EPW 0.21% $2.43 erm power limited

Lilac that was a very good and opportune post. You do deserve...

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    Lilac that was a very good and opportune post. You do deserve the praise - you have always said it like it is and have some experience in this area.

    What did interest me were these parts of your post:

    "Don't underestimate the influence the uncertainty the MacGen bid had on this slide"

    It got me thinking as they had raised $60 million earlier in 2013 and as such the Nov 7 raising was two days after being shortlisted - I know they stated it was to buy Oakley and reapy oakley's debt but in reality they had free cash available that would have done that as was stated at the AGM. They did not have to repay oakley Debt. So they placed the $75million @ $2.53 two days after being shortlisted. I would presume that the presentations to those SOPH's and the question would have been asked - why now you can do it out of existing resources. The timing suggests that the trigger was the shortlisting so that must have been the thrust of the need - we can have a totally unencumbered asset with a replacement cost north of $300m and in fact hardly used. It allows you to gear it and on the numbers it can probably take around $200 to $250m debt if it was to buy more income generating assets.

    The big issue is that those shareholders that got on board - would they stay if the MacGen deal did not happen - who know but in reality the final straw in my opinion is the MEL referral to ICAC - I a new shareholder who bought into the dream because of MacGen would have to believe that the events recently would preclude the NSW government of having anything to do with the sale of MacGen. So rationale for buying shares gone. Most of the smaller insto that I know would want to exit - the framework sold to clients would be gone. That to my mind was and is the reason for the plunge.Previous to that it was just a question mark about value IMO and MacGen looked a bit dubious as the price was too high.

    "(challenges ahead yes, insurmountable(?)...NOT to this management imo."

    Wow I was surprised by this statement - I am not aware of what these challenges you see are. I cannot tell whether we need a generating capacity - surely we just need say a smaller base load power station - why not the gas fired one in WA could we not go from operator to acquirer - is that not better than coal. However I invested in a company that only had peakers and I was happy and they are really competent in the electricity trading game. The smaller end of town is a far harder changeover than the big end because it does not make so much difference to them and they have probably had bad experiences before - So I am not surprised by the slow take-up but we have expensed the money and now its just a slower brand building exercise but each added customer is at a much higher margin and will over time protect us from the low margin environment and give us a better mix. The way I see it one day someone will come knocking with a chequebook.

    I see the contract they got to be supplier to the commonwealth as securing the growth for 2016 and beyond. The only headwind is the NSW contract and I think that ICAC and it throwing the referral out is indicative of NSW government having to be a bit careful of its behaviour into the future. We could lose it but thats life and each month a few more users sign up.

    So I am trying to understand the headwinds or concerns. The only ones I see are in the peripheral business plays - The Gas - Not sure we really should be wasting time here - do we have assets that are really going to deliver EGO ?? MEL ?? the ROG - who knows st baker has taken a stake there directly as well.

    Personally I dont see how they make any sense - The sale of Gas yes and they are approaching it wisely.

    Give us your thoughts? what is concerning?



 
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