bad investment for me, page-8

Fair point - perhaps it's better rephrased as saying he has the ambition/cahunas/screws loose to buy a company making asset like Mac Gen, but perhaps not the equity to back it all up...

The wholesale price of electricity in the NEM (East coast Aus market) is in the region of $40/MWh. During periods of constrained supply or peak demand, that can hit $12,900MWh for short periods. Peaking power stations can be economic on the basis of less than 5 hours a year of peak pricing!

But that’s where hedging comes in. Just like a well behaved gold company, electricity retailers hedge their forward sales book – up to 4+ years into the future. And who do they buy these ‘hedges’ off? Well, if it’s in NSW for baseload power (24/7, as opposed to peaking), then a lot of the time it’s going to be Mac Gen.

The advantage of owning a Mac Gen is guaranteed hedging (you literally make the electricity), owning the ‘source’ of hedges (giving you a revenue stream to sell to other retailers) and, in the case of Mac Gen, market power to muscle the spot price of electricity by turning up or down the level of generation.

The market thinks that it’s cheaper to buy hedges than to own generation. Especially coal fired generation. Could that strategy cost you in price spikes? Yes, it’s a very real risk. I’m just not sure the protection offered by guaranteed hedging and revenue from generation and hedge sales offsets the massive capital tie up required an asset this size.

My recommendation if you're looking to learn more about this sort of stuff is to read some of AGL & Origin's more technical corporate presentations. The stuff they present to bank analysts is a pretty good temperature check of the driving forces behind the Australian electricity industry.