The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.
Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.
With Europe’s wind and solar farms set to triple by 2020, utilities investing in new coal and gas-fired power stations no longer face stable returns. As more renewables come on line, a gas plant owned by RWE or EON that may cost $1 billion to build will be stopped more often from running at full capacity. It may only pay for itself on days like Jan. 31, when clouds and still weather pushed an hour of power on the same-day market above 162 ($220) euros a megawatt-hour after dusk, in peak demand time.
Logically, increased volatility in the price of spot power will increase the price of spot power, as investors will seek a greater return on capital for their investment in power plants. Logically as well, volatile sources of power should be at the mercy of spot markets, while reliable sources of power get longer term assured contracts. Logic, however, is neither green nor precious, so this won’t happen.
The Canadian preferred share market closed the month on a mixed note, with PerpetualDiscounts losing 10bp, FixedResets down 2bp and DeemedRetractibles gaining 11bp. Volatility was good. Volume was enlivened by the ENB.PR.B new issue but was otherwise very light.
PerpetualDiscounts now yield 5.35%, equivalent to 6.96% interest at the standard conversion factor of 1.3x. Long corporates now yield about 4.8%, so the pre-tax interest equivalent spread is now about 215bp, basically unchanged from the September 21 figure.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2972 % | 2,076.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2972 % | 3,123.7 |
| Floater | 3.13 % | 3.45 % | 53,684 | 18.62 | 3 | -0.2972 % | 2,242.5 |
| OpRet | 4.85 % | 2.74 % | 58,655 | 1.60 | 8 | 0.0049 % | 2,442.9 |
| SplitShare | 5.39 % | -0.47 % | 52,795 | 0.41 | 4 | 0.1356 % | 2,486.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0049 % | 2,233.8 |
| Perpetual-Premium | 5.65 % | 4.35 % | 110,333 | 0.57 | 16 | 0.0642 % | 2,120.4 |
| Perpetual-Discount | 5.34 % | 5.35 % | 116,028 | 14.81 | 14 | -0.0966 % | 2,238.2 |
| FixedReset | 5.15 % | 3.32 % | 210,865 | 2.65 | 61 | -0.0191 % | 2,320.3 |
| Deemed-Retractible | 5.07 % | 4.58 % | 233,319 | 5.88 | 46 | 0.1120 % | 2,192.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.A | Perpetual-Discount | -1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 22.76 Evaluated at bid price : 23.15 Bid-YTW : 5.00 % |
| HSE.PR.A | FixedReset | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 23.28 Evaluated at bid price : 25.26 Bid-YTW : 3.23 % |
| BAM.PR.X | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 22.56 Evaluated at bid price : 23.61 Bid-YTW : 3.72 % |
| ELF.PR.F | Perpetual-Discount | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 22.11 Evaluated at bid price : 22.35 Bid-YTW : 5.94 % |
| HSB.PR.E | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.67 Bid-YTW : 4.05 % |
| GWO.PR.N | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.37 % |
| TD.PR.O | Deemed-Retractible | 1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 4.05 % |
| SLF.PR.F | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 3.64 % |
| FTS.PR.F | Perpetual-Discount | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 24.35 Evaluated at bid price : 24.65 Bid-YTW : 5.01 % |
| CIU.PR.B | FixedReset | 3.40 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 27.40 Bid-YTW : 3.16 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.B | FixedReset | 978,815 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 23.18 Evaluated at bid price : 25.19 Bid-YTW : 3.68 % |
| RY.PR.B | Deemed-Retractible | 39,271 | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 4.47 % |
| SLF.PR.A | Deemed-Retractible | 39,257 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 6.10 % |
| RY.PR.G | Deemed-Retractible | 33,143 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 4.62 % |
| TD.PR.N | OpRet | 21,078 | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.25 Evaluated at bid price : 25.70 Bid-YTW : 2.74 % |
| BAM.PR.B | Floater | 20,029 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-30 Maturity Price : 15.11 Evaluated at bid price : 15.11 Bid-YTW : 3.47 % |
| There were 17 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.A | Perpetual-Discount | Quote: 23.15 – 24.15 Spot Rate : 1.0000 Average : 0.7547 YTW SCENARIO |
| BAM.PR.X | FixedReset | Quote: 23.61 – 24.20 Spot Rate : 0.5900 Average : 0.3783 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 20.95 – 21.75 Spot Rate : 0.8000 Average : 0.6395 YTW SCENARIO |
| BNS.PR.O | Deemed-Retractible | Quote: 26.40 – 26.82 Spot Rate : 0.4200 Average : 0.2700 YTW SCENARIO |
| TD.PR.P | Deemed-Retractible | Quote: 26.16 – 26.56 Spot Rate : 0.4000 Average : 0.2503 YTW SCENARIO |
| NA.PR.O | FixedReset | Quote: 27.31 – 27.80 Spot Rate : 0.4900 Average : 0.3771 YTW SCENARIO |
Well James: I guess based on the latest values of the preferreds that Yellow’s demise is imminent ! Either there is a pending notice, or the prefs are a screaming buy – I assume you’re still holding.
See MAPF Performance: September 2011.