cer equity injection, page-6

Hi Apples

Have a read of page 54 to 58 of the CNP annual report.

Interest rate and FX movements have been hedged against.

It says that during the year, CNP entered into FX contracts to sell USD and NZD to buy AUD.

Not sure what percentage has been hedged but you would have to assume that foreign income and variable interest rate movements would be mostly hedged.

Same goes with CER if you have a read of their annual report and presentation.

THe only thing that a movement in the FX rate is going to materially change is the valuation of debt and properties in AUD terms.

At 30 June, CNP had US$12.8b in US properties (refer to page 6 of annual report). They also had US$12.16b in US debt.

That is only a 5% difference between US assets and liabilities. If the value of US properties has fallen by more than 5% since 30 June, then CNP would be WORSE off with a weaker AUD as there would be more debt than assets once converted to AUD.

CER on the other hand have $6.1b in US assets v $3.6n in US liabilities. That is 69% more US assets than liabilities.

If Super LLC goes into admin/receivership, then CER's US assets would fall by US$2.7b (refer to CER presentation of assets in SuperLLC) to US$3.4b and their US liabilities would fall by US$1.9b (refer to US debt in SuperLLC in supplemental report) to US$1.7b.

There would still be 100% more US assets than liabilities for CER is Super LLC goes into admin.

Although a lower interest rate may not be direct saving in variable interest payments, it would reduce the required yield on investment, which would increase the value of the properties substantially as the risk free rate is lower.

Anyway hope thats answered your question :-)

Cheers