Forum Archive Index - November 1999

[tennyson@caverock.net.nz]

Quoting Brent Wheeler <brentw@bwcl.co.nz>:
>
> * Survival for the Trust seems likely to dominate their behaviour.
> 
> *    For TransAlta there are probably benefits in getting rid of
> untidyness - but at what cost?  
>
According to Transalta the cost they are prepared to pay is $2.50 per 
share.  My impression, after reading the Grant Samuels independent report
 is that this is too low for the following reasons:

1/ The Samuals report does not value imputation credits.  From the point of 
view of the shareholders selling out who will be losing these benefits surely 
this is a mistake.
2/ No attempt is made to allow for the benefit of integrating the existing 
retail businesses.   As Transalta is the largest retailer in the country 
these could be considerable, but at the very least shouldn't be ignored.
3/ Future Transalta earnings are discounted using a guesstimated 'Beta' value.  
This severely discounts the value of future Transalta earnings.   Yet Transalta 
did have a choice about whether they were to become a lines company or a retail 
company.  They chose retail which would provide more volatile yet overall 
higher returns.  Personally I think Transalta made the right choice.  I don't 
see a shortage of generation capacity any time soon and consequently think that 
the 'Beta' value chosen by Samuels was too high, and unfairly discounts the 
value of the Transalta retail business.  
>
> Verdict?  I would incline to the private sector player who is at least
> accountable via share price/takeover threat etc..
>
As a matter of principle I would tend to agree.   But for the reasons given 
above I can't agree with the conclusions of the Grant Samuels report.
>
> If one was too concerned a possible way out is
> to buy some TransAlta stock - a sort of "be part of the team not one 
> of the crowd" strategy.
>
I am starting to warm to this idea.  Wait for the bid to expire (that will get 
rid of the weak sellers) and the share price to ease.  Then buy in on the cheap!
>
>An alternative would be to become a beneficiary of the trust
> Trust and play up, eg, demand to see the independent valuation.
> 
That means going to live in Lower Hutt!  Ugh, I'm not that desperate!
 ;-)SNOOPY

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