Waikato River in the northern-cental North Island. The geothermal stations will run as base load, while the hydro stations, which used to be exclusively base load too, will assume the role of 'topping up the power' as Southdown once did. Consumate with this wholesale capacity, MRP, under the Mercury Energy brand, runs the largest power retail business in Auckland. MRP has a significant South Island custmer base too in Christchurch and Dunedin. These customers receive their power from a virtual asset swap deal that involves Meridian Energy doing their South Island generating.

Conclusion: Pass Test

SNOOPY

[Snoopy]

Mighty River Power currently has 1,400,012,517 shares on issue. Just prior to listing there were only 377,560,546 shares on issue, held by sole shareholder the NZ government.. The government decreed that more shares be issued just prior to listing to bring the total share count up to 1.4billion. For ease of comparison I have adjusted the eps figures before listing as though the 1.4b of shares currently on issue had been on issue throughout the entire comparison period. The financial year for MRP ends on 30th June.

'Earnings' used are normalised operational earnings, excluding one off gains/losses and asset revaluations.

FY2010: $115.3m/ 1,400m = 8.2cps
FY2011: $161.6m/ 1,400m = 11.5cps
FY2012: $148.1m/ 1,400m = 10.8cps
FY2013: $167.9m/ 1,400m = 12.0cps
FY2014: $186.5m/ 1,400m = 13.3cps

Conclusion: Pass Test

[Snoopy]

ROE = Net profit / EOFY Shareholder Equity

FY2010: $115.3m/ $2,689.0m = 4.3%
FY2011: $161.6m/ $2,906.5m = 5.6%
FY2012: $148.1m/ $3,104.2m = 4.9%
FY2013: $167.9m/ $3,181.7m = 5.3%
FY2014: $186.5m/ $3,219m = 5.8%

Conclusion: Fail Test

[Snoopy]

Margin = Normalised Net profit / Normalised Revenue

Note: all revenue figures are exclusive of line charges

FY2010: $115.3m/ $1,104.6m = 10.4%
FY2011: $161.6m/ $1,163.9m = 13.9%
FY2012: $148.1m/ $1,520.6m = 9.7%
FY2013: $167.9m/ $1,382.4m = 12.1%
FY2014: $186.5m/ ($1,705m -$431m)= 14.6%

While not increasing year on year every year, it is clear the ability to raise margin is there

Conclusion: Pass Test

[Snoopy]

This share should be valued over the long term on its ability to pay dividends only. The low ROE figure is not sufficient to be sure of growth given a ten year timeframe. The Warren Buffett style growth model won't fit as a result. Yet actually, there is something wrong with this analysis as I have presented it. It deserves a closer look. But that will have to wait until tomorrow!

SNOOPY

[trader_jackson]

So in other words, MRP is a buy?

[couta1]

So in other words, MRP is a buy?
Must be the Aussies have already told us so.

[fish]

This share should be valued over the long term on its ability to pay dividends only. The low ROE figure is not sufficient to be sure of growth given a ten year timeframe. The Warren Buffett style growth model won't fit as a result. Yet actually, there is something wrong with this analysis as I have presented it. It deserves a closer look. But that will have to wait until tomorrow!

SNOOPY
I didn't-regretfully-buy into MRP because I felt they were too exposed to a dry summer.
Have they overcome this problem with geothermal supplying base load and I presume hydro able to do some base plus act as peakers?.

[LAC]

I have been trying to find some information of the following, come someone point me in the right direction please.
Over the past 5 years I have read that demand for power has decreased 0.2%pa in NZ so I would assume prices would have to go up to get in increasing revenue. Where could I get the info on demand (units used) and price (per unit) for the past few years? Not just for MRP, but in NZ.

[Baa_Baa]

I have been trying to find some information of the following, come someone point me in the right direction please.
Over the past 5 years I have read that demand for power has decreased 0.2%pa in NZ so I would assume prices would have to go up to get in increasing revenue. Where could I get the info on demand (units used) and price (per unit) for the past few years? Not just for MRP, but in NZ.

Try here, http://www.emi.ea.govt.nz

[LAC]

Thanks Baa Baa, exactly what I was looking for

[Snoopy]

So in other words, MRP is a buy?

I admire your desire to 'cut to the chase' TJ. But for a fundamentals investor such as myself, that isn't how it works. My procedure is:

1/ Design a financial model so that I can value MRP on my own assumptions.
2/ Check the market price to see what sort of discount I can get on my perceived 'value', and consequently whether I feel MRP is a buy or not.

So far I am only doing step 1. I bought MRP at float time. But whether I would buy more today is another question. At the moment, I don't know the answer.

SNOOPY

PS I might add a third step too. Even if I do decide MRP is a buy, I ask the question:

"Is it more of a buy than another comparative option such as CEN?"

[Marilyn Munroe]

[b]

....and 8 hydro stations on the Waitaki River in the northern-cental North Island.

SNOOPY

I sure Snoopy meant Waikato River.

Boop boop de
Marilyn

[Crackity]

I admire your desire to 'cut to the chase' TJ. But for a fundamentals investor such as myself, that isn't how it works. My procedure is:

1/ Design a financial model so that I can value MRP on my own assumptions.
2/ Check the market price to see what sort of discount I can get on my perceived 'value', and consequently whether I feel MRP is a buy or not.

So far I am only doing step 1. I bought MRP at float time. But whether I would buy more today is another question. At the moment, I don't know the answer.

SNOOPY

PS I might add a third step too. Even if I do decide MRP is a buy, I ask teh question:

"Is it more of a buy than another comparative option such as CEN?"

And I thought 1 was turn on steam powered calculator and wait for it to warm up ? :)

[Aaron]

Thanks for the post Snoopy. A great contributor. I haven't followed your ARI thread as I immediately thought you were insane to go against the commodity price trend even the companies supplying the miners would suffer I would have thought.

P.S. I hope it goes well for you.

[Snoopy]

I didn't-regretfully-buy into MRP because I felt they were too exposed to a dry summer.
Have they overcome this problem with geothermal supplying base load and I presume hydro able to do some base plus act as peakers?.

A great question fish. I was being a bit naughty suggesting that the entire Waikato river has now been reduced to a 'top up' system supporting the 'main' source of power generation - geothermal. MRP still generates more power in total from hydro, even in the driest catchment years. However, it is true that hydro is a very effective peaker as well.

The best way I know to answer it is to present you with a table of 'Electricity sales to Customers' vs 'Electricity Generated'. I could make up some desperate theoretical scenario. But real life can be almost as desperate. So I will take FY2013 as representative of the highest demand I can find ('FY2013 Electricity Sales').

To make it just that bit harder for MRP for hydro generation purposes, I will take the year that departed CEO Doug Heffernan described thus:

"inflows to the Waikato hydro river system being the lowest in the Company's history" (FY2014, p9 ARvw2014).

Geothermal energy is regarded as a highly stable source of renewable energy. I shall use FY2014 again because this was the first year over which all of Genesis's geothermal power plants were up and operating.
To be extra nasty, rather than look just on an 'annual basis', I will present the quarterly figures, to see if I can expose any seasonal weakness in the power supply/demand profile.

So how does MRPs 'demand' vs 'generation' equation stack up?



Q4 30th JuneQ3 31st MarchQ2 31st DecemberQ1 30th September


FY2013 Electricity Sales (GWh)1316115912721505


less FY2014 Geothermal Generation (GWh)670682630691


less FY2014 Hydro Generation (GWh)815834985863


Generation Power Surplus (GWh)16935734349



That result should give you some reassurance Fish. Sure, in the depth of winter September quarter, the power surplus from renewables is getting thin. But it is still there, even in the combination worst year conditions the weather has thrown at MRP so far!


SNOOPY

[Snoopy]

That result should give you some reassurance Fish. Sure, in the depth of winter September quarter, the power surplus from renewables is getting thin. But it is still there, even in the combination worst year conditions the weather has thrown at MRP so far!


A follow up comment on power generation in the 21st century.

The above table I have produced is representative of the 20th century 'bricks and mortar' generation system. These days we have 'virtual power plants'. With a 'virtual power plant', rival generators can have under contract access to a rival's power station in a different island in times of unusual river flows (for example). Next there is the NZ power 'hedge market' operated out of the ASX I believe. Then of course there is the 'regular market' where gentailers can buy power off each other by signing up to the lowest quoted marginal cost net supplier of power. The whole thing has got very complex. Nevertheless I think there is still real value in looking at the 'hard asset' to 'customer sales' power balance. If nothing else it provides a 'base case' of what is happening, and is the ultimate measure of reversion should all of these fancy 'on paper' power trading systems be suspended.

SNOOPY

[Snoopy]

ROE = Net profit / EOFY Shareholder Equity

FY2010: $115.3m/ $2,689.0m = 4.3%
FY2011: $161.6m/ $2,906.5m = 5.6%
FY2012: $148.1m/ $3,104.2m = 4.9%
FY2013: $167.9m/ $3,181.7m = 5.3%
FY2014: $186.5m/ $3,219m = 5.8%

Conclusion: Fail Test

There is an alternative calculation using different data to work out the return on shareholders equity of MRP. If you look right at the end of note 10 in AR2014 you will see the carrying value of assets had they been recognised at cost. Just above that you will see the note referring to the increase in value of generation assets of $40m, in addition to the $80m booked in FY2013. With MRP there have been many prior year asset revaluations like this.

Go to the income statement (p6) and you will see that the total comprehensive income for the year of $258m includes revaluation of generation assets of $35m +$5m =$40m. None of this is included in the net profit of $212m (p5). Now go to the Statement of Changes in Equity (p8) and you will that there are entries for fair valuation of hydro and thermal assets ($4m) and other generation assets ($25m) net of taxation. The tax paid on these asset revaluations was therefore:

($40m - ($25m+$4m))/ $40m = 28%

This is the normal company income tax rate. This implies the company has chosen to revalue their generation assets and pay tax on that revaluation and therefore generate extra income tax imputation credits that will be available for shareholders. That policy strikes me as strange. I would have thought revaluation of capital assets like power stations was a non taxable item! Can any accountants out there explain why MRP have treated their asset revaluations in this way?

Whatever the explanation, it looks to me as though these asset revaluations are being treated as though they will be a perpetually occurring benefit over and above the net profit for every year. The asset valuations, as I see it, are effectively new capital that goes onto the balance sheet out of thin air! This is a good thing for shareholders. But it artificially decreases the ROE figures if you calculate these at declared asset value. That's because the capital that arose out of thin air was never contributed by shareholders!

If we redo the ROE calculations, removing the 'thin air' capital I have described above, then the ROE results are very different.

FY2010: $115.3m/ ($2,689.0m - $2342.0m)= 33.2%
FY2011: $161.6m/ ($2,906.5m -$2,710.2m)= 82.3%
FY2012: $148.1m/ ($3,104.2m -$2,239.2m)= 84.6%
FY2013: $167.9m/ ($3,181.7m -$2,831.4) = 47.9%
FY2014: $186.5m/ ($3,219m -$2,844m) = 49.7%

Conclusion: Pass Test, with flying colours!

SNOOPY

[Snoopy]

The company has chosen to revalue their generation assets and pay tax on that revaluation and therefore generate extra income tax imputation credits that will be available for shareholders. That policy strikes me as strange. I would have thought revaluation of capital assets like power stations was a non taxable item! Can any accountants out there explain why MRP have treated their asset revaluations in this way?

Whatever the explanation, it looks to me as though these asset revaluations are being treated as though they will be a perpetually occurring benefit over and above the net profit for every year. The asset valuations, as I see it, are effectively new capital that goes onto the balance sheet out of thin air! This is a good thing for shareholders.


They say you can't get something out of nothing. But with the NZ electricity market, I am not sure that holds. Here is how the 'something out of nothing' method works:

1/ Revalue assets to market.
2/ Note that after revaluation your return on assets in not acceptable.
3/ Put up prices to get an acceptable return on assets.
4/ Price increases now increase underlying value of assets
5/ Go back to step 1

The power companies are very keen on using EBITDAF as a measure of their operating performance. But MRP has another profit stream, generated according to steps 1 to 5 above, not included in EDITDAF. These revaluations are based on future earnings projections. That means they might go down, although in practice I have never seen this. The figures I present below are from FY2009 onwards. This is the first year after the GFC hit, and power usage growth changed from its historical pattern.

All base figures are taken from the 'Statement of Change in Equity' Group figure for the appropriate year.



Revaluation Hydro & Thermal Assets ($m)Revaluation Other Generation Assets ($m)Total Revaluation ($m)Pre Tax Revaluation ($m)Pre Tax New Capital Per Share (c)


20090170.987170.98724417.4


2010200.90060.250261.15037326.6


2011153.300135.275288.57541229.4


2012119.5202.880122.24017012.1


201330.9602657795.6


201442529402.9


Total92994.0



Note:

1/ eps figures assume 1,400m shares on issue throughout the whole comparative period.
2/ 30% tax rate assumed up until FY2012. 28% tax rate assumed from FY2012 forwards.

That first total figure represents the new 'thin air' capital that has appeared on the MRP balance sheet from 2009 to 2014 inclusive. $929m is a lot of money, perhaps even enough to fund a new power station, without going back to shareholders for more capital? It would certainly go a way towards that!

The last total figure represents the equivalent extra eps in a gross dividend form. This is the amount of extra gross dividend that could have been paid to shareholders, should the MRP board have decided not to reinvest their 'thin air' capital. I do note the amount of 'thin air' capital has been decreasing, year on year. But perhaps this is not a problem, given MRP have declared they are not planning on building any more new power stations in the forseeable future? Furthermore when the need for more electricity generation does become apparent, value will once again arise out of thin air based on increasing energy use projections. So MRP may never need to raise capital again to build new power stations!

SNOOPY

[Snoopy]

I thought the revaluations were on the basis of "replacement cost" rather than earnings or revenue. That makes sure the valuations never retreat. This little accounting trick seems to work across multiple sectors and industries in MNSHO.

No smilie with your post. So just in case you were serious, at the end of the PP&E notes section of the Annual Report, the following sentence appears:

"All hydro thermal and other generation assets shown at valuation were revalued using a net present value valuation methodology by Pricewaterhouse Coopers, an independent valuer."

I note as an observation that Contact Energy, a similar gentailer which operates hydro and geothermal assets, does not do this!

SNOOPY

[Harvey Specter]

Perhaps you could explain to a non-accountant the difference between NPV and "replacement cost". Ain't they the same thing? :t_up:

cheers; foolReplacement cost is what it costs to replace
NPV is the net present value of future cashflows.

If you can buy something for $100, that will deliver more than $100 in todays dollar terms, then NPV is higher than replacement.

[Snoopy]

The figures I present below are from FY2009 onwards. This is the first year after the GFC hit, and power usage growth changed from its historical pattern.

All base figures are taken from the 'Statement of Change in Equity' Group figure for the appropriate year.



Revaluation Hydro & Thermal Assets ($m)Revaluation Other Generation Assets ($m)Total Revaluation ($m)Pre Tax Revaluation ($m)Pre Tax New Capital Per Share (c)


20090170.987170.98724417.4


2010200.90060.250261.15037326.6


2011153.300135.275288.57541229.4


2012119.5202.880122.24017012.1


201330.9602657795.6


201442529402.9


Total92994.0



Note: eps figures assume 1,400m shares on issue throughout the whole comparative period.

That first total figure represents the new 'thin air' capital that has appeared on the MRP balance sheet from 2009 to 2014 inclusive. $929m is a lot of money, perhaps even enough to fund a new power station, without going back to shareholders for more capital? It would certainly go a way towards that!


The following table illustrates the actual cashflow in and out of the balance sheet over the years.



NPAT as declared (cps)Dividend (cps)Pre Tax New Capital Per Share (c)


200911.33.9617.4


20106.120.4326.6


20119.16.7929.4


20124.98.6012.1


20138.28.015.6


201415.112.402.9


Total54.755.694.0



You can see that net profits are almost exactly cancelled out by dividends over the years. This means that the only source of strengthening the balance sheet has had since the beginning of FY2009 is the previously described 'thin air equity'.

During this time two new geothermal have been constructed. These were

1/ Nga Awa Purua, commissioned in FY2010. Total cost $430m or 30.7cps
2/ Ngatamariki, commissioned in FY2014. Total cost $475m or 33.9cps

Total cost: 30.7 + 33.9 = 64.6c = 65c (figure A)

The after tax value of the asset revaluations from FY2009 to FY2014 inclusive were:

= 0.7*(17.4+26.6+29.4) + 0.72*(12.1+5.6+2.9) = 66.2c

Now take away the 0.9c 'dividend deficit': 66.2c - 0.9c = 65.3c = 65c (figure B)

To the nearest cent, 'Figure A' matches 'Figure B'. So this shows that both of Mighty River Power's brand new geothermal stations built since 2009 have been created out of nothing else but 'thin air capital', without a cent having been stumped up by shareholders! Amazing stuff.

SNOOPY

[Snoopy]

To the nearest cent, 'Figure A' matches 'Figure B'. So this shows that both of Mighty River Power's brand new geothermal stations built since 2009 have been created out of nothing else but 'thin air capital', without a cent having been stumped up by shareholders! Amazing stuff.


My 'proof' as presented above actually still has a big hole in it. There is another way to create two new power stations without stumping up new equity. That way is to borrow the money! I think it is worthwhile looking at the balance sheet at the end of FY2008 verses how it was at the end of FY2014 to see if the borrowing did go up over that time.



EOFY2008EOFY2014


Total Assets ($m)4,058(100%)5,689(100%)


Total Liabilities ($m)1,800(44.4%)2,470(43.4%)


Net Assets ($m)2,258(55.6%)2,470(56.5%)



This table shows that the total liabilities have increased over the comparative period. However, the assets have increased too. As a proportion to assets, the company was slightly less indebted at the end of FY2014 compared to FY2008. This in turn means the company did not expand by becoming more indebted out of proportion to its growth. Finally, that means that my explanation of MRP as a company expanding using 'thin air' capital is still valid.

SNOOPY

[xafalcon]

https://nzx.com/companies/MRP/announcements/269216

[trader_jackson]

Is it just me or do these look pretty bad?

[LAC]

Not that good, NPAT:(

[xafalcon]

Looks OK to me once the exceptional costs are removed

Keep in mind that water inflow into Waikato catchment was comparatively low and Southdown was being run much harder at higher cost

[sb9]

Good yield also, with another special divvy announced...makes it 8.4c+2.5c = 10.9c for this period.

[trader_jackson]

Yes special dividend was a bit of a (good) surprise, everything else average at best... but I still think long term MRP is best positioned power company (with the exception of maybe MEL)

[Snoopy]

Mighty River Power currently has 1,400,012,517 shares on issue. Just prior to listing there were only 377,560,546 shares on issue, held by sole shareholder the NZ government.. The government decreed that more shares be issued just prior to listing to bring the total share count up to 1.4billion. For ease of comparison I have adjusted the eps figures before listing as though the 1.4b of shares currently on issue had been on issue throughout the entire comparison period. The financial year for MRP ends on 30th June.

'Earnings' used are normalised operational earnings, excluding one off gains/losses and asset revaluations.

FY2010: $115.3m/ 1,400m = 8.2cps
FY2011: $161.6m/ 1,400m = 11.5cps
FY2012: $148.1m/ 1,400m = 10.8cps
FY2013: $167.9m/ 1,400m = 12.0cps
FY2014: $186.5m/ 1,400m = 13.3cps

Conclusion: Pass Test

The FY2015 results came out on Friday. So time to do the annual statistical overview update.

For ease of comparison I have adjusted the eps figures before listing as though the 1.4b of shares currently on issue had been on issue throughout the entire comparison period. The financial year for MRP ends on 30th June.

'Earnings' used are normalised operational earnings, excluding one off gains/losses and asset revaluations.

FY2011: $161.6m/ 1,400m = 11.5cps
FY2012: $148.1m/ 1,400m = 10.8cps
FY2013: $167.9m/ 1,400m = 12.0cps
FY2014: $186.5m/ 1,400m = 13.3cps
FY2015: $155.5m/ 1,400m = 11.1cps

Conclusion: Fail Test

SNOOPY

[Snoopy]

Whatever the explanation, it looks to me as though the annual MRP asset revaluations are being treated as though they will be a perpetually occurring benefit over and above the net profit for every year. The asset valuations, as I see it, are effectively new capital that goes onto the balance sheet out of thin air! This is a good thing for shareholders. But it artificially decreases the ROE figures if you calculate these at declared asset value. That's because the capital that arose out of thin air was never contributed by shareholders!

If we redo the ROE calculations, removing the 'thin air' capital I have described above, then the ROE results are very different.

FY2010: $115.3m/ ($2,689.0m - $2342.0m)= 33.2%
FY2011: $161.6m/ ($2,906.5m -$2,710.2m)= 82.3%
FY2012: $148.1m/ ($3,104.2m -$2,239.2m)= 84.6%
FY2013: $167.9m/ ($3,181.7m -$2,831.4) = 47.9%
FY2014: $186.5m/ ($3,219m -$2,844m) = 49.7%

Conclusion: Pass Test, with flying colours!



FY2011: $161.6m/ ($2,906.5m -$2,710.2m)= 82.3%
FY2012: $148.1m/ ($3,104.2m -$2,239.2m)= 84.6%
FY2013: $167.9m/ ($3,181.7m -$2,831.4) = 47.9%
FY2014: $186.5m/ ($3,219m -$2,844m) = 49.7%
FY2015: $155.5m/ ($3,337m -$3,204m) = 116.9%

Conclusion: Pass Test

SNOOPY

[Snoopy]

Margin = Normalised Net profit / Normalised Revenue

Note: all revenue figures are exclusive of line charges

FY2010: $115.3m/ $1,104.6m = 10.4%
FY2011: $161.6m/ $1,163.9m = 13.9%
FY2012: $148.1m/ $1,520.6m = 9.7%
FY2013: $167.9m/ $1,382.4m = 12.1%
FY2014: $186.5m/ ($1,705m -$431m)= 14.6%

While not increasing year on year every year, it is clear the ability to raise margin is there

Conclusion: Pass Test

Margin = Normalised Net profit / Normalised Revenue

Note: all revenue figures are exclusive of line charges

FY2011: $161.6m/ $1,163.9m = 13.9%
FY2012: $148.1m/ $1,520.6m = 9.7%
FY2013: $167.9m/ $1,382.4m = 12.1%
FY2014: $186.5m/ ($1,705m -$431m)= 14.6%
FY2015: $155.5m/ ($1,678m -$422m)= 12.4%

Conclusion: Fail Test

SNOOPY

[Snoopy]

This share should be valued over the long term on its ability to pay dividends only. The low ROE figure is not sufficient to be sure of growth given a ten year timeframe. The Warren Buffett style growth model won't fit as a result. Yet actually, there is something wrong with this analysis as I have presented it. It deserves a closer look. But that will have to wait until tomorrow!


Thanks to the 'Thin air' asset value correction applying to the FY2014 result, the FY2014 data does support a Warren Bufffet style growth projection calculation. However, what a difference a year makes.

The increasing earnings trend is no longer discernable. Neither is there any pattern showing an ability to increase margins accross the years. The culprit? FY2015 was the worst on record for water inflows into the Taupo hydro scheme. But just a few years before that there were two more 'worst year since the company was formed' events: The Waikato river system drought of FY2008, and the second driest autumn in 80 years in FY2010. When the abnormal becomes the new norm, this is where many company valuation techniques break down.

SNOOPY

[Snoopy]

Yes special dividend was a bit of a (good) surprise, everything else average at best... but I still think long term MRP is best positioned power company (with the exception of maybe MEL)

One thing that caught my eye was the increase in the carrying value of assets profit of $504m before tax. In a time of relatively flat demand, this struck me as an extraordinary amount to once again pull out of thin air. It's MRP's biggest asset revaluation profit in eight years.

If you believe the Property plant and equipment sensitivity notes, +$504m is equivalent to revaluing all industry profits up by over 6%. Given that this was a 30th June figure, made before the subsequently announced closure of two large thermal stations (Contact's Otahuhu B and Genesis Energy's Rankine units at Huntly), we MRP shareholders could be in line for another large revaluation bonus next year. That's because the baseload renewable power stations that do remain become consummately more valuable!

SNOOPY

[Aaron]

What is the call then Snoopy buy, hold or sell?
Is your concern is an ability to grow earnings above the rate of inflation. Wouldn't the only restraint be rules provided by govt. these should surely include an allowance for inflation. Or are they restrained by competition. I only ask because my own understanding of the company is limited but I like a good yield.

Current dividend (incl special) of 15.139cents (incl imp crs) and assuming they match last March's dividend of 7.778cents I calculate a before tax yield of 9.2% based on a purchase price of $2.50.

I guess I need you to tell me if this is sustainable.

[Snoopy]

If your concern is an ability to grow earnings above the rate of inflation. Wouldn't the only restraint be rules provided by govt. these should surely include an allowance for inflation. Or are they restrained by competition. I only ask because my own understanding of the company is limited but I like a good yield.


The ability to grow margins above the rate of inflation is one way to measure a company's ability to recover from a bad patch in the market. If they don't have the ability to do this, then there is every chance that competition will result in a race to the bottom. Competitors chop prices to gain market share, others do the same and before long the margin for the whole electricity generating industry is cut to the bone. If you are a consumer you might say "Great". But ultimately these companies have to generate enough profit to allow reinvestment in power generation plants to take place.

Opportunities exist in electricty generation markets beyond just price competition. Shifting the time of day that power is required will allow more profit to be generated from the same infrastructure. Ultimately good for the consumers and good for the gentailers if they play their cards right.

AFAIK, there is no government restraint on the gentailers. It is only the lines companies, the local monopoly, that have government mandated acceptable rates of return. The fact that most companies are not able to increase their margin (by cutting costs or increasing prices) all the time is the reality of a competitive market.

SNOOPY

[Snoopy]

Current dividend (incl special) of 15.139cents (incl imp crs) and assuming they match last March's dividend of 7.778cents I calculate a before tax yield of 9.2% based on a purchase price of $2.50.

I guess I need you to tell me if this is sustainable.


In general a 'special dividend' is not sustainable. If it were, it would be part of the regular dividend. The last five years is IMO the best yardstick we have of what the potential for regular income might be. This includes good and bad years and is, in my view, a better way of looking at things than trying to guess what weather conditions will be like "next year". The eps record is as follows:



Yeareps (normalised)


201111.5c


201210.8c


201312.0c


201413.3c


201511.1c



I get an average of 11.74cps. Buying on a 6% gross yield that I regard as 'about right' given current interest settings and a low to no growth demand environment gives an implied share price of:

11.74/ (0.06 x 0.72) = $2.72

I note the current trading price is $2.77. So even if the current dividend yield is sustainable, I don't believe the share price is cum an 8.4c final dividend combined with 2.5c special (ex dividend price is an implied $2.66).

SNOOPY

[Snoopy]

This share should be valued over the long term on its ability to pay dividends only. The low ROE figure is not sufficient to be sure of growth given a ten year timeframe. The Warren Buffett style growth model won't fit as a result. Yet actually, there is something wrong with this analysis as I have presented it. It deserves a closer look.


The 'closer look' revealed that the ROE was actually spectacular. So that meant the Warren Buffett style growth model could be applied after all. Until the 2015 result came out and destroyed any recognisable eps and margin trends! This doesn't mean that MRP is not a good investment though. It just means I have to use a different valuation model to find out.

The valuation model I like to use in these circumstances is the average dividend over the business cycle method. In the case of MRP I am restricted to five years of data. Going back any further is IMO not useful because much of the geothermal power generation that makes MRP the company it is today was not in place before FY2011 (FY2010 was when the 140MW Nga Awa Purua station came on stream).

Nevertheless 'average value of dividends' does not allow for the company's ability to generate 'thin air capital'. If a company was never going to grow then this 'thin air capital' could be regarded as a bonus dividend stream. MRP has been able to commission two brand new significant geothermal power stations out of thin air capital since FY2010. And they have consent to build more (on the Taheke Geothermal Field, NE of Rotorua with local iwi co-ownership). Shareholders have the ability to fund MRP's growth without injecting any new cash capital into the company. I think that fact of the company has 'extra value' that is not reflected in the normalised 'earnings per share' figures.

SNOOPY

[Snoopy]

Nevertheless 'average value of dividends' does not allow for the company's ability to generate 'thin air capital'. If a company was never going to grow then this 'thin air capital' could be regarded as a bonus dividend stream. MRP has been able to commission two brand new significant geothermal power stations out of thin air capital since FY2010. And they have consent to build more. Shareholders have the ability to fund MRP's growth without injecting any new cash capital into the company. I think that facet of the company has 'extra value' that is not reflected in the normalised 'earnimngs per share' figures.


Slide 14 in the annual results presentation on "Tightening Supply with Thermal Rationalisation" is worthy of comment. It shows the 'Winter Energy Margin' (based on energy consumed) adjusted for thermal closures is expected to disappear by 2025. The margin will reduce below the 'System Operator Security Standard' as soon as 2019. So the construction of at least one major new power station may occur sooner than most people think. I think MRP are well positioned to build that new geothermal plant. And that bodes well for MRPs potential 'market share' in the medium term.

SNOOPY

[Aaron]

In general a 'special dividend' is not sustainable.
11.74/ (0.06 x 0.72) = $2.72
SNOOPY
Two years in a row for special dividends hopefully it is becoming the norm.
Using a capitalisation rate of 6% for Gentailers, what is your current cap rate for property trusts. (although I read somewhere you don't invest in them as your house is considered your property in your portfolio)
How do you establish a cap rate and does it just move up in line with interest rate rises so in theory if interest rates rise you write down the value of your investments. 6% is OK from savings but if I am borrowing to invest with a 7% interest rate my cap rate should be at least 10% I suppose. All guess work... I guess.

[Snoopy]

Two years in a row for special dividends hopefully it is becoming the norm.


By booking tax credits from an associated $500m asset revaluation, they certainly have the capacity to pay more special dividends in FY2016, whether or not they choose to do so.



Using a capitalisation rate of 6% for Gentailers, what is your current cap rate for property trusts. (although I read somewhere you don't invest in them as your house is considered your property in your portfolio)


It would depend on the property company. With AIA, I might still go for 6%. Something like Kiwi Income Property, with a lot of mall exposure. Maybe 7.5%. Something that was more office towers, maybe 9%. But as you noted, I don't own any listed property investments.



How do you establish a cap rate and does it just move up in line with interest rate rises so in theory if interest rates rise you write down the value of your investments.


All else remaining equal, yes a rise in interest rates would cause my fair value of my high yield income producing assets to head south. But for an income investment I have a lot of confidence in, I would still be looking for a gross yield around 2 percentage points more than if I had put that same money in the bank.



6% is OK from savings but if I am borrowing to invest with a 7% interest rate my cap rate should be at least 10% I suppose. All guess work... I guess.


You are playing quite a dangerous game borrowing to invest in these high yielding shares I think. The reason is that the directors already have a fiducary duty to shareholders to pay out excess capital. So by borrowing you are in effect saying that you know better than the directors and they should be paying out more to you. It's a big call to make.

SNOOPY

[Snoopy]

Nevertheless 'average value of dividends' does not allow for the company's ability to generate 'thin air capital'. If a company was never going to grow then this 'thin air capital' could be regarded as a bonus dividend stream. MRP has been able to commission two brand new significant geothermal power stations out of thin air capital since FY2010. And they have consent to build more (on the Taheke Geothermal Field, NE of Rotorua with local iwi co-ownership). Shareholders have the ability to fund MRP's growth without injecting any new cash capital into the company. I think that fact of the company has 'extra value' that is not reflected in the normalised 'earnings per share' figures.


A couple of interesting statistics from FY2012, a year without an unusual river inflow. Mighty River Power had a 51.4% capacity utilisation from their hydro stations and a very impressive 94% capacity utilisation from their geothermal stations. This gives an idea of the relative importance of the two kinds of generation in relation to total energy generated by MRP. Since the commissioning of the latest geothermal station (Ngatamariki) in 2013/2014, MRP have enough revalued capital on the books to build yet another 'free' geothermal power station if they so choose. Let's say this potential new station could deliver 100MW. By how much would that increase the base generating capacity of MRPs portfolio?

1044MW Hydro (existing) x 0.514 = 537MW (effective)
463MW Geothermal (existing) x 0.940 = 435MW (effective)
100MW Geothermal (new) x 0.940 = 94MW (effective)

Hence the effective new capacity increase is:

94 / (537+435) = 10%

OK that new power station is not yet built, or even hinted that it will be started. But I would argue that MRP already has this new hidden value built into the company. The company is effectively 10% bigger than its current production capacity, and could up size by 10% seemlessly if management so chose to do it.

So I take my previous valuation based on eps flow alone:

11.74/ (0.06 x 0.72) = $2.72

and up it by 10% to take account of the power station on the books that could be built now:

$2.72 x 1.1 = $2.99

By my reckoning $2.99 is my best 'investment estimate' of where the value of MRP sits right now.

SNOOPY

[Aaron]

There is an alternative calculation using different data to work out the return on shareholders equity of MRP. If you look right at the end of note 10 in AR2014 you will see the carrying value of assets had they been recognised at cost. Just above that you will see the note referring to the increase in value of generation assets of $40m, in addition to the $80m booked in FY2013. With MRP there have been many prior year asset revaluations like this.

Go to the income statement (p6) and you will see that the total comprehensive income for the year of $258m includes revaluation of generation assets of $35m +$5m =$40m. None of this is included in the net profit of $212m (p5). Now go to the Statement of Changes in Equity (p8) and you will that there are entries for fair valuation of hydro and thermal assets ($4m) and other generation assets ($25m) net of taxation. The tax paid on these asset revaluations was therefore:

($40m - ($25m+$4m))/ $40m = 28%

This is the normal company income tax rate. This implies the company has chosen to revalue their generation assets and pay tax on that revaluation and therefore generate extra income tax imputation credits that will be available for shareholders. That policy strikes me as strange. I would have thought revaluation of capital assets like power stations was a non taxable item! Can any accountants out there explain why MRP have treated their asset revaluations in this way?
SNOOPY
Thanks for the reply Snoopy.

In regard to your question on asset revaluations post #663 (this may have already been answered) I would suggest the following but wouldn't put money on it.

I assume MRP claims depreciation on their dams and geothermal assets for tax purposes but they need to record a "fair value" for their assets for the presentation of the financial statements. Fair value is established using NPV and the assets are revalued up especially when interest rates are so low as interest rates form part of the capitalisation rate (low cap rate high asset value). There is no tax paid or imputation credits created by the revaluation but they recognise that if the assets were sold it would create an equivalent amount of income in the form of depreciation recovered so the revaluation is shown in equity after tax. That is my best guess but anyone can feel free to point out any errors in my theory.

Capital out of "thin air" watch it disappear again if interest rates start to rise and the capitalisation rate increases. You would have seen this with AIA with the return of capital. To me it looks like AIA borrowed real money to pay shareholders the asset revaluation increase(capital return). Also you see it all the time with property company revaluations. Interest rates fall, cap rates fall and assets increase in value. If interest rates rise it all heads the other way.
You shouldn’t see an allowance for tax (depreciation recovered) on property valuations anymore as they can no longer claim depreciation on buildings for tax purposes.
Large companies like these will have a tax fixed asset schedule and the one we see in the financial statements. Any tax deferred should be shown in the financial statements. In the case of MRP the tax deferral is indefinite as the assets are never likely to be sold.
The roughly $83mill tax paid on profits would be more than enough imputation credits for the dividends paid.
Property and asset revaluations would not incur any income tax. They are accounting journals based on subjective valuations that is one of the reasons we have a cashflow report.

[BlackCross]

MorningStar's latest recommendation report (31/8/15) has MRP as a hold.....

".....Our fair value estimate is unchanged at NZD 2.90 (AUD 2.70) per share. Mighty River Power is trading broadly in line with our fair value estimate. We maintain our narrow economic moat and high fair value uncertainty ratings. Mighty River Power is one of the four large electricity generator and retailers efficiently servicing the oligopolistic New Zealand Market. The company boasts the lowest cost structure in the industry, which is on track to decline even further as it moves to a fully renewable model...."

[Snoopy]

MorningStar's latest recommendation report (31/8/15) has MRP as a hold.....

".....Our fair value estimate is unchanged at NZD 2.90 (AUD 2.70) per share. Mighty River Power is trading broadly in line with our fair value estimate. We maintain our narrow economic moat and high fair value uncertainty ratings. Mighty River Power is one of the four large electricity generator and retailers efficiently servicing the oligopolistic New Zealand Market. The company boasts the lowest cost structure in the industry, which is on track to decline even further as it moves to a fully renewable model...."

Thanks for this update 'from the pros' Blackcross. I am pleased that my own valuation of $2.99 is within the ballpark. All these NZX top ten companies are analysed to death. So it would be a real surprise if there were big disagreements. Nevertheless different analysts looking at a company can have different perspectives. It would be interesting to know more about how Morningstar set up their assumptions as well as their final $2.90 result.

My '6% gross yield' benchmark is lower than most analysts would use (resulting in a higher MRP valuation). But generally I assume less growth than other analysts, which is a balancing factor. I am a little surprised that Morningstar think that MRP has the lowest cost structure though. I thought Meridian's cost structure would be lower.

I tend to look longer term than most analysts, because I hold shares right through the business cycles. I never try to guess exactly where the power market will be in a years time, for instance. I prefer to remain safe in the knowledge that weather does not always go to a plan. I also heavily favour actual recent result scenarios, rather than dreaming up what I think might happen. In stable markets, I find history tends to repeat!

'Stable markets'! Well nothing is ever truly stable. Some of you may have noticed an inconsistency in my valuation.

1/ I am assuming a stable power market going forwards.
2/ I am building in an allowance for an increase in 'thin air capital'. 'Thin air capital' can only arise long term because the valuation of generation assets goes up because the overall market is growing!

In truth I do believe the electricity market will continue to grow in the medium term (except if Tiwai closes). But I think it will grow less than in the pre-GFC days. Probably about 1% per annum on average, down from 2% per annum pre-GFC. I could fiddle around adding a 1% growth factor to my 'stable' energy revenue projections. But I don't believe it would change my valuation result much, and it is easier not to do it. So in keeping with my new investment analysis philosophy (keep everything as simple as you can to be effective, but no simpler) I chose not to do it. Not doing it will introduce an extra small element of conservatisim in my investments valuation. And I think that is a good thing.

SNOOPY

[Snoopy]

Thanks for the reply Snoopy.

In regard to your question on asset revaluations post #663 (this may have already been answered)


It hasn't!



I would suggest the following but wouldn't put money on it.

I assume MRP claims depreciation on their dams and geothermal assets for tax purposes but they need to record a "fair value" for their assets for the presentation of the financial statements. Fair value is established using NPV and the assets are revalued up especially when interest rates are so low as interest rates form part of the capitalisation rate (low cap rate high asset value).


I agree with all you have written above. If you go to page 14 of AR2014 you will see that an increase in discount rate of just 0.5% will reduce the value of the power stations by $489m! That is very significant when on the same page it would take a 'future wholesale electricity price path' (I think that means the result of a discounted cash flow calculation reflecting future prospects), shows that prices would have to fall some 7% to have a similar effect.



There is no tax paid or imputation credits created by the revaluation but they recognise that if the assets were sold it would create an equivalent amount of income in the form of depreciation recovered so the revaluation is shown in equity after tax. That is my best guess but anyone can feel free to point out any errors in my theory.

Property and asset revaluations would not incur any income tax. They are accounting journals based on subjective valuations that is one of the reasons we have a cashflow report.


Sounds plausable. This helps solve a problem with my own suggestion of just taking the asset revaluation straight to the bottom line, and so incurring an immediate tax bill. Say the assets needed to increase by $500m to reflect the NPV of the discounted cashflow. The company does this but in so doing so creates a tax bill of $500m x 0.28 = $140m. This in turn means the net assets gained as a result of the revaluation is only $500m-$140m = $360m. So the revaluation falls short and we have to do another revaluation of $140m, which also incurs tax. And that leaves the valuation short again, so we carry on in a kind of endless revaluation loop!



You shouldn’t see an allowance for tax (depreciation recovered) on property valuations anymore as they can no longer claim depreciation on buildings for tax purposes.
Large companies like these will have a tax fixed asset schedule and the one we see in the financial statements. Any tax deferred should be shown in the financial statements. In the case of MRP the tax deferral is indefinite as the assets are never likely to be sold.
The roughly $83mill tax paid on profits would be more than enough imputation credits for the dividends paid.


In FY2014 normalised earnings of 11.1cps were rather less than the 16.9cps declared in dividends. Obviously that situation is possible because of accumulated tax credits from previous years.

SNOOPY

[Aaron]

In FY2014 normalised earnings of 11.1cps were rather less than the 16.9cps declared in dividends. Obviously that situation is possible because of accumulated tax credits from previous years.

SNOOPY
This is from Note 6 2014 accounts. "Imputation credits available to shareholders in the future amount to $45.8 million (2013: $32.5 million)." Accumulated $13.3mil additional Imp Crs in 2014. Paid more in tax than attached to dividends. I guess you could compare dividends to earnings to estimate it all but I haven't tried.

[Snoopy]

This is from Note 6 2014 accounts. "Imputation credits available to shareholders in the future amount to $45.8 million (2013: $32.5 million)." Accumulated $13.3mil additional Imp Crs in 2014. Paid more in tax than attached to dividends. I guess you could compare dividends to earnings to estimate it all but I haven't tried.

Thanks Aaron. I have decided to follow up on your hint to look at what has happened to MRPs imputation credits over the years. By the end of FY2012 (SOFY2013) just before the public partial float management virtually cleared out their imputation credits($2.9m left) by issuing a lot of tax paid bonus shares. So SOFY2013 is a good base date to work from.



YearImputation Credits Available (SOFY)Declared Net ProfitImplied Imputation Credit AttachedDividend paid Over Year


2013$2.9m$115.0m$32.2m$112m


2014$32.5m$212m$59.4m$173m


2015$45.6m$47m$13.1m$260m


2016$16.1m



I always prefer to think in 'per share' figures rather than the above very large absolute numbers. $69m is equivalent to 5.0cps. The final dividend for FY2014, paid in the FY2015 year, was 8.3cps. The available imputation credits just before it was paid (at SOFY2015) were worth $45.6m, or 3.3cps.

3.3cps of imputation credits can support a fully imputed net dividend of: 3.3/0.28 = 11.8cps

The actual final dividend for FY2014 was 8.3cps. So there were excess imputation credits which could be used to support the special dividend for FY2015 paid later.

This year, the actual final dividend for FY2015 has been declared at 8.4cps in conjunction with a special divdend of 2.5cps: a grand total of 10.9cps. However, imputation credits available amount to only $16.1m this time, equivalent to 1.17cps.

1.17cps imputation credits will support a fully imputed dividend of 4.2cps. I think that MRP have until 31st March to make sure their imputation account is in credit (Harvey I hope will correct me if that is wrong!). But it is clear this time there are no imputation credits to spare (in fact there is a deficit), unlike last year. This leads me to suspect there will be no more fully imputed special divdends for FY2016 after the one due for payment on 30th September 2015.

SNOOPY

[Harvey Specter]

I think that MRP have until 31st March to make sure their imputation account is in credit (Harvey I hope will correct me if that is wrong!).
Correct. You learn quickly.

[mouse]

Has anyone an idea as to why the share price fell 11 cents yesterday? One would think that a reduction in the manipulation of the bank rate by the Reserve Bank would put the sp UP. And why, in a free market economy, do we have the Reserve Bank able to fiddle the interest rate at which I can lend or borrow money? All most peculiar.

[Harvey Specter]

. And why, in a free market economy, do we have the Reserve Bank able to fiddle the interest rate at which I can lend or borrow money? All most peculiar.We dont. Dont the RB set the rates the bank is able to borrow off the government? Nothing to do with individuals.

[couta1]

Has anyone an idea as to why the share price fell 11 cents yesterday? One would think that a reduction in the manipulation of the bank rate by the Reserve Bank would put the sp UP. And why, in a free market economy, do we have the Reserve Bank able to fiddle the interest rate at which I can lend or borrow money? All most peculiar.
It went Ex divvy so nothing unusual at all, 10.9c to be exact(Divvy +special)

[trader_jackson]

ex dividend only reason really, but should go up slowly again, really should be over $3 by end of the year (especially with interest rate cuts still on the cards)

[mouse]

It went Ex divvy so nothing unusual at all, 10.9c to be exact(Divvy +special)

Many thanks. I saw the dates, but failed to process them. I shall see the Doctor for pills!

[mouse]

today, 2 October, we are back down to the issue price. More or less. Any ideas as to why? The six update briefings planned are sorely needed. But will they do any good? Are we now going lower? Any ideas?

[Baa_Baa]

today, 2 October, we are back down to the issue price. More or less. Any ideas as to why? The six update briefings planned are sorely needed. But will they do any good? Are we now going lower? Any ideas?

I'm not sure about the answers to your questions, but the Energy companies haven't been quite the safe-haven that I expected in the current down-turn. I sold out of MRP some time ago at a nice profit and out of MEL recently as well at a very nice profit. There's no telling imo what this Bear / correction will turn up, better I think to be on the sidelines and buy weakness as it emerges, or if necessary wait to buy back in on a confirmed reversal to an uptrend.

Jmho, dyodd.
BAA

[trader_jackson]

One of the questions I have been asking myself is, is the company really in the same position it was over 1 year ago? (when the price was around 2.50, before the election)

The answer (in my view) is absolutely not, they are argubly in a much better position... there is no immediate threat of regulation (and this is still remote even in the next election), power plants are being withdrawn from the market, meaning prices will eventually have to increase, demand is still (slowly) growing, the threat of tiwai point shutting down is put to bed at least for a little while. and MRP has arguably some of the best (if not, the best) power plants in the country, not to mention excellent management, and I don't need to even touch on the great dividend stream.

So why such a big slump from the $3.5x or so that MRP was earlier this year? yes, this was arguably a 'expensive' price, but from an investor (not trader/charting point of view) I am not entirely sure why we are back at IPO price (not even sure why we are under $3 really)

[ratkin]

the threat of tiwai point shutting down is put to bed at least for a little while.

The threat is still there, 2017 not far away

[xafalcon]

The threat is still there, 2017 not far away

But I believe the playing field has tipped heavily towards the generators - demand is growing, concurrently capacity is being retired, and transpower will likely be charging differently, meanwhile Tiwai is still for sale with a huge associated remediation cost

If I was a generator (esp Meridian) I would be playing Rio Tinto at their own game, and bully them into a long term contract at better rates on the threat of walking away

There is no better time for this than when potential new generation capacity is needed to be built = about 2017/2018

So I say the "threat" has actually switched onto Rio - do they want a huge clean-up bill when their commodities are priced so low?

[airedale]

Could Rio even sell Tiwai and who else would be interested in buying it? Lack of buyers?? big remediation costs?? Low aluminium prices. Any talk of selling by Rio sounds like posturing for political purposes.

[trader_jackson]

Could Pacific Aluminium be floated? (if they really really wanted an exit...)

Extremely 'out there' and incredibly difficult to 'sell' in these times... but desperate times (if they are as 'desperate' as Rio is making it sound) call for desperate measures (assuming they did not want to shut it down)

[xafalcon]

I do not see a Tiwai Pt shut-down currently being acceptable to Rio Tinto shareholders. It would be a direct loss of any residual plant value (probably zero from an accounting perspective, but there would be some real value in the plant) and would also invoke a clean-up bill rumored to be around $500M. With low commodity prices, dividends will already be skinny and a $500M hit would come straight out of the dividend. Much easier to sell this to shareholders when making loads of money - the next boom cycle I reckon

[mouse]

I'm not sure about the answers to your questions, but the Energy companies haven't been quite the safe-haven that I expected in the current down-turn. I sold out of MRP some time ago at a nice profit and out of MEL recently as well at a very nice profit. There's no telling imo what this Bear / correction will turn up, better I think to be on the sidelines and buy weakness as it emerges, or if necessary wait to buy back in on a confirmed reversal to an uptrend.

Jmho, dyodd.
BAA

I managed to sell out of MRP, kept a few, but most sold. Managed a good profit, but I am still concerned about their share price. It seems quite ridiculous. I am still holding Meridian as I am a great fan of Hydro generation. I look at wind power, plus geothermal, and wonder how much life the machines have, plus maintenance costs. Maintenance is not cheap, but it is essential. I suspect MRP contract out their maintenance. As everyone associated with maintenance knows, you make profit on what you do not do, not what you do, do. An essential and vital difference. The result is equipment becomes very poorly maintained since forms in triplicate are needed to tighten a nut. AND It takes three months to get it tightened!

[Hoop]

Could Rio even sell Tiwai and who else would be interested in buying it? Lack of buyers?? big remediation costs?? Low aluminium prices. Any talk of selling by Rio sounds like posturing for political purposes.

http://www.kitconet.com/charts/metals/base/spot-aluminum-5y-Large.gif

[horus1]

The question is how much can the generators get for there product. At the moment they charge Tiwai 4-5 c/kwhr , commercials 7c/kwhr , and domestic 20-25c/Kwhr. with new technology , solar , batteries , and IT giving better control domestic consumers have choice coming at well below 20-25 c/Kwhr so the prices will have to drop or people will leave the networks more and more . Overseas that I what is happening and it will happen here. Read the PWC report out last week. Thus the present share prices are not sustainable as the revenue streams will drop for all of the generator / retailers.

[xafalcon]

Generators do not charge domestic users 20-25c/kWhr, retailers do. This includes transmission costs that are paid on behalf of consumers to transpower & local lines companies, and the electricity cost includes an element of price averaging and hedging. Then GST is added on top of everything.

In commercial power sales all this is separated out and charged individually at time of use (for the large manufacturing company I work for).

Batteries are years away from having a material effect on retail pricing. Solar is fringe, and the significantly lower NZD has made it 20% more expensive. Both are only an option for those people who can afford to invest thousands of dollars and who plan to stay in their current home for at least 5-10 years and who want to have panels installed on their roof

I do not see the generators revenue stream under any threat, especially with demand growing

[stoploss]

Generators do not charge domestic users 20-25c/kWhr, retailers do. This includes transmission costs that are paid on behalf of consumers to transpower & local lines companies, and the electricity cost includes an element of price averaging and hedging. Then GST is added on top of everything.

In commercial power sales all this is separated out and charged individually at time of use (for the large manufacturing company I work for).

Batteries are years away from having a material effect on retail pricing. Solar is fringe, and the significantly lower NZD has made it 20% more expensive. Both are only an option for those people who can afford to invest thousands of dollars and who plan to stay in their current home for at least 5-10 years and who want to have panels installed on their roof

I do not see the generators revenue stream under any threat, especially with demand growing
demand growing but our friendly generators have shut a few plants recently .... Doesn't make sense , apart from trying to keep pumping prices up , way faster than inflation .....
Is Electricity the only commodity that keeps going up in price .....?

[Crackity]

http://www.kitconet.com/charts/metals/base/spot-aluminum-5y-Large.gif

The chart doesn't look quite as bad if you convert from USD to NZD - Tiwai cost base very sensitive to USD / NZD rate - aluminium spot in a downtrend but so is USD / NZD - not to downplay the aluminium spot price decline this year but it could be much worse for NZAS / Rio.....

[Baa_Baa]

7639
The chart doesn't look quite as bad if you convert from USD to NZD - Tiwai cost base very sensitive to USD / NZD rate - aluminium spot in a downtrend but so is USD / NZD - not to downplay the aluminium spot price decline this year but it could be much worse for NZAS / Rio.....

Yeah nah, it still looks pretty bloody awful in NZD as well. The 2014 party is over and despite NZD decline to USD the Alu spot is soft to weak. This has been going on for ages now, no wonder Rio/NZAS are questioning the viability, but I think they're pretty much stuffed and have to dig in, wait out the price weakness, or suffer an intolerable exit cost.

Jmho.

[Crackity]

7639

Yeah nah, it still looks pretty bloody awful in NZD as well. The 2014 party is over and despite NZD decline to USD the Alu spot is soft to weak. This has been going on for ages now, no wonder Rio/NZAS are questioning the viability, but I think they're pretty much stuffed and have to dig in, wait out the price weakness, or suffer an intolerable exit cost.

Jmho.

No different to coal / steel / oil markets - how much can each individual producer take before they quit or their bankers make them quit....many factors at play - is this a structural shift or can you last longer than your competitor....interesting times

[xafalcon]

demand growing but our friendly generators have shut a few plants recently .... Doesn't make sense , apart from trying to keep pumping prices up , way faster than inflation .....
Is Electricity the only commodity that keeps going up in price .....?

If you think about it, the retirement of expensive thermal generation capacity at this time makes perfect sense.

The collective generators have gone from an over-capacity situation with a major customer threatening to leave every 2 years, and using this as leverage to keep the price low = negotiating power was with Rio Tinto

Whereas the situation has now become - one of the generators will need to commit substantial capital to build new capacity which would not be required if Tiwai Pt shut down, so the price Rio Tinto pays for electricity must rise, or Rio Tinto can close the plant and pay $500M in clean-up costs when their revenue stream is already under pressure = negotiating power now with generators

You will note that the announcements of plant closure came almost immediately after the latest Tiwai Pt deal was inked. Rio Tinto got blindsided

Very smart positioning if you ask me

[mouse]

If you think about it, the retirement of expensive thermal generation capacity at this time makes perfect sense.

The collective generators have gone from an over-capacity situation with a major customer threatening to leave every 2 years, and using this as leverage to keep the price low = negotiating power was with Rio Tinto

Whereas the situation has now become - one of the generators will need to commit substantial capital to build new capacity which would not be required if Tiwai Pt shut down, so the price Rio Tinto pays for electricity must rise, or Rio Tinto can close the plant and pay $500M in clean-up costs when their revenue stream is already under pressure = negotiating power now with generators

You will note that the announcements of plant closure came almost immediately after the latest Tiwai Pt deal was inked. Rio Tinto got blindsided

Very smart positioning if you ask me

Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.

[Joshuatree]

On another point ;if ElNino is going to have the impact they say it will; which Generator will benefit the most and which will get the least rainfall?. Im thinking Meridian to get the Southern alps runoff as a plus(as they should get a lot of rainfall) and not sure who is worst placed Mighty River on the Waikato maybe.

[xafalcon]

Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.

I wouldn't be so sure the government won't insist on full site clean-up. Remember how Rio Tinto used the power companies share floats as a lever and threatened to pull out. The government had to stump up $30M (from memory) to get them to stay a little longer. That situation will be at the forefront of politicians minds when RT finally pull up stumps and leave. Payback's a b*tch

Playing hard-ball with the government and essentially blackmailing them was a very short-sighted business decision IMO.

[Harvey Specter]

Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.I dont think thats allowed. And no one would purchase the land without the clean up done (or a corresponding reduction in purchase price).

[macduffy]

I dont think thats allowed. And no one would purchase the land without the clean up done (or a corresponding reduction in purchase price).

Aside from the question of the clean-up and whether RIO would contemplate the expense, how attractive would a heavy industrial site in Bluff be to a potential purchaser? After all, the smelter's only there because of its relative proximity to Manapouri and its subsidised electricity - and the port, of course. Who might be interested in that site, without subsidised power!

[Harvey Specter]

Aside from the question of the clean-up and whether RIO would contemplate the expense, how attractive would a heavy industrial site in Bluff be to a potential purchaser? After all, the smelter's only there because of its relative proximity to Manapouri and its subsidised electricity - and the port, of course. Who might be interested in that site, without subsidised power!Any new large industrial of that scale is unlikely in NZ again given cheaper costs and scale from doing it in Asia. NZ needs to focus on value add going forward, not commoditisation. Fonterra is a perfect example in that it has lead the race to the bottom as far as milk price has gone (look at historical milk price on a real basis).

[horus1]

I was charged over 30c/kwhr by a retailer owned by a generator. I switched to fickelectric and my bill has been reduced by 15% over 3 months. that is why share prices are reducing. The problem with the Nz electricity market is that there is not enough competition in the generation side and generation and retailing were not separated when the market was set up.Tiwai only has to shut one potline to create problems,and no board will commit to new generation as long as Tiwai is on short term contracts .

[xafalcon]

I was charged over 30c/kwhr by a retailer owned by a generator. I switched to fickelectric and my bill has been reduced by 15% over 3 months. that is why share prices are reducing. The problem with the Nz electricity market is that there is not enough competition in the generation side and generation and retailing were not separated when the market was set up.Tiwai only has to shut one potline to create problems,and no board will commit to new generation as long as Tiwai is on short term contracts .

I am with a gentailer and my average unit price (controlled & uncontrolled, volume weighted) is just over $0.23/unit incl GST. For the convenience this brings to my life, I find it exceptional value for money

There are a half dozen generators and over 20 retailers. That is plenty of competition. They all want your business, and their switching incentives demonstrate this

Look to the local lines companies for high charges - no competition there. Watch out for comcom to act on this, sometime. This would bring power costs down (but your annual rebate would also disappear)

Shutting one pot line would not create a problem, it would resolve a problem - what generation to build in the next 3 years.

[axe]

Aside from the question of the clean-up and whether RIO would contemplate the expense, how attractive would a heavy industrial site in Bluff be to a potential purchaser? After all, the smelter's only there because of its relative proximity to Manapouri and its subsidised electricity - and the port, of course. Who might be interested in that site, without subsidised power!


http://www.google.co.nz/about/datacenters/ One of these might go nicely if RIO moves out.
The data centres consume 100% renewable to keep google happy and access to water for cooling is a plus.
Also SIT can train the engineers. :)



Here is an example of the potential.

http://techcrunch.com/2015/06/24/google-will-build-its-next-data-center-on-the-grounds-of-an-old-coal-power-plant-in-alabama/

[Zaphod]

http://www.google.co.nz/about/datacenters/ One of these might go nicely if RIO moves out.
The data centres consume 100% renewable to keep google happy and access to water for cooling is a plus.
Also SIT can train the engineers. :)


Some very good lateral thinking there! Latency and a lack of international back-haul could be a stumbling block, as will the blinkered centric Auckland & Hamilton data centre approach other firms have been taking of late. None of which couldn't be overcome.

[Harvey Specter]

http://www.google.co.nz/about/datacenters/ One of these might go nicely if RIO moves out.
The data centres consume 100% renewable to keep google happy and access to water for cooling is a plus.
Also SIT can train the engineers. :)



Here is an example of the potential.

http://techcrunch.com/2015/06/24/google-will-build-its-next-data-center-on-the-grounds-of-an-old-coal-power-plant-in-alabama/
http://www.nytimes.com/2011/09/09/technology/google-details-and-defends-its-use-of-electricity.html?_r=0

My maths say Google globally doesn't use as much electricity as Tewai.

[trader_jackson]

What was up with today's trading??
Looked like it was in for a good day, and well deserved increase, only to drop below IPO price in the final minutes... any explanations?7646

[mouse]

What was up with today's trading??
Looked like it was in for a good day, and well deserved increase, only to drop below IPO price in the final minutes... any explanations?7646

Aaaarrrgggh. Below issue price!!!!!!!! Is it going lower, or is this the limit? To sell, hold, or buy more?????????
I have no clue, no advice. But I did make a bit on MRP.

[IAK]

Crikey, I'd hate to know what would have happened to the sp if Tiwai aluminium smelter had closed down.
Disc. Holding for the divs.

[limmy]

Yes, still paying good dividends. :)

[trader_jackson]

Forsyth have put another positive report out on MRP, retain $2.85 price target, with improved profit outlook (EBITDAF up 0.8% to $502m) as a result of strong North Island hydro generation, creating a good start to the year...

[trader_jackson]

Almost back into the $2.30's now..

[horus1]

read in NBR about solar coming . Watch volumes go down over 5 years

[trader_jackson]

Even if it was solar that was 'causing doubt'... why is MRP being hit extremely hard compared to other listed power stocks?

[horus1]

It may be El Nino which usually has a bigger affect on the NI catchments than the SI, although I think from memory it affects them too

[xafalcon]

read in NBR about solar coming . Watch volumes go down over 5 years

I do not see it that way.

Solar is 20% more expensive now than it was 18 months ago since CNY is tied to USD (most panels come from China). Meanwhile retail power prices are static and look like staying that way. So the cost recovery period has extended significantly, meaning solar is much less viable now than 18 months ago. There was no huge uptick in solar installations 18 months ago, so unlikely to be one in the next few years either.

In the unsubsidised NZ market, solar needs all these things to "make it happen"

- homeowner must have significant spare capital
- homeowner must expect to remain in current house for about 6-7 years just to achieve pay-back (cost parity), even longer for "cost saving"
- homeowner must not mind aesthetic deterioration
- homeowner must want solar
- homeowner must have energy supplier that allows grid-tied connection

Solar is a great idea, I am planning an install. But I can do it myself, which vastly improves economics. However the pool of potential customers who tick all the above boxes is small (alot less than the 3% annual electricity usage growth).

I do not see any decrease in electricity usage unless Tiwai reduces/stops production

[mouse]

Down to $2.40. Is it time to PANIC, or buy more????

[trader_jackson]

Down to $2.40. Is it time to PANIC, or buy more????

I'm thinking buy more, it is like when Genesis went down into the mid 1.60's a couple months back, it was stupidity driving the market, not fundamentals

[Antipodean]

Down to $2.40. Is it time to PANIC, or buy more????

$2.40 only on intraday and these are relatively small trades - definitely wouldn't make a decision to sell or buy based on that. Stick to the trends, fundamentals and your overall strategy. For example someone today bought 99 shares at $2.415 ($99) and paid $30 fee for the privilege - this is not the type of person to follow in behaviour.

[trader_jackson]

For example someone today bought 99 shares at $2.415 ($99) and paid $30 fee for the privilege - this is not the type of person to follow in behaviour.

Although this is possible, it is unlikely, it was probably the remainder of an outstanding order

[IAK]

It looks like Contact Energy is being hit too.

[Antipodean]

Although this is possible, it is unlikely, it was probably the remainder of an outstanding order

Fair point on that example. Though there are large number of small trades today raising the possibility some are not what they seem.

[stoploss]

Fair point on that example. Though there are large number of small trades today raising the possibility some are not what they seem.

Hi Antipodean .
A fund manager or hedge fund that is looking to buy or sell large amounts of shares can do the following . Key in an order to buy/ sell say 100,000 shares . This is one order however it will be released in small parcels to hide the activity .So when you think it is 99 shares and the guy is an idiot ... it could be 99 of 100,000. You will find some books about this if you are interested , Flash Boys comes to mind , although I have not read this.

[mouse]

I bought some at $2.16. MRP then dropped to below $2.00. So how on earth do you spot the bottom of the market, unless you are Madoff. Or is that Madeoff? I suppose I will watch the market and miss the bus.

[axe]

I bought some at $2.16. MRP then dropped to below $2.00. So how on earth do you spot the bottom of the market, unless you are Madoff. Or is that Madeoff? I suppose I will watch the market and miss the bus.

Does it matter if you don't get in right at the bottom of the market? How much does 16CPS of downside compare against 100+CPS of upside MRP saw from the bottom.
As long as you have rightly a picked a stock that is trading at a current discount to where it will be in the future, set stops where you are comfortable, stick to them and things might go okay :)
There was a poster on here who went in very heavy into MRP @ 1.90. (Belg i think ?)
They are no longer on ST. I assume they no longer on ST because they sold all their MRP @ $3+ and are now a tropical beach somewhere drinking the proceeds. :cool:

Did you still hold your MRP that you get at 2.16 when it went to 3.00?

[mouse]

Does it matter if you don't get in right at the bottom of the market? How much does 16CPS of downside compare against 100+CPS of upside MRP saw from the bottom.
As long as you have rightly a picked a stock that is trading at a current discount to where it will be in the future, set stops where you are comfortable, stick to them and things might go okay :)
There was a poster on here who went in very heavy into MRP @ 1.90. (Belg i think ?)
They are no longer on ST. I assume they no longer on ST because they sold all their MRP @ $3+ and are now a tropical beach somewhere drinking the proceeds. :cool:

Did you still hold your MRP that you get at 2.16 when it went to 3.00?

No. I sold. But not at $3.00. I held on to around 1,000 MRP. But they are now more or less free shares.
I agree with you, spotting the bottom to buy or the top to sell is impossible. But I am very disappointed not to have held off buying until $1.90! Life can be hard.

[BlackCross]

MornignStar has an accumulate ($2.90) recommendation this a.m.

[trader_jackson]

https://www.nzx.com/files/attachments/223025.pdf

Great stuff I think, what is not so great is why the share price is low given such a strong start and slowing (almost stopped) customer churn... (I think its amazing the share price is below the $3 mark...)

Look forward to hearing other peoples thoughts

[trader_jackson]

https://www.nzx.com/files/attachments/223142.pdf

Another impressive presentation

[mouse]

I have a minor problem about Mighty River. Latest price is around $2.75 per share. Earnings per share appear to be 3.4 cents. So, being particularly stupid, I divided the cost per share by the earnings per share. Leaving out a few decimal places, it came to 81. Surprisingly, that is more years than I have had birthdays. Only a few, it must be admitted, but I have to hold MRP for 81 years for its earnings to have paid back its price.
Price to Earning ratios could be between 15 and 25 say at present. Depends upon the company. But 81???????????
Can anyone explain it to me. I must emphasize that I do not have lots of brain, so a simple explanation would be appreciated.
On a 20 P/E ratio, MRP is worth 69 cents?

[silverblizzard888]

I have a minor problem about Mighty River. Latest price is around $2.75 per share. Earnings per share appear to be 3.4 cents. So, being particularly stupid, I divided the cost per share by the earnings per share. Leaving out a few decimal places, it came to 81. Surprisingly, that is more years than I have had birthdays. Only a few, it must be admitted, but I have to hold MRP for 81 years for its earnings to have paid back its price.
Price to Earning ratios could be between 15 and 25 say at present. Depends upon the company. But 81???????????
Can anyone explain it to me. I must emphasize that I do not have lots of brain, so a simple explanation would be appreciated.
On a 20 P/E ration, MRP is worth 69 cents?

You're very right this does not make sense at all, but not as bad as you think either. I will make one correction for you though, 3.4 cents is not correct figure because that is profit attributed to the share after all expenses including non cash, which included impairment, impairment is technically a non cash flow expense and doesn't really affect the running of the business. Impairment was 130 million so add that back into your incoming profits and you actually have about 161 million after tax or 11 cents per share in earnings. For me revenue dropped, profits dropped, so its not quite risk free. They are performing better now but it does not convince me to feel safer here than any other stock.

I could go on the market and find other much better dividend yield stocks available. Tourism Holdings, Heartland, Skellerup, Air NZ and so on. What the market feels is different here is a solid power company that has stability and being partially government owned has a safety towards their regulation bias. Basically people are valuing this as nearly risk free dividend because of its so called solid operating base. I do not feel that way and don't normally express so, but I read your statement and thought it might help you in understanding it more with my views. Hope that helps :)