Raymond,
Thanks for your thoughts. I for one, was fairly disappointed in the quality of the research by Gretchen Morgenson. I too have read her articles in the past as she is fairly well syndicated across even in Canada's Globe and Mail. Unfortunately, her latest article I felt was fraught with innuendo and error and very much unfair to the company given the accusations and suggestions made.
One note about the growth proposed -- it is not entirely based on new plant production. In fact, its model is also based very much on replacing old plants that will die out. Solely considering the new needs would be inaccurate. Though they are doubling capacity, bear in mind much of that capacity is already accounted for in long term contracts and has not even shown up as growth on the income statement yet! So the question is not can they grow, as much of that growth is already locked in. I believe the question is more appropriately, can they grow after the next series of capacity comes online in the next year or two -- and after they double today's income (they currently have 12,000 MW, and they are building 17,000 MW which will come online in the near term).
In this light, I believe that there is little risk and a substantial opportunity for reward. I just listened to the conference call. I have a bit more work to do, but I'll post some of my notes up later. The conference call is worth the listen since it focuses on the downside risks and also the the upside potential in a very focused way (which is very refreshing - I am in the finance industry).
Later,
Clement |
