Snowy Mountain Hydro Float

Just preregistered for shares here:

http://snowyshareoffer.com.au/Home.aspx

Has anyone any info or opinions to offer on this one?

Will it be worth a stag play?

Cheers,

 

What does stag play mean?

 

If a share float is oversubscribed they can debut on the market at a significantly higher price. Shares can then be sold at a quick profit. This is stagging.

Sometimes after the initial flurry the share price can settle down - even below the issue price.

Not always successful and sometimes the price goes up further over time.

but in the past I have made 30%+ profits in this manner. wish I had done it with my telstra shares tho....

 

I've worked as an analyst of sorts in the electricity market (the NEM) for some years now. Maybe I'm too close to the action, but I think there is still a lot of uncertainty in the structure and regulation of the NEM which puts me off investing in a company like the Snowy.
For example, there are some unique "features" of the market that Snowy have been taking advantage of in the last few years to make some good revenue. These features are due to a combination of the physical characteristics of the network around the Snowy region, and the market rules that set spot prices in each region. There is currently an industry review underway which is looking to modify the rules to reduce the "market power" that Snowy can exert under certain conditions.

I don't mean this as a reason not to invest in Snowy - they are a very dynamic company (I have seen some of their trading activities, and they are more sophisticated than most in the NEM). For me though the NEM is a very complicated market with a lot of political risk, so I'm not sure if I would be comfortable investing in that environment. There is also still a lot of mergers and sell-offs going on. You never know if the new owner will change the operating strategy of the assets as they integrate them with the rest of their portfolio, and what implications that would have on your investment.

I think one of the real advantages that a company like Snowy has is that it is a renewable energy company. If the fed governemnt ever gets around to increasing renewable energy targets then companies like Snowy, Hydro Tasmania, and Southern Hydro (I think AGL owns them now though) could make some easy money. Just recently in Tasmania there is talk about scrapping one or both of the planned wind farms because they are not viable without the extra revenue from the Green Certificates.

John.

P.S. The other thing about Snowy is that it has obligations regarding water management for the national park and Murray river. As we're all aware, the Murray is a pretty sensitive topic in rural Oz, and will only become more so in the future I think. Maybe this will impact the operation of the snowy scheme as well.

 

Thanks for the insight jonnyb, that's some good info for further research.