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clock Created with Sketch. 23/08/17
15:45
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Originally posted by DeltaHedge
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The final payment is being delayed due to cash flow constraints in FY18. So if they don't have better cashflow in FY19 they won't be able to pay for the cable. So the project is being delayed as if they could afford it, they would pay now and allow full construction to be completed. Think of it this way, if you were the cable company, would you accept 70% of the construction cost of the cable in a lump sum in FY19? Especially if there was no certainty of payment. There is credit default risk on the payer here. Its like building a home and instead of paying in progress payments at each stage, the borrower says ill pay you 70% at the end. No builder will do that. Management is trying to spin this as a deferred payment but its not and it aint a good thing. There is underlying risk here.
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They indicated at the Investor Presentation that cash flow will improve by most significantly, the $91 million that represented the increased demand on working capital in FY16. There will be other material gains but this was the big one. See slide 12 in the Investor Presentation.
