Forum Archive Index - May 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

The biggest issue for me as regards Contact Energy is what happens 
to Otahuhu B, and the Taranaki Combined Cycle Station, and 
Contact's third planned for but not started gas power plant when the 
cheap supply of Maui gas ends in 3-4 years time.  The best scenario is 
that a new large-scale gas field will be discovered.   However, there is 
no sign of this happening and I don't think it is good practice to go into 
a business investment, like buying shares in Contact Energy, when 
your only guaranteed supply is 'pipe dreams'.

Contact Energy has prudently taken the initiative to investigate the 
worst case scenario.    Contact have put up a 'kite flying' proposal to 
import LNG by the tanker-load.   LNG is a fuel that can be burned in 
Contact's existing gas turbine stations without too many modifications.  
That means there is no chance that the huge investment Contact has 
made in Otahuhu B already will become obsolete.    Latest figures I 
have seen for LNG leads me to believe that the wholesale-generated 
cost will be between 8c and 10c per kWh.   Those kinds of figures are 
in the ballpark with new wind power and incremental small-scale hydro 
projects.  However LNG is an international commodity and the price is 
liable to be much more volatile than Maui gas!  My take on what will 
happen if the LNG scenario unfolds is that it will have very little effect 
on Contact's gas power stations stand alone profitability, for any higher 
input prices will be fed straight through to the energy customers.

What effects will higher power prices have on Contact's existing giant 
hydro stations of Roxburgh and Clyde?    Scarcity of power will drive 
up prices but not the cost from these hydro stations.    Those hydro 
turbines effectively become money presses, printing out profits for 
Contact at a rate that could not have been conceived only a few years 
ago.  

SNOOPY
--
Message posted by Harry Tennyson
 using Pegasus Mail 4.02
I have Word 97 to read attachments
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