Latest / Best of Business / Jeremy Hutton: Milford Asset Management Equities Analyst on Tiwai Point locking in a 20-year deal

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Jeremy Hutton: Milford Asset Management Equities Analyst on Tiwai Point locking in a 20-year deal · Best of Business

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  Speaker 2: Jeremy Hutton, Milford Acid Managements with Us, Hey, Jeremy.
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  Speaker 3: Good evening, Heather.
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  Speaker 2: Were you surprised by the fact that there was a
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  Speaker 2: twenty year deal with Typoint.
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  Speaker 3: Yeah, it was the news that everyone who follows the
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  Speaker 3: New Zealand electricity sector had been waiting for eagerly, and
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  Speaker 3: it was a positive, positive news. And yes the deal
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  Speaker 3: length was a surprise. So Moody and Energy, who is
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  Speaker 3: the primary negotiator, had requested a longer deal than the
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  Speaker 3: normal or the previous three yearly deal cycle, and Rio
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  Speaker 3: Tinto who's the owner of the smelter, like to play
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  Speaker 3: hardball around the shorter timing in the past, so effectively,
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  Speaker 3: Mudian was seeking the longer term, a more meaningful deal
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  Speaker 3: and something that it gives a sector more opportunity to
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  Speaker 3: invest long term and of course give the local community
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  Speaker 3: done on South lond more certainly around jobs and opportunities
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  Speaker 3: as well.
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  Speaker 2: What do you reckon this means for new renewable projects
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  Speaker 2: in the kind Will more of them get built?
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  Speaker 3: Yeah? It should be a large positive for new renewable
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  Speaker 3: builds in New Zealand, and the ty smelter is a
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  Speaker 3: really large user of electricity in the country, around twelve
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  Speaker 3: to thirteen percent of total electricity demand, and if the
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  Speaker 3: smelter had exited, it would have left the electricity market
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  Speaker 3: and a heavy oversupply, and this incentive to build for
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  Speaker 3: developers would have been gone probably for the rest of
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  Speaker 3: this decade.
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  Speaker 2: And a smelter exit would have impacted our country's electrification plans.
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  Speaker 3: Do you think, yeah, my viewer would have It would
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  Speaker 3: have impacted our ability to decarbonize and electrify materially. I mean,
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  Speaker 3: we do as a country need to produce a lot
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  Speaker 3: more electricity to meet our total country carbon commitment goals.
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  Speaker 3: And the Gentailers and other developers have been building a
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  Speaker 3: large amount of view generation already, mainly on the back
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  Speaker 3: of growing demand from things like electric vehicles and data
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  Speaker 3: centers that we know. But now the gentailers and other
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  Speaker 3: developers will be you know, they have that suit to
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  Speaker 3: commit to more generation and they are long term projects,
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  Speaker 3: so they need that certainty. And there are some great
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  Speaker 3: wind projects that I think will kick off on the
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  Speaker 3: back of this, particularly down in the Deep South where
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  Speaker 3: there is some great resource. Unfortunately it's really close to
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  Speaker 3: large users like the Tay smelter as well.
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  Speaker 2: That's good stuff. And what happened to the share prices
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  Speaker 2: of the gent.
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  Speaker 3: Tailors, Yeah, the size of the positive reaction was a
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  Speaker 3: surprise to me. I mean, the market had been anticipating
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  Speaker 3: a ty Stay deal as likely, so part of the
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  Speaker 3: good news was factored and already. But there is always
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  Speaker 3: some risk that the exit scenario could play out, and
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  Speaker 3: that was in the price a little bit too, albeit
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  Speaker 3: it was small in this instance. So you saw a
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  Speaker 3: small pop of between three and five percent for the
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  Speaker 3: big three gent tailors, so Maridy and Mercury and Contact.
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  Speaker 3: But there was always also a bit of other action.
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  Speaker 3: On that day, there was a large passive index rebalancing event,
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  Speaker 3: and that generally happens on the last trading month, of
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  Speaker 3: the last trading day of the month, and these passive
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  Speaker 3: funds tend to the market a little bit. When that
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  Speaker 3: hit in the last hour, those share prices took another
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  Speaker 3: leg up and Meridian finished up ten percent on the day,
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  Speaker 3: which is really a huge move for a steady gent
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  Speaker 3: tailor like MERIDIANY.
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  Speaker 2: Tell you what, Jeremy, thank you Jeremy Hutton Milford Asset Management. Hey,
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  Speaker 2: I you with one of the mum and dad investors
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  Speaker 2: buying into these companies when the country sold down. Chuch
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  Speaker 2: hang good move from you.
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