Climate-change activists (when they go back to school) could study why there is good news for energy companies

As NZ schoolchildren  gear   up  for a   ‘strike’   against  the  approaching  apocalypse  precipitated  by  global  warming,  there is  (slightly)  more comforting  news  (though  not  perhaps to the children) from an outfit   familiar with NZ weather  patterns.

Meridian  Energy  reports  that  it  has  seen  no significant  change to  catchment inflows over the last 100 years.  There has been some  seasonal  shift in inflows , with drier   autumns and wetter  summers.  It  notes snowpack  and glaciers  are getting smaller.

Meridian,  NZ’s  largest  electricity generator,  reports it is  projected  to get wetter in its   catchments, including in  winter, with bigger  individual  rainstorms.  But it  will be drier in  irrigation areas.

And  warmer  everywhere.

But is this bad  news  for  a  company  that sells  electricity?

On the  contrary.

Meridian  reckons  with  demands for   action on climate change growing, electrification  of  existing fossil fuel  energy use,  (largely  outside the electricity sector)   could significantly   lift  electricity demand,  meaning  lots of  new generation will be needed.

Unsubsidised renewables  are  likely to form the  bulk of   new generation (though investment timing is uncertain).  Unit costs of  newer technologies  (wind, solar, batteries)   will  continue to  decline.   However   increases  in intermittent  generation will create  more volatile market   prices.

Though  consumer-led technology  uptake will occur,  it will  supplement, rather than displace, grid-level  power.

With  wholesale prices  reflecting  gas supply  concerns,  Meridian   says  that, along with  recent  high inflows, has produced  “very favourable”  second half FY19 trading conditions.

So  it’s  not   all  bad  news   on the climate  change  front — at  least   for investors  in   companies  like  Meridian.

And that  includes the  government   which,  back  when it   partially  privatised  the  state-owned  enterprise,  carried  it  at  a book value  of   $5bn.

Now the  market  capitalisation of  Meridian  is  $11.2bn,   meaning the government’s  51%  share  is worth  more than  the full enterprise’s value  at the time of the share  float.

Maybe  if  the government  sold down  more of its  shares,  it  could  afford to   pay  the teachers   (who  are so  helpful  to children   writing   those  apocalyptic   placards)   the higher  salaries  they are striking for.

Something for everyone, then?

 

One thought on “Climate-change activists (when they go back to school) could study why there is good news for energy companies

  1. The current government won’t sell any of its shares in the energy companies. If it did, it would lose control of the Boards, who then might tell them to get lost with their nudge nudge wink wink suggestions. b

    Like

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