About to have an electricity glut?

LETTER

Tiwai smelter uses 14 percent of our nation’s hydro power output, and it might be closing. Investors in the electricity sector have already started selling their shares. The flip side, if the smelter closes, is the supply of electricity available to Kiwi households will be increased — potentially by a whopping 14 percent.

Are we about to have a glut of electricity? If so, it follows that our monthly power bills will come down.
The then Eastland Community Trust (now Trust Tairawhiti) bought into Meridian when the government did its asset sales. As a beneficiary of TT, it is my hope our trust sold before this rush to sell began.

Winston Moreton

Footnote response from Trust Tairawhiti chief executive Gavin Murphy:
Trust Tairawhiti holds a long-term, diversified investment portfolio via Craigs across a range of investments, including some electricity sector holdings such as Meridian. Aligned to our trust’s tenure and deed requirements, we hold these with a strategy for the long term and with diversification.
All sectors have cycles and higher or lower valuation points. We believe our investment approach provides the best way to mitigate this. The review Mr Moreton references from Tiwai Point comes up periodically so if investors were worried about this having an impact, they would not have been in the shares over the past six years and would have missed out on some pretty significant gains from both capital and dividends. This is not a new thing. A 6-8 percent sell-off this week is fairly small in context when compared to the gains the trust has experienced from these companies.
Most importantly, we are not over-exposed but are still participating in the sector. Meridian shares are 1.7 percent of our current portfolio.

Tiwai smelter uses 14 percent of our nation’s hydro power output, and it might be closing. Investors in the electricity sector have already started selling their shares. The flip side, if the smelter closes, is the supply of electricity available to Kiwi households will be increased — potentially by a whopping 14 percent.

Are we about to have a glut of electricity? If so, it follows that our monthly power bills will come down.
The then Eastland Community Trust (now Trust Tairawhiti) bought into Meridian when the government did its asset sales. As a beneficiary of TT, it is my hope our trust sold before this rush to sell began.

Winston Moreton

Footnote response from Trust Tairawhiti chief executive Gavin Murphy:
Trust Tairawhiti holds a long-term, diversified investment portfolio via Craigs across a range of investments, including some electricity sector holdings such as Meridian. Aligned to our trust’s tenure and deed requirements, we hold these with a strategy for the long term and with diversification.
All sectors have cycles and higher or lower valuation points. We believe our investment approach provides the best way to mitigate this. The review Mr Moreton references from Tiwai Point comes up periodically so if investors were worried about this having an impact, they would not have been in the shares over the past six years and would have missed out on some pretty significant gains from both capital and dividends. This is not a new thing. A 6-8 percent sell-off this week is fairly small in context when compared to the gains the trust has experienced from these companies.
Most importantly, we are not over-exposed but are still participating in the sector. Meridian shares are 1.7 percent of our current portfolio.

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Winston Moreton - 25 days ago
Electricity Glut Consequences

It is pleasing to find Trust Tairawhiti, early on in its new livery, showing real signs of transparency. I suppose it is both public spirited and reassuring to put some of the trust's business decisions in the public arena. My concern last week was the trust with more than $100,000 of our money invested in Meridian Energy might have missed the "sell now" orders flying out to stockbrokers around NZ. It is reassuring to know the trustees consider a 6-8 percent sell-off (it has happened) "fairly small in context when compared to the gains the trust has experienced (past tense) from these companies". My point is Energy Minister, Megan Woods, has announced that the Government will no longer (present tense) be propping up the Southland Comalco plant and letting it continue to have 14 percent of NZ's electricity supply from Lake Manapouri at a fraction of true cost.
The downstream consequence is even more alarming. If the smelter no longer takes the Manapouri output that means an oversupply of electricity. What value then is our $125 million spend, via TT, on a geo-thermal generator in Kawerau? Plus, as I've said before, it's built on a non-renewable Maori land lease.