Z Energy considers another bond issue

Z Energy looking at another bond issue on back of strong demand for NZ$150 million issue

19th Jul 11, 1:26pm by Alex Tarrant

Z Energy says it is considering another bond issue on top of its existing NZ$150 million offer amid strong demand for the seven-year issue targeted at retail investors.

The company, owned by Infratil and the New Zealand Superannuation Fund, says "overwhelming demand" in a domestic bond market facing a dearth of new issues is behind its consideration of another issue.

See the release from Z Energy below:

Z Energy Limited (“Z Energy”) today said that, due to overwhelming demand for its current retail bond issue, the company was considering an additional bond issue.

On 8 July 2011, Z Energy announced to the market that demand for its retail bonds, which have an interest rate of 7.25% p.a. and mature on 15 August 2018, had been exceptionally strong and oversubscriptions of NZ$50 million were to be accepted, taking the issue size to NZ$150 million.

Z Energy Chief Executive Mike Bennetts said that even at NZ$150 million, a number of investors were going to miss out, prompting the company to look closely at the possibility of opening an additional offer to reinforce Z Energy’s commitment to investors and the domestic capital markets.

“We’ve been very pleased with the strong support for our company from New Zealand investors and with the very strong demand for our bonds. Based on the clear appetite from retail investors to invest further in Z Energy, we are discussing the possibility of opening another bond offer to satisfy this demand.”

Mike Bennetts said while no decision had been made, the company was discussing the possibility of issuing a new bond maturing September 2019. He said Z Energy would make a decision over the coming week.

“On the back of the current successful issue, another bond issue would further retire bank debt, increase funding flexibility and extend the average maturity of its existing debt portfolio."

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32 Comments

by Snarlypuss | 19th Jul 11, 2:17pm 1311041838

7 year lockup for 7.25% pa? Even the BNZ aren't lending mortgage money for that run at that ( 8.3% pa). So why is an unrated, unsecured bond better than the risk BNZ see in "bricks and mortar"? I'm not saying it's not worthy of concideration, but the rate appears quite a bit skinny, to me.

by JB | 20th Jul 11, 5:33am 1311096812

Amazing given the Parent has had negative operating cash flows for some time.

Still we never see an analyst even mention what I would assume is a critical operating measure for any company.

by David B | 19th Jul 11, 3:04pm 1311044684

Well I guess retail investors have got to put their money somewhere. And actually there is bugger all out there in the bond market at the moment.

They are not unsecured. According to Roger Kerr's website they are :-

The bonds are secured senior obligations of Z Energy and will rank equally with each other and the existing series of bonds issued by Greenstone Energy Finance Limited. They are subordinated only to Shell’s petroleum products and statutorily preferred creditors.

by Snarlypuss | 19th Jul 11, 3:33pm 1311046422

Secured in name only? " Senior Debt Obligation...is debt that takes priority over other unsecured debt...", and that after Shell and its preferred creditors ( bankers) have had their lot!

by David B | 19th Jul 11, 3:50pm 1311047454

At the rate it's raising money from the retail bond market it probably won't have any bank debt left.

by Snarlypuss | 19th Jul 11, 4:17pm 1311049036

Isn't that just the point? When retail bond buyers replace wholesale banking funders, it's because the banks don't see the risk priced correctly ( or they would remain in the deal; that's how they make their money). It's not about security, to me, but pricing. And 7.25% pa for 7 years with CPI at, whatever it really is, just doesn't make sense. The BNZ, for instance ~ as I said~ can lend its out at 8.3% pa. Why should a retail investor take less? This smacks of the retail panic for yield that preceded the finance companies. The risk here being interest rate risk, not solvency.

by steven | 20th Jul 11, 10:44am 1311115441

CPI is volitile and monthly, lets consider 3.3% when you take out GST or core inflation at <2% because its the long term values that count over 7 years and not a few quarters of high CPI, indeed CPI has dropped off in the US....

Apart from that I can but assume investors are suicidal.....7.25% is awful considering they are so reliant on cheap fossil energy....

Banks, yes I agree....going out into the retail market just makes me scratch my head when there should be other cheaper options....So what happens in 7 years? they can give you shares at the price they want? and let you sell them on the open market? spot the losses if that's the case...even assuming the company isnt insolvent in 7 years which is what I suspect with the Peak oil effect will happen.

"This smacks of the retail panic for yield" yep, crazy. I think the in-competent ppl who invested in the finance sector are now in the company bond market which I suspect they dont understand, just as the financial market wasnt understood.....somehow no one sees risk....or can judge it....

regards

by Bernard Hickey | 19th Jul 11, 5:21pm 1311052860

David B

Here's a lot more detail on the subordination issues from Gareth Vaughan earlier

http://www.interest.co.nz/news/54102/z-energy-bonds-likely-be-subordina…

cheers

Bernard

by goNZ | 19th Jul 11, 4:39pm 1311050362

Pretty good demand for a Peak Oil sellers paper ,eh powerdown

by powerdownkiwi | 19th Jul 11, 5:06pm 1311051975

There's only reality, and degrees of wishful thinking.

The fact that economists are not taught about absolute limits, and that the media hang on their every word, means the punters aren't very well informed.

The fact that there are a lot of punters, ill informed, doesn't change reality one jot.

Optimism I categorise alle same as ill-informed.

by steven | 20th Jul 11, 8:06am 1311105977

No they are not, why do you think Shell and Exxon etc are getting out of retail? apart from the costs, low margins its also a PR problem they just dont need...

From what I can read from Peak oil Im 99% sure we dont have a decade to severe shortages, very high prices and rationing....it could be as little as 3 years.....

Join the dots.....Z had some loony "expert" over last year? to say there was no such thing as peak oil? and then they complain that they only make money when gas is cheap, but it hasnt been. Now they want to issue more debt? what company takes on debt it doesnt need yet (ie sit in the bank) and then pays interest it doesnt need to unless it has a strategic problem (or opportunity) that will compromise it further down the track? As you say electric cars fill up at home, or the work carpark....where is the need for all their present real estate? ie the stations? hydrogen power is 20 years off if ever...so it has to be battery....or bio-fuel....

NB does anyone make a prius like car but has a deisel engine? I havnt noticed one....but making your own bio-deisel is easy, compared to bio-petrol anyway.

If I had $45k "spare" I would buy a MiEV today or maybe a prius and get its battery packs "up'd" so it can run for some miles just on battery....I dont, so I expect I will be reliant on public transport totally in the coming years (within a decade) as will a huge % of the population. Hence why I have not replaced by 15 year old car, it will see affordable petrol out I suspect. Hence why I am near good public transport and hence why I could if I had to walk or bike to work.....my only weakness is insufficient land area and probably water for food....but I have a stream near by....but of course many ppl will have the same idea.

regards

by goNZ | 20th Jul 11, 8:18am 1311106730

Why do you think Shell Exploration are staying in NZ ,then Steven ? Maybe it is because they think theres unrealised energy reserves

by steven | 20th Jul 11, 10:47am 1311115640

All the companies are still doing exploration....and refining.....its the retail they are exiting on.

Exploration, it maybe they do global wide work here because kiwi's get paid less, I have no idea....it certainly looks like we have little to offer in terms of fossil fuel reserves as yet un-tapped.....

regards

by goNZ | 20th Jul 11, 8:12am 1311106353

Electric cars ? they will be affected by Peak Electricity - the supply situation developing in NZ caused by years of enviro fundamentalism preventing more hydro dams being constructed. Also the carbon footprint of electric cars due to their toxic and expensive batteries makes them every bit as dirty as hydrocarbon fueled ones.NZ could easily be self sufficient in energy needs but its not too likely due to the Long March into every institution by the green/ex-communist cabal

by Wolly | 20th Jul 11, 8:43am 1311108224

No worries gonza...the pinky greens gunna use their bikes but discover the roads are shit to ride on and transport the snotty brood to the daily dose of education..they too will demand power...give us more power....haha

My money's on developments in the synthetic rubber science for a better longer lasting rubber band...then we can wind our way for every K.

by powerdownkiwi | 20th Jul 11, 8:57am 1311109077

GoNZ - you have so much mental baggage, I doubt you'll ever get to untangle it.

Lets start from the top - there are limits to how much of it's habitat one species can alter, before it hamstrings itself. Conservation actions merely slow that process. Forget the silly rhetoric. There is a limit to the amount of head and flow available, and there are competing values.

You are, however, (note that I deal in facts) correct about 'electric cars', but for the wrong reason.

They are not the BAU panacea they are claimed to be, but it's not so much the batteries that are the problem (although there are question marks over pollution, recycling, and sheer volumes-available of the component resources).

No - the problem is that 40% - and growing - of the world's electricity is powerd by coal. These are coal cars. Not electric cars.

And coal, unfortunately, has a peak too - my (dispassionate) pick is 2027 - it depends on some variables of course, Chinese countinuance being the biggest.

Worse, though, is that if we burn all the coal, our kids are dead.

Sequestration thus far is bullshit. Spin. A lie. There ain't the volume available (you can't bury in an open cast, of course) even if the EROEI issues could be overcome, and they in turn say that coal won't support BAU. Lignite, of course, is a tad wet. You're lucky none of the NZ press understand that they can't boil a kettle without using energy.

I'd hate to be a spindoctor - a small matter of having to sleep with my own conscience.

by powerdownkiwi | 20th Jul 11, 9:04am 1311109446

Wolly - we worked out 30 years ago that roads in their current form would be compromised.

Cut the smart-assed rhetoric eh?

Just accept that all finite supplies of anything run out, and that the messengers are not to blame for this.

I appreciate thaty you may have fiscal reasons for wishing things werre different, but hey, so did the first-class Titanic passengers.

Some of them are still underwater.

by David B | 20th Jul 11, 9:09am 1311109796

Hey, power, how’s that mud hut and ensuite Armageddon bunker working out for ya?

by powerdownkiwi | 20th Jul 11, 9:26am 1311110772

David B

schoolboy put-downs aside, you sound scared.

No need to.

Try putting your house through the Homestar appraisal. Mine scored an 8.

Everyone here should try it - it's free and doesn't take long.

Come back to me if you know of any that come within a bull's roar of mine, eh?

Being proactive beats denial, every time.

Cheers.

by steven | 20th Jul 11, 11:11am 1311117073

Hi Wild coyote, noticed how far you have run over the cliff egde yet? dont lokk down is my advice....

regards

by steven | 20th Jul 11, 11:09am 1311116999

Peak coal, latest research Ive seen is 2011 give or take 3 years...its very similar to Oil.

"Worse, though, is that if we burn all the coal, our kids are dead."

maybe grand or great-grand children, which looking at China etc is frankly a given.....

"spindoctor" they dont have any.......I suspect they are all closet libertarians....

regards

by steven | 20th Jul 11, 11:03am 1311116630

Your ignorance is frankly outstanding....

Over-night charging is outside the 5pm to 9pm peak slot....so in terms of power lines and generation it is probably fine (I have to see numbers numbers). It still uses (say) water/hydro of course of which we dont have enough....hence why wind and tide will be crucial so save hydro water when we can, hello 40cents+ a kwh.

Dams, mostly we have dammed all the rivers its sensible/economic to do....and yes ppl have a choice. Funny but the ppl objecting to the few spots left can be anyone from fundie christians nutters (and yes a know a few), to some greenies but its mostly right wing retard lifestyle blockers....Im a greenie but I'd dam them tomorrow.....its NIMBIES more than anything....

Carbon footprint != toxic, shows how little you understand....the toxic issues of batteries etc is not a (driectly) carbon problem. Mostly the used batteries etc can be reclaimed and its profitable to do so. The problem will be getting enough lithium to make enough batteries and make them fast enough at a price ppl can afford...it wont happen... Say hello to public transport for the rest of your life (unless you make a shedload of $ or have a big stash of cash)....MiEV's/Prius's etc will be in extreme demand.....

NZ easily self-sufficient, not really, I think the plan is to be 90% odd by 2025....that will accelerate when the problem of Peak oil is ack'd...but no matter the problem isnt static power generation but transport energy and food, it will be lacking....

regards

by goNZ | 20th Jul 11, 11:24am 1311117860

Public transport is allready fantastically expensive but because the gigantic subsidies are hidden in rates notices and general taxation it feels bearable.Off memory the true cost of a Johnsonville-Wgtn train ride is $60 versus $6 charged . At present rate of expenditure e.g by Kiwirail,Wgtn reg council,Len Brown madness et al , it going to be Unsustainable by rate/taxpayers , leading to Peak Public Transport

by Chris-M | 20th Jul 11, 1:05pm 1311123934

$60! Is it that bad down there. I wonder how bad we are in Aukland. Yesterday I was pondering the real cost of rail transport and compared it with what we pay for air transport. You can regularly fly the length of the country for about $120. Sometimes more sometimes less. Air NZ is an unsubsidised very profitable company that has hudge capital comitments and fuel costs. In comparison it is hard to believe that it is possible to run a railway so poorly. Put Rob Fyfe in charge of the railways.

by powerdownkiwi | 20th Jul 11, 3:51pm 1311133897

gonz - look ahead.

You are (and it's purposely done, isn't it?) failing to acknowledge what is ahead.

Monetary value now, is irrelevant if you're preparing for a compromised future. I once (1979) laughed at a fellow flier of hang-gliders at Stanwell Park. He'd just bought a parachute for 400 AUS (that's then $).

"I'm not paying that much" says I.

"How much will it be worth to you when you're spiralling in with a broken leading-edge?" says he.

I went out and bought one. Never used it and my airtime is in the thousands of hours.

Public transport isn't an 'if, it's a 'when'.

You're just in a denial that precludes you seeing that. Or your income depends on you saying what you do.

by steven | 20th Jul 11, 7:05pm 1311145520

Its actually $4.50 peak (http://www.tranzmetro.co.nz/Timetable.aspx?LineID=1&DirectionID=1) see research is easy. Also lets see some data or URLs to prove that ascertion ($60) please, i would like to read it, cant find anything near $60. Even if the subsidy is quite substantial, its simple, petrol and deisel will be rationed and expensive....probably out of reach of the pockets of many......in which case the prices are going to rise...

regards

by goNZ | 20th Jul 11, 4:44pm 1311137076

PDK Im amazed at your ability to fortell the future.You know how much undiscovered oil and coal is in the ground,what the worlds population should be,public transport is future proof and how to power NZ on just Benmore dam ( too bad for all those jobs at the Smelter )

are you Helen Clark ? - she knew what was best for us too -Tui ad

by Sepherial | 20th Jul 11, 5:44pm 1311140678

Oil - its public record released by oil companies and geologists, there are no more easy Ghwar feilds...

Pre 1900 and the haber bosch process approx 80-85% of the worlds pop was still on the land growing food which puts the global pop at about 1.6 billion...

Sorry your NZ power generation is no longer your concern it will be privately owned...

The smelter well its a free market isnt it? So the smelter needs no subsidy in power supply for doing business in the great free market eh?

Public transport - alot of consumers will be walking...

by steven | 20th Jul 11, 6:40pm 1311144034

To where? (walking) there will be hefty un-employment and I suspect a lot of telecommuting....

regards

by Sepherial | 20th Jul 11, 10:13pm 1311156788

aahhh Steven to the food bank of coarse!

...or the deserted places for scraps, like wood, spare parts, any tit bits left behind of use, for trade or barter etc etc....

.... take ya pick I dont really care...it all depends...

...society has the ability to morph in many ways. Which way know one knows for sure, not even you...

Even in not so bad times metals do go a walking...

...Cheers

by steven | 20th Jul 11, 6:37pm 1311143865

Anybody with more than half a brain can see that when the glass is half empty and bigger and bigger gulps are being taken that time is running out fast before a refill is needed, but there are no spare planets with oil.....The information is out there, ASPO is a good place to look, as is www.peakoil.com, http://www.energybulletin.net/  and the http://www.theoildrum.com/ and for those in denial, http://www.peakoilblues.com/ it might help with your mental adjustments.

No so much us, as a huge body of data, research, investigation, statistics, engineering, and experience by top line oil-geologists, mathematicians and other experts. Peak oil was calculates as long ago as the 1950s by M K H....he estimated 2000 and since then his work has been backed up again and again.... If academic quals frighten you, try looking up say some top line business ppls views, like say Richard Branson. http://www.ted.com/speakers/richard_branson.html

Population has been calculated/estimated at about 1.75billion ppl give or take 0.25billion...so we have 5billion who eat fossil fuels to stay alive. Even a half whit should be able to see when oil output declines so will population.....and you would have to be really retarded not to see they wont go quietly.

Benmore Dam, consider in the 1960s how much energy was used per person....growth rate is about 2~4% per year NB were they unhappy? .....so if tomorrow we had to use 1/2 of what we use today we'd still be living like ppl in the 60s....

regards

by powerdownkiwi | 20th Jul 11, 8:09pm 1311149378

gonz - don't be amazed, emotions shouldn't come into it.

Just get a mathematician - I mean a real one, say a Professor - to check this out:

http://www.hubbertpeak.com/bartlett/hubbert.htm

It's math says I'm right.

But then, I'm not a paid industry spinmeister.