Forum Archive Index - June 2001

["Andrew Smith" <smith5@free.net.nz>]

Sam
>From what I have read recently and posted on the 17th May it contradicts a
lot of what you say. I feel you were not a happy Sand boy with CEN. I have
included my previous comments from an independent report to assist others to
make a balanced judgment.

>From 15/05
Received in mail & just finished reading. A very comprehensive coverage of
the power industry of NZ. well worth the read if you are interested in where
Contact fits within it. My personal feelings are, as a long term investor,
CEN is worth holding onto. This is based on

1.CEN mix of fuel sources and geographic locations means that CEN is
strategically well placed to react to the various fuel and weather
scenarios, compared to its competitors. In particular CEN enjoys less
exposure to dry-year hydro risk than its principle competitors Meridian &
Mighty River. (Page 14)

2. CEN has a 24% share of the Wholesale market by generation but sells 60%
to its own retail customers leaving the ability to sell the other 40% to the
spot market which has resulted in record revenue levels for April. (page 16)

3. Currently 36% of the shares are held by minority share holders.(Page 25)
I expect this figure to reduce after CEN purchase the 7-8% they require and
hopefully there will be a situation similar to Trustpower, shortage of
script, resulting in higher share price. (my own ramblings based on info
page 32).

4. Good Dividend.

Regards
Andrew

Hold CEN

Sam McGregor wrote

> IMHO Contact Energy will not benefit from the "high" spot prices at the
> moment for two reasons: 1.  The are also an electricity retailer, so they
> will have to pay the high prices at the other end 2.  Their lake and river
> levels are presently low, with forecasts for them remaining so over the
> entire winter.  They don't have  a lot of the cheap hydro power/storage
> anyway, most of CEN's electricity is thermal.
>
> Basically, IMHO Meridian Energy controls the market as they control most
of
> the country's hydro storage. Spring flows can be elevated through
snowmelt,
> but this is a minimal gain not worth worrying about.  If it rains,
> Meridian's lakes will also rise, thereby bringing prices down.  Either
way,
> Contact can't win.  Contact has never been able to produce the goods
growth
> or profit-wise, so I would not advise anybody to buy them at any price.
>
> Disc:  Sold CEN recently, never to buy again
>
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