I'm definitely not arguing the relative merits of GNE, but just though I'd add that I do see some sector-wide risk due to the long term effects of the pandemic on commercial and industrial demand.
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Been mulling this over for a bit Beagle....as have a bit to much cash at the moment. However have decided not to chase yield in the market right now, going to suck it up and get my 1.4% at Kiwibank.
- There has to be quite a bit of uncertainty in the electricity market at the moment. The power companies are already >20% of my portfolio...I think that's enough.
- The market is high overall, and we are not through the problems that COVID is creating for the world and NZ as yet. I see more dips in the future, maybe significant before this thing resolves itself.
So it will be mostly sitting on my hands and some opportunistic buying for me as opportunities present themselves.
As an aside, we rely on dividends a lot for our income, our reduced income from them has reduced our overall income by about 2% so far...waiting anxiously on the Heartland result.
So far so good.
A relatively small share market correction will take many years of dividends to make up. Can't count on the market rebounding everytime.
You're well positioned already :)
I topped up a few more GNE this morning. By my calculations on a forward basis GNE is still yielding 7.5% gross at $3.06 (if ones nets back the dividend due shortly off their purchase price). I am working on 17.4 cps in annual divvies for FY21, (broker targets have them paying 18.0 cps in annual dividends in a few years) and 80% imputation rate. I have a price target of $3.73, (have been as high as $3.77 in the last year in a higher interest rate environment), which would still give them a 6.0% yield and I think that's going to be highly attractive in a negative interest rate world.
I believe the size of the tsunami of money that's going to be looking for safe yield in the market is drastically underestimated by almost everyone on here, (probably including myself)...another $3.2 Billion to be released with the wind-up of bonus bonds announced today is just the tip of the iceberg.
Bought a block of Genesis this morning also, just before the NZX crashed again...
Find your target price of $3.77 very encouraging Beagle. Can you explain where this comes from, considering all the uncertainty with Tiwai etc?
Is is based on maintaining a particular P/E level? Thanks in advance.
I'm using a dividend valuation model to get that figure. Using a 0.5% risk free Govt stock rate and 5.5% risk premium for Genesis. I think a gross yield of 6% is extremely attractive for a Gentailier in the negative interest rate world into which we're headed in 2021 and where we are likely to stay for several years.
I'm aware of one broker having a ~ $460m EBITDA forecast for FY24. GEN think they will be relatively unaffected by Tiwai and the major reserve upgrade at Kupe should see this valuable part of their business (circa 30%) have a viable life for well over 20 years.
$3.01 ex divvy gives 7.5% gross yield, (assuming 17.5 cps divvies in FY21 and 80% imputation rate).
22.5515 / 155 = 14.5% gross for those who bought into the IPO.
22.5515 / 145 = 15.6% gross for those who bought into the IPO and hanged onto them for a year to get the bonus shares.
What a terrible decision by National and John Key to give away some of NZ's best assets, especially since they preferred overseas investors over retail investors, which could only invest $5,000 worth. Always such a terrible steward of NZ's wealth that National Party.
DYOR, of course!Quote:
What to do....
;)
Whether you get your principal back in three years will be entirely up to the market. But whether you still have your principle(s) after three years is entirely up to you :-)
SNOOPY
P.S. not wanting to be too anal about this, but just noting that on some occasions, spelling does make a difference!
Beautiful....9% yield....buying hard out!!!
this stock been thumped since ex div , stink i had a few i brought for the div
Dividend stock....don't lose money bifbu don't sell it bull...
Problem some holders just want the divvie not interested in hanging about for next one.
What are you general thoughts (everyone) on Labour's pumped hydro scheme and the implications on GNE? I doubt such a scheme would be implemented within the next term of government.
In the immortal words of Gwen Stefani "This **** is bananas, B-A-N-A-N-A-S"
Some good posts on this thread https://www.sharetrader.co.nz/showth...-shares/page37
Well, the biggest scheme in the world only stores 3 gWh. These guys are talking about a 5000 gwh effective battery. Guess they are assuming the weed referendum will pass and they are starting early. Most of the "large" schemes were built decades ago. Hasn't been a rush to built more, any guesses why? It isn't because they are making so much money the owners and funders are all on holiday in the Bahamas.
Next if anyone thinks you are going to get a resource consent dealing with that amount of water go look at all the failed attempts of building a dam. There isn't one generator who thinks they can built a new dam.
Operationally you would probably do less than 200 full discharges a year based on the current largest scheme in the world. Revenue pre costs say $60m. Take off costs eg the energy you use, staff, etc etc. well at a cost of over $4bil you are probably on an ungeared PE of 100x. So who is going to fund this folly?
Basically their numbers are rubbish. Oh well at least the green consultants get $30m in scoping fees
The RMA will most definitely prove to be a significant hurdle, unless Labour exempt the project from the act. The only way to fund this will be for the tax payer to do so, and thereby absorb the cost overruns and lack of return in order to claim 100% renewable status. I suppose Labour are trying to create their own Think Big era.
It will also no doubt have significant impacts on the profitability of all sectors within the electricity market, leading to lower dividends for the government itself.
Largest pumped storage plants in operation and development
POWERHYDROPUMPED STORAGE
By Carrieann Stocks 13 May 2020
Here is my reference. Other ref material agrees may be a term issue. Even if wrong the "dream" is over 200 x the scheme you quote. Ingula cost USD$3.5 billion. Took 12 year from construction start 2005 to complete. Who knows how long design took. It can produce 15.8 hrs of 1333 mwh. What I would be interested in is the time it took to pump that water. I assume that it takes longer than 15.8 hours to back go up or they have pumps that are unbelievable.
I do believe your numbers are rubbish. That 3 GW is installed generation capacity, not storage capapcity. The largest storage in the world is shown below, with Onslow on the top.
Attachment 11940
Thanks Jantar for clearing that up. So the cost in the table has reduced by 25%. Certainly spending over $3m per mwh of production seems sensible(sarcastic). In effect the Onsliw scheme seems like a hydro dam. The pumped storage is just putting lipstick on the pig.
Onslow would be pure pumped storage, not just a hydro dam. It has very low natural inflows at around 4 cumecs, and so relies on pumped water for its fuel. It is not that the cost in the table has reduced by 25%, but that Labours estimate is 33% more than Majeed calculated in his thesis.
I fail to see where your $3m per mwh of production cost comes from. That is not in the table nor in any calculation I have seen anywhere. The construction cost would work out at $3.3m per MW. That is Construction, not production, and is certainly in line with other hydro projects. The storage construction cost is $0.50 per kw and the actual cost of the water stored would be $40 per MWh or 4 c per unit.
With an OPEX of $12 M per annum the cost of generation would be $62 per MWh or 6.2 c per unit.
GNE div yld is over 9% at the moment, so it says on ASB site :t_up:.
I can confirm that something is amiss with the yield showing on direct brooking's website when you look up GNE under detail.
From memory they paid 17.2 cps last year in total and I am working on either 17.4 cps or 17.5 cps for FY21. (Their policy is to put it up a bit each year)
Assuming dividends continue to be imputed to 80% that gives a gross payout of 22.5515 cps in the year ahead as noted above.
At today's closing price of $2.88 that gives a gross yield inclusive of imputation credits of 22.5515 / 288 = 7.83% Gross Yield forecast for FY21.
I think this yield is truly compelling for the moderate risk profile of the company and the environment in which we exist of interest rates at such a low level they are unprecedented in N.Z.'s history so the size of my holding in GNE reflects my belief this is a high conviction hold for yield.
I'm beginning to regret getting seduced recently by the high divie yield that GNE offers. I reckon that over a 3 or 5 year time frame (pretending the 'investment' in GNE is a Term Deposit) I'm going to come out worse off than just leaving it in the bank miserable rates..... or alternatively 'investing' / 'gambling' on something that will give capital gains.
Have I essentially taken a punt on the GNE share price going up nicely - if that is the case bad move.
Anyway I have no idea what the chart I quickly ran up showing the difference between the GNE divie yield (not gross) and the 5 year Govt Bonds means ...but it must mean something.
Many variables in play but it must mean something - even if its only a measure of how 'risky' punters see GNE
Disc - I repeat, I know squat all about power companies and how they make money (now percy will tell me that I shouldn't invest in anything you don't understand...but these are weird times
That does not compute. Can't see your attachment though for some reason. Surely you only need GNE sp to stay more or less the same to be better off.
Winner, the main 'mistake' I see investors making when looking at the superior yield that Genesis offers compared to other gentailers is encapsulated in paragraph below that I wrote in April 2019.
Since I wrote that two things have happened:
1/ The reserves of Kupe have been upgraded.
2/ The discount rate has lowered further from what were at the time seen as all time lows.
Both of these points are favourable for the valuation of Genesis. But you can't look at earnings on a PE basis of 30 (for example) on an 'ongoing valuation basis', when the source of those earnings will be extinct within 15 years.
SNOOPY
P.S. Don't feel too badly about not having the best handle on valuing the gentailers. IMO a certain other Beagle doesn't know as much as he should either. And it is pretty easy to be seduced by a flash coat of high yield paint in these low interest times.
The mistake you're making my Beagle friend is that you're trying to put a definitive life on Kupe and have been trying to do so for some time.
The reserve upgrade you allude too was quite substantial (about 33% proven reserves), wasn't the first field upgrade and is unlikely to be the last one in my opinion after applying my super sensitive long range gas detector nose to the situation ;)
Winner me ol mate. I recommend some calming herbal tea each morning. Don't worry my friend. GNE was around $3.70 this time last year. Where's it going to go when interest rates go negative in 2021 ?
Its important to take a "dogged" approach to things when some initial adversity comes ;)
Cut loss master winner....join me at FRE...n KPG...hahha
My perspective is different from yours's me ol mate. I have bought quite a few since the annual result and have treated the shares just allocated this week in lieu of dividend as a partial return of the initial capital price, (as I do for all shares bought cum a dividend).
On the basis of my net purchase price methodology, I am up 1.2% on shares bought last month. You'd have to wait a whole year to get 1.2% on term deposit with a bank.
GNE have been very good to me over the years and a ultra reliable high yield stock despite all sorts of prognostications about it on here over the years.
I wasn’t as clever as you as a bit late to the party :p ...seduction took longer
On a net purchase price methodology I’m down 2.2% over a month
Maybe that’s what the banks are going to charge to look after your money with negative interest rates
Even knowing that some punters are down 10% if they were seduced a year ago doesn’t console me.
Snoopy, have you had a crack at estimating GNE's earnings and possible dividends post Kupe?
Still got my WHS too :( I'm telling myself its good to have a red arrow in my portfolio...if it was all green all the time one might be tempted to start believing one's own B.S. lol
Unfortunately further highlights the vagaries of the market and the fact that the Govt has a lot of power over the outcomes tho.
I think those two things are called market risk and regulatory risk.
I note that GNE was least responsive to the news (excl TPW which seems to have a life of its own) which confirms of the reverse scenario - i.e Tiwai closes and GNE goes down the least. Tiwai closing is still quite possible given the Labour govt put a few must have clauses around the deal.
Disc holder on both domiciles.Attachment 11978
Was reading today that the wholesale power futures are pricing in a high probability of a deal with Rio Tinto.
Feeling a bit more comfortable with your term deposit now at $3.045 ?...possibly $3.450 sometime in 2021 with interest rates at zero ?
Reckon you'll be wrong and I think WHS will turn into a reliable dividend payer again at circa 16 cps per annum fully imputed = 10% gross yield. I can't see any reason to sell....actually still thinking of doubling down :)
Well...that WHS didn't work out to well...nbever mind. Time to update the "term deposit" rate, (seeing as the BNZ have updated there's and people can earn a "whopping" maximum of 1.05% per annum before tax), and with the risk of an open banking resolution and the risk of the BNZ itself. WOW...that's breathtakingly miserable for the risk involved.
Anyway...it would seem we are on our way to $3.45 as suggested above so that's good. Is it too late to get some decent return from a Gentailier ?
Lets have a look. Assuming 17.5 cps for FY21 and the same 80% imputation as it has been for years that's 17.5 / 0.776 = 22.55 cps gross and on a share price of a few minutes ago of $3.20 that's
22.55 / 320 = 7.04% Gross Yield But wait there's more. If you sign up to the dividend reinvestment plan and take shares in lieu of dividend you get a 2.5% discount so your effective yield is 7.04% / 0.975 =7.22% Gross Yield...Hmmm
Save me before the man in the white coat comes and gets me - I've developed a morbid fascination with these quasi bond type high yielding stocks like GNE.
I dont know what it all means but my database throws up this -
- The GNE dividend yield (net) over the last few years has generally been around 4.7% more than the 10 year Govt bond rate (Currently 5.3% but reverting to that average from a brief spike in March 2020). I suppose this spread a measure of the risk holding GNE?
- so not surprisingly the GNE dividend yield has fallen in line with declining interest rates
- The GNE yield was over 8% in 2015 and has been trending down since
- We should not overlook that as interest rates fall so does expected overall total returns from equities - we are happy getting less because less is better than almost nothing
- The 10 year govt bond rate is now zero (or nearly there)
- Does this mean the historical spread of 4.7% noted above will shrink further? Would this imply that yield seekers are prepared to take on 'added risk'?
- How low can the GNE dividend yield go - after all it's been trending down for years.
- What impact does this have on the GNE share price in the future - bearing in mind it is basically the face value of a quasi bond.
Conclusion I've come to is that one needs to act early (like soon) if they want to get current yields -- TRINA or is TINA will have a field day in case of FOMO.
But then again one needs to consider where the share price (capital) might be in a year or two.
And I've done all this without even really looking at how Genesis makes money - all I see is that their preferred measure of profitability EBITDAF trend doesn't look too flash - the financial performance doesn't seem to be the driver of the GNE share price, its that divie yield.
Even though i've got this quasi bond as a substitute for a 3 year year term deposit i don't actually see myself lasting the 3 years - i expect (and hope) that I'll have to take/lock in some capital gains
Must go now - i hear the man in the white coat coming up the front steps
I think you'll be safe from the men in the white coats down at Franz Joseph mate...they probably don't know how to get there but I'm expecting them to turn up this evening at my place because my morbid fascination with these quasi bond thingies is getting the better of me too. Since making this "term deposit" in Sept I'm up 12.5% in just on a month for an annualized return of 150%.
Hmmm...I can't help wondering what my BNZ relationship manager would make of that since they're offering a "stellar" 1% per annum on their term deposits ;)
well of course if banking wasnt such a regulated industry there would be a banker who would offer you higher rates, and he would just go down the road to the bourse with a carefully calculated proportion of your money. You may not choose to trust his 7% tho
Considering the bond substitute though, shouldnt one , at this point , take the profits and run back to cash because from now on that would be more like a bond i.e risk free and you've already bagged the say 5-10 % that you require. Otherwise it remains true risk capital because you know one day Sxxx will Hit The Fan. And we never know when that might be. Sure sure, it all looks good now with QE etc but it often does look good right until the brown stuff blows. So was this money truly a bond proxy and its done well yay out now, OR, is it Risk Capital.
22.85 cps gross / 329 = 6.85% Gross yield. Peat, this was nearly $3.70 similar time last year when interest rates were much higher. The party is only just getting started with this one. 5% gross yield = $4.57...still a fabulous yield in a zero interest rate environment for a Utility.
Psst...just between you and I mate we know its risk capital and all this quasi bond stuff is complete hogwash...just having a bit of fun ;)
Peat/Beagle
The spread between GNE divie and Govt 5 yr stock has average 5% points since they floated.
That spread last year ranged from 3.6% points to 4.2% points and then 'spiked' to 6% points in March
Isee this spread as a measure of how punters see the 'market risk' in holding GNE equity
Seems that we are heading back to that spread becoming sub 4% points again - which would imply punters happy with a 4% yield (net)
That implies a share price of $4.30 sometime soon ....and even higher if there is an increased divie.
So Peat, in my mind I terminated the GNE term deposit early the other day and kept the bonus increase in capital .....and then took out another 3 year GNE term deposit at current rates and fully expect to terminate that some time after Christmas to keep the bonus capital gains.
So maybe quasi bonds or whatever but at the end of the day we are playing the capital gains game .....like beagle not many in it 'just for the divie' which still seems a dangerous game to play
https://www.interest.co.nz/bonds/107...7+October+2020
Bonds are not without risk either. REIT's have been the "go to" quasi bond alternative but I think with many trading at substantial premium's to NTA, Gentailiers still offering a good and extremely reliable and growing yield, (GNE has a multi year track record of increasing its dividends every year) are next cab off the rank when it comes to safe yielding opportunities.
I think GNE still has a lot of room to run. TA looks good to Winner. A lot of TA guys reckon the best way to be a winner is to get out of your losers and let your winners run, makes sense eh Winner ;)
Excellent question. 3.5% net yield with 80% imputation = 4.51% gross yield. In post #2879 I postulated that a 5% gross yield = $4.57 and I certainly think if there's a deal on Tiwai point and interest rates head even lower that's possible. Could it go even lower, who knows ? We seem to be headed into completely uncharted territory with a negative interest rate OCR environment.
I was chatting with a senior partner at PWC on the weekend and we certainly agreed that there's a real rush on to find safe dependable yield with banks already offering nothing better than negative interest rates already on term deposit after taking into account inflation and tax.
4.5% gross yield would suggest a share price of as much as $5.08 is possible.
I cant get my head around how negative interest rates will do more good than damage (if we assume increasingly overpriced housing isnt ideal) but Orr's comments a while suggest he is merely waiting for all parties to sort out their IT systems before he gives it a whirl.
With that in mind surely anything yielding over 3% from a reasonably governed cash cow starts to look tasty to a pension fund.
If we consider NZ in isolation, I personally don't think we need negative interest rates to spur things along, those that borrow are already pretty stoked with the current cost of such. I think the possibility of going negative is only there in the war chest just in case our main trading partners go there, or things become really dire on the domestic front and the RBNZ get backed into a corner. I wouldn't expect us to go there unless it looked like the RBA was headed that way too. Meanwhile the RBNZ have the make noises about the possibility to make sure the banks get ready for it and also to encourage them to sharpen up on the lending rates. Just my 2C.
Russian and Mexican central banks have it set at a very attractive 4.25%...who's keen?
https://www.global-rates.com/en/inte...ral-banks.aspx
Pretty good chance it would do the opposite I would have thought...those that are mortgaged up to the eyeballs, or plenty leveraged for their investment portfolio will be loving it, while making it hell of a difficult for those looking to get on the ladder...oops, off topic.
GNE has been under performing when compared to other power companies. Anyone have insight to why?
Disc: hold and regularly adding on weakness to my long term portfolio.
GNE looking like its overdue for some love compared to the other Gentailiers. Brokers are forecasting dividends of approx. 17.5 cps which together with 80% imputation = 22.5 cps gross in the year ahead and they have an excellent track record of increasing dividends slightly each year.
22.5 cps / 316 = 7.1% Gross Yield.
That's a stunning yield for a Gentailier compared to the others in this sector who by comparison have seen their share prices really run away.
Disc: I bought some more quite recently.
Beagles are very good at sniffing out tasty morsels at ground level, but sometimes they need a bigger beast to see the enemies & storm clouds on the horizon.
As you would already know, GNE has a lot of thermal capacity, and despite the wishes of some, it isnt going to be turned off tomorrow.
However, medium term it will be.
What is happening globally, institutions, pension funds & the like are withdrawing exposure to such investments.
Recent examples are NZR, and AGL on Asx, where capital is being withdrawn, ahead of future dents to cashflow.
So while your divvies are safe for now, the capital value of such stocks will be eroded, as that capital takes flight, & these companies re invent themselves. to wind, hydro, geo, nuclear, oops, who said that?, and may have to capital raise to do so.
Albert Brantley turned off the Rankines last year, but the ever pragmatic Gennie Shipley said give them another spin Albert, I like feeling the heat in the kitchen.
Strategic review ofvKupe
I hate it when they give this veiled warning - It is not expected that the outcome of this strategic review will impact our ability to maintain the current level of dividends
http://nzx-prod-s7fsd7f98s.s3-websit...038/336214.pdf
I knew I’d timed this dividend hype game wrong ...without DYOR on an industry I know squat all about that’ll teach me
kupe probably not very profitable in a low price environment. im picking they sell it for way less than its on the books. so one would need to factor this in gne financials going forward.
I would have thought it added a useful amount of diversity to their resource base. we should go back and see what they said when they bought it.
The possibilities for the Kupe field are that they find the gas reserves are larger than previously thought, or they are not larger, but an additional well could tap the remaining reserves faster. It is very unlikely that they would find the reserves are diminished on what was previously counted. The upfront costs of drilling are not cheap, and hence the reason for the review.
Couple the positive aspects of this drilling programme along with the government's stated policy of no fossil fuel electricity generation after 2030, and it would seem prudent for Genesis to consider selling their interest ion Kupe at a time that the value is increasing. I see this as having more upside for Genesis than potential downside. If they keep their interest in Kupe as is, it will be costlier in the short term, but will increase earnings long term. If they sell now they will have a small cash mountain (special dividend perhaps), but the ongoing cost of their fuel for Huntly units 5 and 6 will increase. However these units have only 10 years left if the government has its way.
I hope they do decide to sell now.
A lot of the attractiveness of Genesis depends on your own circumstances. For anyone in their 70s for example who just wants an income stream then they are pretty good.
If you are just going to stick them in the draw from 30 years then maybe not so much. However at 7% plus it does not take that many years to recoup your initial investment back in dividends. They have plenty of time to transition away from thermal, they recently did a deal with tilt for example
Agreed. Sold out of AGL not long after their dividend. The Superannuation funds in Aust anyway have woken up to the climate risk on coal power. From now on in Aust at least, AGL for example is now a dividend trap in my view with medium term capital losses accruing to the shares.
The Super funds in NZ haven't fully woken up yet to the Climate risk of coal yet IMO, so while Huntly's baseload generation is needed, the dividend is safe. It comes down to how fast AGL and Genesis can transition to renewables eg gridscale batteries with AGL and wind with Genesis via TILT.
I also sold out of Genesis with medium term capital losses in mind recently before this announcement. Gonna miss Genesis, it's been good to me, but until the Govt wakes up to the transition fuel argument for Gas and its needed exploration in NZ - and the baseload generation puzzle is resolved with Tiwai and the possible Pumped Hydro option which looks tempting to the Govt, I'm out for now. Maybe if the transition to renewables accelerates markedly I'll reconsider, but renewables are somewhat on hold with all the uncertainty at the moment. Time will tell. Good luck to holders...
The GNE term deposit is performing well Beagle. Very strong weekly uptrend. Still 10% upside to hit last years highs so definitely lagging its peers though.