Originally Posted by
Snoopy
Hi King. I wrote the above post in October 2016, before the current weather pattern that was favourable to MCY became obvious.
Your points above I agree are all worthy of attention, but just to give them some context:
1/ MCY have no plans to build a new power station in the declared future. That means that free cashflow is likely to significantly exceed earnings. And that points to the likelihood that dividends will not be fully imputed over the next few years.
2/ Population increase should underpin higher earnings in the medium to long term.
3/ Significant night time charging of EVs is a speculative long term earnings driver. Some say EV's are only a stop gap technology before more widespread adoption of hydrogen powered vehicles.
4/ The tie up with 'Trina Solar' I do not see as significant. In NZ, the timing of peak solar generation does not match peak load. So we are still reliant on advances in battery technology to make the use of solar a mainstream profit driver.
5/ Good rain over the last few months is likely a 'weather event'. It might influence a higher one off dividend of a cent or two, but is not a long term value driver.
6/ Tiwai Smelter, along with the parent company's Australian aluminium manufacturing assets are for sale. Tiwai doesn't have the power supply issues that Australia has. It looks economic for now, but it could set power industry earnings back for 5-10 years if it did close. My feeling is that Tiwai won't close. But that doesn't mean there is no risk of it closing. And that smaller chance of closing is still a risk that you should build into your investment equation.
Given all the above, I would suggest that now is not a good time to invest in Mercury Energy. There is nothing wrong with the company, and you can make the argument that it is better managed than ever. However, it looks to me as though all of the good news is already built into the share price. I intend to remain a Mercury Energy shareholder for the foreseeable future. But is has crossed my mind that now might be a good time to reduce my holding a bit.
SNOOPY
discl: have held MCY since it was floated.