Infratil NZ sells Lumno, page-6

Well I have been here a long time on this stock so have discussed it to death with the likes of Lilac and co.

All I can say is this:

I have two stocks that have come off highs in November last year. the other is PGC - Both have delivered good results to year end 2014. Both however raised significant capital by way of share placements - In PGC case 50% more shares issued for cash. and EPW issued almost 34 million shares which is just north of 16% however on 11 June 2013 another 25 million shares had been issued. For my purposes I have added both so in fact since 1 June 2013 59 million shares where subject to a cap raising and that was nearer 33% of the shares on issue 1 June 2013.

Personally until you are in the top 200 and have a growth story thats just too many shares for your audience. I have felt that both companies paid down debt and did all the right things , acquisitions etc but the parties that bought those shares were looking for mpore of the growth. They were looking in ERM case for a win in NSW electricity assets - when that fell off the bus they didnt hesitate and the share has struggled since then. In PGC case they did not get their half year timing right and the acquisitions were slow to be concluded.

I wont buy more because I am full up and I am overweight both stocks. I understand ,many are - In 2013 I was a monthly buyer but with the cap raisings I went and sold others to benefit but now my cash flow is rebuilding those holdings.

In addition here we have an electricity story and everywhere I turn I hear that electricity usage is down so the industry is in decline and private consumption is dropping and base rates will have to increase etc etc. ERM are not AGL or Origin they don't have swathes of retail customers. their model already is competitive in the most competitive sector - ;large users. They can add on smaller users and make an even better margin. So ERM as a smaller player has more potential - even if the entire market is declining.

Then you have the strange accounting facts that both have. They are both too small to take risk and as I understand it the hedge exposure , however as the market declines the purchase price for forward electricity drops compared to what ERM has secured it at. They have to mark that to market and recognise the loss. However because their customer contracts are for usage at a price they cannot match that to the cost. So that is ignored. As I understand it Paragon also hedges its offshore exposure which has the same impact. So you see these huge losses in hedging but the revenue when booked provide them with a profit and its a conservative thing to do.

However the market does not like the statutory accounting results and management keep having to refer to normalised ...

So until the sky does not fall in and until all the shareholders who want in have some room for more shares we will suffer from this indigestion in my opinion.

Or more people will wake up.