About to have an electricity glut?
Tiwai smelter uses 14 percent of our nation’s hydro power output, and it might be closing. Investors in the electricity sector have already started selling their shares. The flip side, if the smelter closes, is the supply of electricity available to Kiwi households will be increased — potentially by a whopping 14 percent.
Are we about to have a glut of electricity? If so, it follows that our monthly power bills will come down.
The then Eastland Community Trust (now Trust Tairawhiti) bought into Meridian when the government did its asset sales. As a beneficiary of TT, it is my hope our trust sold before this rush to sell began.
Footnote response from Trust Tairawhiti chief executive Gavin Murphy:
Trust Tairawhiti holds a long-term, diversified investment portfolio via Craigs across a range of investments, including some electricity sector holdings such as Meridian. Aligned to our trust’s tenure and deed requirements, we hold these with a strategy for the long term and with diversification.
All sectors have cycles and higher or lower valuation points. We believe our investment approach provides the best way to mitigate this. The review Mr Moreton references from Tiwai Point comes up periodically so if investors were worried about this having an impact, they would not have been in the shares over the past six years and would have missed out on some pretty significant gains from both capital and dividends. This is not a new thing. A 6-8 percent sell-off this week is fairly small in context when compared to the gains the trust has experienced from these companies.
Most importantly, we are not over-exposed but are still participating in the sector. Meridian shares are 1.7 percent of our current portfolio.