National Grid Share Discussion Threads

[skinny] 29/7/2013 07:02

HIGHLIGHTS

· Solid operational and financial performance during the period
· UK: Good progress developing UK business to deliver outperformance under RIIO
· US: Positive start to the year with all outstanding rate plan settlements now approved

[newbank] 28/7/2013 13:35

AGM Monday, may get some insight into whether the Divi policy is robust, as I expect some 'City Analyst' would want some questions answered.

[pierre oreilly] 22/7/2013 10:58

redartbmud 22 Jul'13 - 08:52 - 2766 of 2766 0 0

Pierre

Can I please have your rose tinted glasses when you have finished with them?

red

Well Red, with that stunning intellectual and informed reply, I think I'll reassess all my opinions on our electricity industry to align them with yours. Thanks.

[redartbmud] 22/7/2013 08:52

Pierre

Can I please have your rose tinted glasses when you have finished with them?

red

[darias] 22/7/2013 08:47

P o'R

Good post. :-)

[pierre oreilly] 22/7/2013 00:59

redartbmud 21 Jul'13 - 20:24 - 2762 of 2762 0 0

Pierre

I trust that your blood pressure is now back to normal.

Qué?

I was referring to the fact that, before privatisation, the government could/should have spent more on infrastructure up-grade/renewal.

Are you sure that's a fact?

So you're talking about pre-1990?, say 24 years ago? Even then, there was no shortage of investment in either people or infrastructure. Dinorwig was built pre-privatisation, and that at the time was the most costly civil engineering project in the World. Plenty of expensive Nuclear stations were built during CEGB's time, along with the grid infrastructure to handle them. In those days, the government were guided by senior grid engineers and investment was targeted on engineering principles (unlike today). Sheesh, how else do you think we had the most reliable electricity supply in the World with our expertise being sold to many other countries? Judging by the fact that today the grid is soon to rely on a large investment in tiny diesel generators, with thousands planned, I doubt anyone is interested in our ESI technology today.

[esmerelda] 22/7/2013 00:37

I have a lot of sympathy for what you say Darius. IMHO buying back shares is always poor use of shareholders money. Whilst it potentially increases EPS that does not necessarily mean a higher share price. Also buying back at high prices (IIRC the share was trading at the top of its range when they did so) is a bit of a risk if the market turns. FWIW I would have paid down the most expensive long term debt with that money but I suspect senior management might have been incentivised on EPS or share price and not net debt!

However I think you have to bear in mind that for NG if debt becomes too low then you become a takeover target for those willing to use the company's own money/debt rating as part of their own financial muscle, eg Manchester United. Perhaps that might be good for shareholders but not necessarily management. I doubt that is something you need to worry about if you own a controlling stake in your company.

I do think there is a reasonable question to ask as to why they were buying back shares only to have a Right's issue a year or two later. That is not good financial planning IMHO.

[riskybiznizz] 21/7/2013 20:37

Be VERY quick. Battered share price expected to rebound hard throughout next week...

19 July 2013
FRONTIER MINING LTD
(�Frontier5533; or �the Company�)
Publication of Expert Independent Report
Frontier Mining (AIM:FML), the AIM listed exploration, development and production company focused on Kazakhstan, announces the publication of an Independent Expert Report, by Wardell Armstrong International, entitled �Review and Preliminary Valuation of Baitimir Project Located within the Naimanjal License Territory NE Kazakhstan, dated 16 July 2013.�
Wardell Armstrong International (WAI) is an independent engineering and environmental Consultancy, which has provided the mineral industry with specialised geological, mining, and processing expertise since 1987. WAI was commissioned by Frontier to prepare a scoping report to include a preliminary financial evaluation, based on data provided by Frontier up to 25 December 2012, of the Baitimir project. The project is located within the Naimanjal license, and is comprised of the Baitimir, Yubileiny and Beschoku copper deposits.
This report documents the geological block preliminary modelling and mineral resource as at October 2012, and is a non JORC (2004) compliant desktop report.
The results of the financial modelling show that, when applying various discount rates between 8% and 20% the model produces Post Tax Net Present Values of US$17 million and US$67 million respectively based on income from the recovery of copper, silver, gold, magnetite and molybdenum. The internal rate of return (IRR) for the Baitemir and Beschoku projects are approximately 40% with a payback period outlined in the report of 2.73 years. Wardell Armstrong estimates that the cash operating costs over the life of mine are approximately US$10.01 per ton of oxide ore processed and US$19.79 per ton of sulphide ore.
DCF Model Results (Before Funding and Debt Service):
NPV@ Discount Rate
8%
USD$m
67
NPV(Base Case) @ Discount Rate
10%
USD$m
53
NPV @ Discount Rate
15%
USD$m
30
NPV@ Discount Rate
20%
USD$m
17
IRR
%
40%
The review and preliminary valuation support Frontier Mining�s view that Baitimir is an attractive project with robust economics. Frontier will keep all options open as to the optimal development strategy for the Baitimir whether that be from its own resources, through joint venture or through the sale of the project to a third party.
A full copy of the report can be found on Frontier�s website: www.frontiermining.com
Frontier Mining Ltd
Yerlan Minavar
[phone]
Libertas Capital (NOMAD)
Sandy Jamieson
[phone]
RFC Ambrian (Broker)
John Harrison
Richard Morrison
[phone]
Walbrook PR
Walbrook IR
Lianne Cawthorne (Media Enquiries)
Paul Cornelius (Investor Enquiries)
+44

[redartbmud] 21/7/2013 20:24

Pierre

I trust that your blood pressure is now back to normal.

I was referring to the fact that, before privatisation, the government could/should have spent more on infrastructure up-grade/renewal.

And yes, the government control Ng spend, profits etc etc. It is a cheap way of running a public service - get someboady else to fund it! That said I have a significant stake.

The bigger the capex, the bigger the interest bill!!


red

[rcturner2] 21/7/2013 07:55

Thanks guys.

[darias] 20/7/2013 14:18

RCT

Redart has highlighted points I was trying to make.

To put it simply - the company had large cash reserves to 2008. So what did the company do with the reserves? As Redart says it did not invest the money to "fix infrastructure". It did not even draw down debt to take its business out of the hands of the money lenders. What it did was buy back shares - not from me or you but from the hedge funds, insurance companies and banks the same organisations that lent them money in the first place.

NG continued to pay a handsome dividend.

4 years later and it comes back to the market because, I assume, the regulator says that they have to "fix infrastructure". Perhaps if they had earlier paid down debt they could have borrowed some more and not needed to come back to the shareholders for more money.

As I have said before the board play with money rather than run a company. When their games go wrong they have a rights issue.

NG. is an established company with predictable cash flows so why does it need a rights issue? It has long gone past the "growth stage" of development.

My company has this year gone for growth. This has been funded by borrowing and a rights issue. I like to think that we would only have been able to borrow more money as, for the last 19 years, I have been vigorously reducing debt so that total borrowings, even now, are less than when I borrowed to set up the company. This is simple economics and NG board have demonstrated to me that they don't understand simple economics.

[pierre oreilly] 20/7/2013 11:07

Where do you get that there has been a huge underinvestment by ngc? It's nonsense I'm afraid.

The regulator dictates the infrastructure investment, as he also dictates the return made on that investment. NGC income is simply an uplift on the traded electricity, and there is (virtually) zero risk there (apart from regulator rsk). This isn't a normal company, it is central to the social infrastructure and even the defence of the UK believe it or not, and hence why the government always has and always will dictate its whole operating environment. It is inconceivable that the company will ever be 'in deep doodoo'.

The main investment to come (50% from operations and 50% straight on customer bills iirc) is almost all due to 'renewables' connections, especially offshore wind which is external to the current footprint. Not only are the costs extremly high in getting the capacity to the footprint, but also the upgrades necessary to improve the resultant transmission constraints they cause within the footprint are very high - especially when you consider the total capacity has to be handled, and yet that the average power transmitted will be about a quarter of the capacity. The power is also non-dispatchable, i.e. grid engineers can't instruct the plant what to generate when in order to match demand, so may have to handle high power at low demand times, which causes problems for the grid, and also may not get any power during periods of high demand when needed most.
Another development, also to reduce transmission constraints, are the bootstraps, bringing lots of power from Scotland (where there is an excess) straight down well into England bypassing the existing grid altogether, getting the power to where there is a deficit and lack of capacity (SE Engand).

There has been no lack of investment in the grid so far, just a new very large requirement from renewables, wind mainly, for very large extra investment (for a relatively small benefit), but the regulator says it has to be done, so it will be, and ngc will be rewarded by a good financial return on that (poor in normal terms) investment, also dictated by the regulator.

[redartbmud] 19/7/2013 08:41

AGM 29th July I believe.

RCT
Ng has to spend a lot of money to fix an infrastructure on which there was huge under-investment for decades.
It also has to up-date and extend the network.
They announced a £20 billions capital programme, over the next few years, from memory.

They do get a return from these investments, but they are monitored and regulated.
The trick is to balance the cost of borrowing against the income generated. If/when borrowing costs rise, selling prices fall then deep doodoo becomes a possibility.

red

[rcturner2] 19/7/2013 08:12

Darius - surely when the company borrowed in order to "deliver attractive returns to shareholders", that means they will invest the money to generate an income, not simply pay out the borrowing as a dividend?

[miata] 08/7/2013 15:02

Perhaps the truth lies in the middle, personally I think 660 is a very low target given the 5.4% yield.

Date Broker name New Price Old price target New price target Broker change
31-May-13 JP Morgan Cazenove Neutral 784.50p 785.00p 735.00p DownGrade
10-May-13 JP Morgan Cazenove Neutral 823.00p 720.00p 785.00p Reiteration
23-Apr-13 Bank of America Neutral 807.50p 735.00p 800.00p DownGrade
22-Mar-13 HSBC Overweight 753.50p 780.00p 850.00p Upgrade
18-Mar-13 JP Morgan Cazenove Neutral 735.00p 640.00p 720.00p Upgrade
25-Feb-13 Credit Suisse Outperform 717.50p 770.00p 770.00p Reiteration

[skinny] 08/7/2013 09:06

Take your pick.

Deutsche Bank Sell 753.25 749.00 660.00 660.00 Retains

Morgan Stanley Overweight 753.25 749.00 880.00 880.00 Reiterates

[pal44] 25/6/2013 08:53

is it a question of money supply . looking very oversold at the mo..

[darias] 24/6/2013 16:59

It is never cheap to borrow money. The lender lends to make a profit and the profit comes from the borrower's exertions, trades or investments. I accept that borrowing is often necessary. My business has just taken on additional borrowing to invest further in property. (You should understand that I will be repaying that debt as quickly as I can).

What I cannot accept is borrowing to "deliver attractive returns to shareholders". Especially after many years of buying back shares from the bankers, hedge funds and insurance companies.

The only way for rates to go now is up especially after we are told that QE in the states is going to end - all those bonds coming onto the market are bound to increase yields hence rates. That is why we have seen the market getting caned. Remember it can always go lower.

[redartbmud] 24/6/2013 15:01

Darias

I agree on the size of the debt, but the company has a big infrastructure programme to deal with.
The FD said that it is cheap to borrow money at present, and the market is happy to lend. They can make a positive return on the borrowings.
It remains to be seen what will happen when rates go up, but that may not be seen for the next 18 months to 2 years hence.
For now the market has taken a view on high yielding regulated utilities and have marked them down IMHO.

red

[darias] 24/6/2013 12:46

Thank you for your opinion. You really should consider why you "invest". Surely you don't believe it gives you a say in how the company is run? NG. is run for the benefit of the bankers, hedge funds, insurance companies and the PI can go hang as far as the board are concerned.

As for ramping, did you not see my opinion in the last post that I still think debt is too high. I do not ramp or deramp. I merely report what company's say and formulate opinions and dealing strategies from that. We did not short the stock merely got out according to our strategy. We may buy more if it drops further but we are very unlikely to take up rights in order to "deliver attractive returns to shareholders".

[pierre oreilly] 24/6/2013 10:55

You can buy and sell as you wish, no problem with that.

The problem I have with people like you is that you have no idea of the underlying functions of the company you invest in, and simply ramp away when you hold (no doubt we have some of that to come), and slag the company off when you have sold.

I expect you probably think that your posts on here have caused the price drop, and you bullish posts to come will make it rise. That wouldn't surprise me at all.

There has been a drop of a larger magnitude in almost high divi shares (and gilts), ng. hasn't done anything particularly different from the market, except not dropped by as much, ex div. All the factors you were slagging off last week are still in place now (if they were last week). You don't buy a ponzi scheme, debt ridden company who only pays dividends from cash raised in rights issues because it's 10% cheaper! You're a disgrace in my opinion.

[darias] 24/6/2013 07:36

Pierre

The club buys shares in order to make money. NG., when we sold, was trading around 12.5% more than the current price therefore the yield on the dividend, if maintained, represents better value than when we sold especially if other mugs take up any rights to maintain the dividend. I still feel that debt is too high. Note the fact that we have come back in with a smaller amount invested.

I also like to post when we take a position rather than, like many, on advfn who dream that they have taken a winning position after the event. Even you must agree to sell at £8:33 and buy back only 3 weeks later at £7:40 is not bad business.

In any event it was you who suggested that I thought that it was a "giant Ponzi Scheme" I merely compared it to a Ponzi Scheme and pointed out a major difference.

Why would our investment decisions concern you?

Regards.

[pierre oreilly] 23/6/2013 17:44

So it's not a Ponzi scheme today. And is 80% debt not too bad afterall? And what happened to the dividend which, according to you, is simply paid out of the money it keeps raising in rights issues? You're investing in a company which only last week you thought was the pits? How strange.

[darias] 21/6/2013 07:59

We're back in.

Lot smaller investment than before

[darias] 10/6/2013 15:09

That is what makes a market - different opinions. :-)