Manawa Acquired by Contact at Last

I breathed a sigh of relief the other day when I got the news that Manawa Energy had received Commerce Commission approval to be acquired by Contact Energy. I have been a long-suffering shareholder of Manawa, and while I'm still down on my investment, I am down by much less than I used to be. I knew that the moment the news came out Manawa was going to rise and was unsurprised by the subsequent 27% increase. Of my shareholding I'm going to get mostly Contact Energy shares (about 80%), and a smaller amount in cash.

Contact Energy is a much better company than Manawa, having a stronger balance sheet and more diversified business. Manawa was also limited after it divested its retail arm a few years ago and become solely an electricity generator (mostly through hydro assets such as Lake Coleridge). Thinking about whether or not Contact Energy is a stable long-term investment, I think that while it won't give me any great capital gains, it likely won't result in a loss. The NZX doesn't have a lot of great companies, and Contact isn't great either. It has market cap of $7.3B though, so should prove to be fairly stable. It has a 4.3% dividend yield, so as long as I reinvest those dividends, my Contact shareholding should at least keep up with the inflation rate. It sells electricity and natural gas, and operates in tw0 segments, wholesale and retail. Through operating in those two segments its revenues will remain stable through times of both high and low electricity prices.

As for the small cash payout I'm going to receive in July, I will add this to the remaining cash in my NZX account. I deployed most of my cash earlier in the year during the recent market volatility. The rest of my cash will probably be going towards buying more Infratil or Fonterra. Since becoming a shareholder, I have been impressed with the returns from Fonterra. On the other hand, I have not been impressed with Infratil. Although over time, Infratil has outperformed Fonterra with their compounded returns. I guess I will make my decision later in the year.