Wholesale Power Price Effect of potential Onslow on Contact Energy (FY2022 re-modelled retrospectively)
Month |
Percentage of Wholesale Power Priced > $111MW/h {A} |
Total Energy Generated (GWh) {B} |
Energy Generated > $111MW/h (GWh) {A}x{B} |
Thermal Energy Generated {C} (GWh) |
Hydro Energy Generated > $111MW/h {A}x{B}-{C} |
Onslow Lost Wholesale Value to Contact Energy @ $60MW/h |
June 2022 |
70% |
760 |
532 |
165 |
367 |
$22.02m |
May 2022 |
100% |
692 |
692 |
141 |
551 |
$33.06m |
April 2022 |
95% |
597 |
567 |
139 |
429 |
$25.68m |
March 2022 |
90% |
637 |
573 |
156 |
417 |
$25.02m |
February 2022 |
60% |
566 |
340 |
37 |
303 |
$18.18m |
January 2022 |
70% |
606 |
424 |
48 |
376 |
$22.56m |
December 2021 |
10% |
664 |
66 |
22 |
44 |
$2.64m |
November 2021 |
5% |
666 |
33 |
15 |
18 |
$1.08m |
October 2021 |
10% |
710 |
71 |
25 |
46 |
$2.76m |
September 2021 |
20% |
696 |
139 |
36 |
103 |
$6.18m |
August 2021 |
53% |
763 |
404 |
76 |
328 |
$19.68m |
July 2021 |
75% |
911 |
683 |
186 |
497 |
$29.82m |
Total |
|
|
|
|
|
$208.68m |
Notes.
1/ The "Percentage of Wholesale Power Priced > $111MW/h" (table column 1) is arrived at by looking at the monthly "Distrbubution of wholesale market price by trading periods" (from each of twelve Monthly Operating Reports) 'bar graph' top three pricing categories: $111-135, $136-160 and >$160, for the Otahuhu electricity market power pricing node. Next, I add together the three 'bright red bars', representing the current month, by eye. Then I write down the 'cumulative total percentage figure' to an accuracy of about 5%. Next, I do the same exercise for the 'Benmore power pricing node'. I average the two results to get a final 'representative percentage'.
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EBITDAF for Contact Energy over FY2022 was $537m. So taking $209m off that figure, reduces EBITDAF to:
$537m - $209m = $328m = OUCH!
This is a massive potential hit coming up for Contact shareholders (and all shareholders of gentailers in fact).
My modelling is somewhat simplistic and Jantar, in post 2288, has pointed out a couple of obvious weaknesses.
1/ There would be a consummate 'upping of supply bids' at the lower end of the power price scale, for pumping. Getting more money at the lower end of the power pricing cycle would be good for Contact Energy.
BUT (1 Counterpoint)/ If you look at the distribution of power pricing, in most instances of 'wholesale power pricing' it is the upper figure range of >$160MW/h that dominates. But in reality power pricing at the peak can go much higher than $160/MWh. So there is a good chance I have
underestimated the real loss in wholesale power price peaking that Contact would incur, by using that $160MW/h figure, should Onslow become operational.
2/ If Contact is being paid less for their wholesale power, then the retail side of the gentailer business becomes more profitable. So some of that 'loss in wholesale power profit' would be clawed back at the retail end.
BUT (2 Counterpoint)/ Retail is a less capital intensive business to enter and competition is more intense than in the wholesale space. The reduction in 'wholesale power price spikes' should make competitor retail businesses easier to operate profitably and sustainably. Thus I would expect retail competition to intensify 'over the medium term', if Onslow goes ahead. And that means lower profit margins for the existing gentailers' retail arms over time.
At this point there are lots of factors to consider. But even if the real loss to Contact is only half of that my somewhat crude calculation assessment, a '$100m hit' to EBITDAF is still pretty substantial. This exercise is making me think again about what premium I should pay for having shares in these gentailers for their supposed 'certain future cashflows' going forwards.
SNOOPY