valuation dates and book values, page-25

"Some constructive feedback from you would be appreciated........"


The first port of call is the reconciliation between the Income statement and the Cash Flow statement (which incidentally most serious companies supply in their HY report, but then again CNP is not exactly a bastion of transparency and simplicity).

The Income Statement states revenues of $233 M
The Cash Flow statement states receipts of $310 M

This is not a sustainable discrepancy, considering that Cash Flows include $125 M in distributions from associates (!) - you won't see much of that in this Half-Year, will you? - and Interest paid was $97 M, well below the accounting expense of $144 M - which is an expense sure to get worse.

Those one-off timing issues aside, CNP are barely generating enough cash to keep their lenders at bay (no great surprise there given the auditor's report and the attitude of it's lenders).

And just to put paid to those glowing appraisals of this so-called gem of a company. Fact is that out of the $2.4 Billion in shareholder equity, $2.3 Billion is contributed equity. This means that for the whole of CNP's illustrious history, they only managed to increase Shareholder Funds by a mere $100 M. I fully expect that after the Full Year results are out, CNP will be in the red as far as Retained Earnings and Reserves are concerned. It will be years before they pay a dividend again (which can only be paid either from current year earnings, reatined earnings and - sometimes - reserves). They cannot pay a dividend if all that reamins from their equity has been contributed by its own shareholders. They call this - in less polite circles - a Ponzi scheme.

Therefore, CNP have a loooooong way to go to revive it's 'Going Concern' status (and I don't propose to go over again the NTA poistion in a liquidation scenario).


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