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  1. #1
    PlanYourTrade > TradeYourPlan RichKid's Avatar
    Join Date
    Jun 2004

    Default Snowy Hydro float

    The Snowy Hydro float is slated for July 2006, not sure if the market will be in corrective phase by then due to profit taking and tax time cleanup but it otherwise looks good for punters. Don't know what it'll mean for farmers and water users in various states (the poor Snowy River is not what it used to be) but the prospectus should be out next month.

    Here's some info:



    My posts are not recommendations (even when I rave about something). Always rely on your own research & judgement.

  2. #2

    Default Re: Snowy Hydro float

    Some discussion of the political issues in the link below, float to be pushed to at least July. Wonder if they think market conditions will be better for a float at that stage? They blame the delay on admin and red tape issues.

    Something that was paid for by taxpayers will now have to be paid for again, the marvel of privatization, the public has to 'buy' it twice, the only consolation is that some money goes to the govt- and some to merchant bankers. http://www.abc.net.au/pm/content/2006/s1630067.htm

    My posts are not recommendations (even when I rave about something). Always rely on your own research & judgement.

  3. #3

    Default Re: Snowy Hydro float

    From the Analysis that I have heard the price that it is going to be offered for is very good (They might be sensitive about another T2). Although, it might not be worth it if these droughts keep getting worse.


  4. #4

    Default Re: Snowy Hydro float

    Do you have any other early info on this float....I have recently moved to NSW.....are the shares likely to be offered on pro-rata basis to people in the state that owns that percentage,or an open float to all Australians?
    I got some in the NSW TAB float years ago and the allocations were cut right back to accommodate all applicants.
    Does the Snowy scheme get most water from melting snow ,or from rain...I say this because I believe that they will introduce a cloud-seeding program to enhance the natural rainfall.How effective this is,who knows?

  5. #5

    Default Re: Snowy Hydro float

    Looks like most from the snow..have u seen a picture of it ? it looks like it's at maximum compared to other damns around..it's huge.

    but yeh im worried too about the corrections effect on it. some ppl say the correction will take wind away from it..some ppl say it will actually push it right up as it's a defensive stock. im leaning towards it being a defensive stock..hoping on the bet that ppl have cashed in anticipation of the correction and waiting for a big tree to cling on to at the land slide.

  6. #6

    Default Im a newbie...worried about Snowy Hydro

    hi...I've recently just started trading and ppls been advising me to join the hydro float. But there's supposedly a correction about to come...if this comes along..and the snowy hydro floats somewhere near the correction date..what would be its effects on the hydro share price ? anyone have a guess ?

  7. #7

    Default Snowy Hydro - public offer.

    Hi All,

    I some opinions regarding this offer please.


  8. #8
    bullmarket's Avatar
    Join Date
    Dec 2005
    Looking over your right shoulder :)

    Default Re: Snowy Hydro - public offer.

    Hi Bobby

    Quote Originally Posted by Bobby
    Hi All,

    I some opinions regarding this offer please.

    I have pre-registered for the prospectus which is due to be sent out later this month. I'd like to read it first before forming an opinion on the offer.

    See you in about 3-4 weeks



  9. #9

    Default Re: Snowy Hydro - public offer.

    Beat me to it bobby,
    I received an email from comsec yesterday about this. Though I havn't really looked at it yet.

    Perhaps smurf would like to add his . He has proven that he is more then up to date on energy subjects!

  10. #10

    Default Re: Snowy Hydro float

    The actual business of Snowy Hydro is more fiancial trading than electricity generation or water management. Sure, it does generate electricity, but that's not the dominant feature of its business (though it is the basis of their entire business).

    The National Electricity Market (NEM) consists of the regions QLD, NSW, SN, VIC, TAS and SA. Snowy Hydro gets its own region simply due to their electrical location with the transmission network - effectively between the NSW and VIC transmission systems. Vic and NSW have been interconnected for decades via the Snowy but the addition of SA, QLD and TAS in that order is more recent (SA in early 1990, QLD a few years ago and TAS only 1 month ago).

    NT and WA are not electrically connected to the other states (in fact they don't even have a statewide grid to connect) due to distance and associated transmission losses making it impractical to connect to the other states. Darwin's electricity comes almost exclusively from Channel Island power staion (gas-fired) whilst in WA there is the SWIS (South-West Interconnected System) fed by coal and gas-fired plant and various gas-fired systems elsewhere. Both also have quite a lot of remote gas and diesel plants not connected to any grid.

    The NEM is the most volatile market you will find. Prices can rise 1000% or more in a matter of minutes and crash even more spectacularly. It's even possible (though not that common) for prices to be literally negative. So it's like buying XYZ stock at $15 and seeing it hit $1000 later in the day only to crash to $5 and then go to $5000 the next day and then become virtually worthless.

    Check out these graphs to see what's happened in the past day in the NEM. One graph for each state. The green line is power demand (not generation since the two may not match due to interstate power flows) and the red line is price in $ per MWh (megawatt hour - a single bar radiator would use this amount in 1000 hours).


    Note that the demand figures for Snowy are all over the place since they are predominantly pumping loads associated with Snowy Hydro which are switched on and off. The late evening / early morning jump in the Vic and SA demand is due to off-peak water heaters switching on. There is no such jump in Qld and NSW since they switch the off-peak on by remote control thus doing it far more smoothly. In Tas there is a substantial amount of non-scheduled generation (generation not traded via the NEM) which means the demand shown is lower than the actual power demand in Tas. Physically, this is the smaller hydro schemes and also wind generation. To a minor extent this also applies elsewhere though it's significant only in Tas.

    So what's this got to do with Snowy Hydro? Everything!

    It takes hours to start or stop a coal-fired power plant. Gas-fired steam turbines (eg Newport (Melbourne) or Torrens Island (Adelaide)) take quite a while too although they're quicker than coal. Gas turbines (basically jet engines) take 30 minutes to start without excessive wear. Also, coal-fired plant can't operate below (typically) 30 - 50% of maximum output - it's either run it hard or not at all. Gas-fired steam plant can get down to about 20% but for gas turbines it's more like a minimum of 65% of maximum output in many cases. And it costs a small fortune every time a steam plant is started (wear and fuel wasted).

    This means that fossil fuel generation has trouble responding to rapid changes in demand. But with hydro it's literally as simple as opening a valve and full output is possible almost immediately. No steam pressures to worry about, no thermal expansion of metals and so on. A hydro-electric plant is absolutely more flexible than any fossil fuel power station.

    This flexibility combined with large (3740 MW) generating capacity puts Snowy Hydro in a strong position to trade in the market. They can buy and sell a lot of power "on paper". Whilst their average output is limited to about 577 MW (otherwise they will run out of water - Snowy was built as a peak load scheme) they can trade far greater volume than this because most of the time it is simply "on paper". If the market price rises then Snowy can crank up their output virtually immediately.

    This puts them in an ideal position to offer hedging contracts to retailers (the businesses who sell power to the public) and even to other generators. Only when the market price rises will Snowy actually generate power.

    For example, today at 4pm the market price in SN was $21.42 / MWh and Snowy was generating 460 MW. At 5pm the price had risen to $25.77 and Snowy was generating 1000 MW. At 6pm it was $48.34 and they generated 1900 MW.

    At 6:00pm - $48.34, 1900 MW.
    At 6:05pm - $50.28, 1900 MW.
    At 6:10pm - $78.03, 1900 MW.
    At 6:15pm - $77.48, 1900 MW.
    At 6:20pm - $60.77, 1900 MW.
    At 6:25pm - $49.10, 1900 MW.
    At 6:30pm - $89.29, 1980 MW.
    At 6:35pm - $64.64, 1924 MW.
    At 6:40pm - $48.85, 1900 MW.
    At 6:45pm - $48.40, 1900 MW.
    At 6:50pm - $44.17, 1900 MW.
    At 6:55pm - $36.00, 1870 MW.
    At 7:00pm - $36.08, 1862 MW.

    At 8:00pm the price was $32.45 and they were generating 1400 MW.

    As can be seen from the above, prices are very volatile. They can range between $-1000 and $10,000 although negative values aren't that common.

    At 5am this morning the price was $17.33 and the Snowy generation was zero. At 6am - $19.97 and 320 MW, at 7am - $24.00 and 1040 MW, at 8am $36.00 and 1624 MW, at 9am $27.50 and 1373 MW, at 10 am $26.66 and 1000 MW.

    A couple of days ago during the evening the Snowy output was just under 3000 MW. Zero output a few hours later.

    So Snowy Hydro uses its flexibility to be able to provide a range of hedging products to electricity generators and retailers. When the price rises, they start generating.

    Snowy Hydro is also the builder of a new 300 MW gas-fired plant in victoria. It too is a peaking plant (though not as flexible as hydro) and will be used in a similar way. Being gas fired, it doesn't have the energy constraint (running out of water) that hydro does although fuel obviously costs a lot more. This will provide them with a degree of internal hydrological risk hedging since the bidding order (and likely actual generation levels) of gas versus hydro can be shifted according to water availability.

    Snowy Hydro is Australia's largest hydro-electric scheme in terms of peak generating capacity and the seccond largest in terms of actual power generation. Hydro Tasmania generates about twice as much energy as Snowy Hydro but has only 2300 (versus Snowy's 3740) MW of capacity. Hydro Tasmania's production does certainly respond to the peaks but they also have a large baseload (constant 24/7/365) output whereas Snowy does not. Fundamentally, Snowy is a peak load scheme whereas Hydro Tasmania runs an integrated scheme designed to supply the entire power demand in Tasmania. A stark contrast in the original design intent.

    It's a point worth noting that all integrated hydro-electric schemes will have different capacity factors for different power stations in order to manage the water efficiently. For example Tumut 3 (Snowy Hydro) rarely runs but has 1500 MW of capacity - a true peak load plant. Lake Echo power station (Hydro Tasmania) basically runs only during Autumn to release water to another 7 power stations downstream. But another plant on the same river, Wayatinah, has an average output that is fully 80% of it's maximum output - it runs fairly constantly with 5 power stations upstream heavily regulating the water flow.

    The effect of all of this is that there is a need to operate at varying output levels rather than "all on" or "all off" in order to balance water flows over time. Hence Snowy's hour or so at a near constant 1900 MW today. They could increase that if prices had surged but at some point the system must be balanced by operating some power stations whilst others are idle or at low output. Otherwise one dam would overflow whilst another upstream ran dry etc. Hence what may seem a rather odd strategy for output levels is actually quite sensible. There's also the point that Snowy can itself heavily influence the market price - not necessarily an advantage although sometimes it is.

    With the interconnection of former state electricity grids it is entirely possible that when you turned the toaster on this morning in Adelaide or Brisbane it was the Gordon power station in a remote part of Tasmania that generated the extra power you used whilst that hot shower I had this morning ultimately means more power generated in NSW (I'm in Tas). A complex system which works better than its complexity may suggest.

  11. #11

    Default Re: Snowy Hydro float

    well that was an interesting although complex read smurf.

    Reading between the lines it would seem that snowy has niche or advantage indicating that it may be a good buy?

    Have you pre-registered smurf?
    The greatest trick the devil ever played was convincing mankind he does not exist.

  12. #12

    Default Re: Snowy Hydro float

    Smurf, I know your expertise is energy and that's what you've been talking about here, but do you know anything about the hydro side of Snowy Hydro?

    Any of our agriculturalists got an opinion about this?

    For instance, just how much conflict of interest might there be between the need to conserve water against predicted agricultural needs in 6 months and the need to let it flow to generate power to be sold tomorrow morning?

    There are already questions over the way the corporatised, but still majority government owned, Snowy Hydro authority implemented its agreement about environmental flows for the Snowy River. I suppose that might imply that changing owners has no particular significance. But on the face of it, selling control of a major water resource in Australia to the private sector seems to me pretty close to national suicide.

    I'm open to convincing that this is a good idea, but to date the people most likely to benefit from the sale in the short term seem to be the NSW government and the Snowy Hydro executives, both of whom stand to gain wads of cash no matter what happens to the share price after the float. And the only reason for selling with such speed and absence of debate is that the NSW govt goes to election in March. That's not good enough IMO.

    Without music, life would be a mistake

  13. #13

    Default Re: Snowy Hydro float

    Hmm food for thought Ghotib.

  14. #14

    Default Breaking News: C'wealth will not sell

    Howard is just announcing that the Commonwealth will NOT sell its stake in Snowy Hydro.

    The immediate implication is that the prospectus has to be rewritten. Beyond that, we can all speculate. And write strenuous letters to our members of parliament if we're in NSW or Vic.

    Without music, life would be a mistake

  15. #15

    Default Re: Snowy Hydro float

    Great read Smurf,

    Morris Iemma (Sydney Premier) said the reason why he wants to list is to raise $3b in capital which will then be used for further funding on govenment projects (Health, Transport etc..). (According to the news last night)

    Vic and S.A Premier's support the idea. So if the pollies are going to raise a ****load of capital, do you think the share price will move slightly up on float day or lower?

    Your Views?

  16. #16

    Default Re: Snowy Hydro float

    It seems that the float is off the cards following the federal governments decision not to sell it's share. Will we see this position reveresed in the near future or is it now off the cards for quite some time?

  17. #17

    Default Re: Snowy Hydro float

    Quote Originally Posted by boults_4545
    It seems that the float is off the cards following the federal governments decision not to sell it's share. Will we see this position reveresed in the near future or is it now off the cards for quite some time?
    Certainly now canned.
    Isn't this a brilliant case of Government listening to the people.

  18. #18

    Default Re: Snowy Hydro float

    Quote Originally Posted by Ageo
    Great read Smurf,

    Morris Iemma (Sydney Premier) said the reason why he wants to list is to raise $3b in capital which will then be used for further funding on govenment projects (Health, Transport etc..). (According to the news last night)

    Vic and S.A Premier's support the idea. So if the pollies are going to raise a ****load of capital, do you think the share price will move slightly up on float day or lower?

    Your Views?
    Great read Smruf, learnt alot about the power market. But, what I want to say is this:
    Our country is much poorer than it should be. Iemma is an id*(&t as most other politicians are. You see, they go for short term gains that will allow them to spend big ready for an election. The downside is that this is at the expense of the general population and counrty long term, for some short term political points and baby kissing (or in this case school maintenance or whatever it was). There is a fundamental flaw in our system and that is that those who control this sort of thing are often the ones whom are trying to use it for personal / party gain rather than what could be the best interests of the nation and people. We will get our school maintenance programs and baby kissing anyway if they stop squandering long term assets for short term bnrownie points. In 10 years what will this money from the sale have achieved? will it be remembered or have lasting effects? not really, but in 20 years the Snowy Hydro will still be benefitting the Govt of Australia and its people if we still own it.
    I put in for the prospectus, only because if they are going to sell it then I may as well own some of it, but frankly im glad we arent selling of more assets for short term gain. The long term affects of this are already bein felt.

  19. #19

    Default Re: Snowy Hydro float

    another good post smurf! I think im going into information over-load... between buying a house, reading up on shares, plus your posts over the last few days I think my heads about to explode

  20. #20
    Mmmmmm 2nd breakfast Knobby22's Avatar
    Join Date
    Oct 2004

    Default Re: Snowy Hydro float

    It's off. Grreat news!
    Yemmers blaming the feds but he could easily sell with 57%.
    Politics (and democaracy) has Won.

    Snowy deal collapses
    The sale of the Australian icon, Snowy Hydro is off.

    The Commonwealth has pulled out the sale, prompting the New South Wales and Victorian governments to follow suit.

    The Prime Minister had been a strong defender of the sale.

    Now John Howard has backed down.

    "It is important that on occasions a government have both the courage and the willingness to change its mind on something," he said.

    Mr Howard's decision follows mounting pressure from the community and his own MPs.

    "I am not such a zealot about privatisation that you sell everything under the sun, irrespective of the circumstances," he said.

    Federal Opposition Leader Kim Beazley welcomes the decision but has seized on the Prime Minister's change of heart.

    "He said previously you couldn't partially own something, and today he's said you could," he said.

    But Mr Howard's turnaround on privatising Snowy Hydro will not be extended to Telstra or Medibank Private.

    The Greens are taking credit for the Government's backdown.

    Greens leader Senator Bob Brown says the legal opinion sought by his party forced the governments into a corner.

    "The motions into Parliament in March were effectively an illegal way of selling the shares," he said.

    "The Government had to come back, bring a bill into Parliament two weeks from now.

    "Mr Howard wasn't prepared to face the Parliament in two weeks with the meltdown coming from public opinion within his own ranks."

    NSW reaction

    NSW Premier Morris Iemma says the Mr Howard has "pulled the rug" from under the sale leaving his state with no choice but to cancel it.

    Yesterday during a speech in Canberra, Mr Iemma said the sale was a "done deal", but after the Prime Minister's announcement he says NSW will not proceed with any sale, including the option of just selling its 58 per cent stake.

    "Now we get into a political melee at a time when you need the confidence of the markets and the public for a sale," he said.

    He says the major problem now is the capital that is needed to keep the Snowy going, saying he does not want taxpayer's money used to expand it.

    "What we will be seeking from the Commonwealth is to engage in a process whereby the three governments and the shareholders resolve Snowy's capital requirements," he said.

    NSW Nationals leader Andrew Stoner says it is a huge victory for people power.

    "Communities right around NSW especially those along the Snowy and through the irrigations areas in the south of the state will be absolutely overjoyed," he said.

    "The PM has listened to the people and that's forced the hand of the NSW Government."

    Laurie Arthur from the Rice Growers Association says he did not think there was any way to stop the sale.

    He says irrigators were worried about their access to water once the scheme was privatised and most will be pleased with the about-turn.

    "I'm sure probably 80 per cent of irrigators are delighted that Snowy Hydro will not be privatised," he said.

    "I think some of our people think that governments don't do a particularly good job of running companies and so it's still a very complicated issue and I would predict that we haven't actually seen the last of it within the next 10 years would be surprised if it doesn't raise its head again."

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