Opg Power Ventures Share Discussion Threads

[azalea] 31/8/2017 12:32

smithless

To cut a long story short, given the numerous factors in play when agreeing contracts running for several years to supply a range of customers large and small, in some cases under the watchful eyes of local authorities; who could predict that a year or so later, coal prices would rise as high as they have? The likes of OPG, cannot turn round and say to customers sorry folks, the contract we signed is no longer valid because of the rise in steam coal prices and we are going to charge you more for electricity. If the UK 'big six' had signed contracts with customers for supplying electricity and/or gas, a few years ago; probably a few could be out of business by now. The hike in coal prices is relatively temporary. Who knows, if contracts with OPG come up for renewal 2018, higher priced electricity contracts could be the order of the day.

[the original goldbug] 31/8/2017 12:08

Smithless, utility companies charge their customers more when their input costs rise no?

Sure they take the hit for a while but not indefinitely.

[turbocharge] 31/8/2017 11:36

Plenty of buyers out there. So far 688,354 buys and 74,537 sells.

Wondering whether I should follow the herd and take a punt...

(Have no knowledge of this company)

[smithless] 31/8/2017 11:05

azalea - yes coal prices are beyond the control of the BoD, but as one of the most important costs of running the business, it shouldn't be agreeing contracts with a customers and leaving it to chance it can buy coal to cover the cost of delivery - any sensible company hedges. If it doesn't it will always be at the mercy of coal volatility and the whole business model would become unviable. That's the whole reason why utility companies are suppose to boring and relatively safe, yielding investments!

[azalea] 31/8/2017 10:45

No point speculating on the issue of covenants when you do not have a clue what they are. The prelims should include news of the delivery of the full paid 64k ton cargo vessel earlier this year, which should help significantly with the overall costs of importing coal from Indonesia. Coal prices are totally beyond the control of the BoD.

[smithless] 31/8/2017 10:31

Looking back at the 31 May trading update, which it stated:


'Independent expectations are for international coal prices to recede further throughout the rest of 2017 and 2018. The Company has purchased coal on short term contracts recently and continually reviews its longer term arrangements. We believe our track record shows this approach serves us well given the term for which we commit our prices to our customers'

It obviously got it badly wrong and we are paying the price. I don't know how long its client contracts are, but I would have thought one would buy forward for the length of the contract to guarantee margin. It would appear it took a view on coal and got it massively wrong. Just hope it is meeting its covenant requirements, otherwise in the merde

[the original goldbug] 31/8/2017 09:28

Tariffs are going to have to go up.

Arguably OPG has the most profitable business model in the sector. Other people are haemorrhaging already at a cash level.

The government is going to have to allow a period of super normal profits to occur if they want to see thermal capacity grow.

Super normal profits would mean tariffs up considerably and coal prices down. It is not inconceivable that such a scenario could generate 10p ++ of net earnings.

Granted that is of small solace to those of (everybody!) in the short term, but nevertheless quite possible within 18 months.

Hand ups, I accept the degree of operational gearing took me by surprise.

[andycapp1] 31/8/2017 09:06

The trouble is Azalea this share is now so toxic that it requires an heroic valuation to buy it. 5x EBITDA for a bunch of coal plants is hardly heroically cheap. So the Bulls or those that will touch this with a barge pole will need to see either tarrif increases, fuel price falls or both so that OPG gets back to 7p of earnings or more. I'd also question again the managements ability to judge and to predict the impact of coal prices. It just is one thing after another with OPG and investors weary of non delivery hence the poor rating and the precipitous fall yesterday when actually the Equity NPV (say 20 years) should not be impacted that much.

[azalea] 31/8/2017 08:50

Buy & sell volumes at the close yesterday were close enough to bring out buyers for 345k shares this morning without a seller in sight, in the first 50 minutes of trading. A dummy 10k sell, attracted an share price of er 32p

[andycapp1] 30/8/2017 18:53

Sadly not. I get the research in a personal capacity it's not for distribution.

[twistednik] 30/8/2017 18:38

Glad i got out earlier this year (albeit at a loss). This share and management team has turned into serial dissappointers.

I like the story, country and sector but management just don't seem focused on driving shareholder value.

Will look for some evidence of a turnaround before getting back in. Not sure what the catalysts are to drive a rerating of this one ...

[john09] 30/8/2017 18:34

Andy thanks. Do you have a link to the Maquarie note please

[andycapp1] 30/8/2017 18:28

Just been reading the Macquarie note. All bit gloomy I fear and eps at best going nowhere with a return to 7p of eps possible in 2019 if coal falls or tariffs adjust albeit with a lag. So divi going nowhere and all a bit dull I'm afraid. So shares bit cheap but won't go anywhere soon. Basic issue is capital raised is not achieving a good enough return and value has been destroyed as a result. But I will hold at this level.

[azalea] 30/8/2017 16:13

If one assumes that the debt problem has been sorted, the other two significant problems the BoD has had to face - delays in building electricity pylons and coal prices; have both been beyond their control. Whilst the former has long been sorted, the other is just a case of waiting until the latter fall as predicted. If the massive coal mine goes ahead in N.E. Australia, then given the reduction in consumption of coal by China, the prices forecast for 2019 should be proved correct.

Edit: As we near the close, Buy volume total 1.22m. Sell volume total 1.35m. unk 71,469.(Morningstar data)

[the original goldbug] 30/8/2017 15:31

The two fund raising at 60p and 90p were in hindsight egregiously mispriced.

However it would be equally foolish to capitalise bottom of cycle profits, which the 30p share price appears to be doing.

[smithless] 30/8/2017 13:26

nerdosteel - might be wrong, but IPO'd 30 May 2008 at 60p, market cap on admission £172m, so a disaster

[azalea] 30/8/2017 13:06

I believe Slater bought less than 3%, hence they are not shown as a major holder.

[nerdofsteel] 30/8/2017 13:02

Slater bought in very early and made a lot of money on this

[falia] 30/8/2017 13:01

guys get into halo, rising

[azalea] 30/8/2017 13:01

According to Morningstar data, since circa 11am, buying volume has increased by 329,000 shares V 164,000 sells.

Edit:1411hrs `Buy volume total 988,000. sells total 1.030,000. Unk 71,000

[nerdofsteel] 30/8/2017 13:00

Still the fastest growth of any AIM Co. nearly 6000% over 10 years if you took part in the original IPO...

[smithless] 30/8/2017 12:20

Well it goes to show the analyst at Shore Cap is just as clueless as the management. It's all just guess work.

[trytotakeiteasy] 30/8/2017 12:14

I seem to remember the Slater fund was in this. Wonder what they think of it now?

[tiltonboy] 30/8/2017 11:55

Shore Capital are forecasting 1p of EPS for 2018, down from 7p.