ERM has a great underlying business and has caught the big with their pants down in the C&I (corporate and industrial) space over the last few years - AGL have said as much on several occasions.
Gas prices basically are irrelevant for Oakey and other similar peaking generators. These peakers fire up in <5 minutes and only when the price of electricity on the NEM are >$300/MWh which is many multiples of the short-run marginal cost of gas generation which is more in the region of $70-$100/MWh.
IMO the biggest threat to ERM's business is that they actually do end up swallowing MacGen and have to raise pretty uncompetitive finance to do so. Plenty of Jap & European banks have been burned in the coal generation financing business in Australia (no pun intended) in the last decade.
However, ERM lowballed the MacGen offer sufficiently with the knowledge that the market would spit the dummy and it did in the run up to bid submission. Mike Baird has said he wouldn't sell it below retention value, so I can't see any deal for MacGen actually happening with ERM
EPW Price at posting:
$1.84 Sentiment: ST Buy Disclosure: Held
