Ann: ASIC registration of Scheme Booklet, page-7

Some initial comments based on a quick read. The report has the same two Grant Thornton directors as authors as had the PEA report. Unsurprisingly the two reports look pretty similar.

The Independent Expert valuation range of $0.89 to $1.02 has primarily been arrived at on a discounted cash flow (DCF) basis using an average of the existing business and some growth scenarios.

The key variables going into the calculation include:

1. Assessed future cash flows (excluding interest and tax) out into the future;
2. A weighted average cost of capital (WACC) of between 8.0% and 8.5% calculated using an assumed debt to equity ratio of 40:60;
3. The extent of growth assumed in the stretch scenario (GT have used a simple average of three activity levels being the current level, 250 MW and 300 MW achieved).

Given that the bidder is prepared to pay $1.01, they have to believe that these assumptions can be comfortably bettered. The key aspects that would impact on the DCF are:

1. The bidders assessment of growth available - is an average future capacity of just over 250 MW too conservative noting that existing BOO sits at 232 MW
2. The debt to equity ratio they (and their bankers) are comfortable with. Note that ZEN currently has a debt to equity ratio of 55:45 (or 101m:82m). A higher debt to equity ratio arguably decreases the WACC (because debt is cheaper than equity) and therefore increases the present value of future cash flows because the discount rate is lower.

The cross check of valuation using an EBITDA multiple comes in at 6.9 to 7.5 FY21 Forecast EBITDA (based on broker forecasts). There is no company forecast of EBITDA detailed for FY21 or FY22 - this is very strange. The long ago quoted 9.0 time multiple by the bidders when announcing the SoA is a distant memory. This multiple is short of average multiples on other transactions quoted - see paragraph 6.2.3. The EBITDA multiple also appears less than what ZEN has historically traded over the last couple of years.

So plenty of areas to debate the appropriateness of the valuation range. For me, it appears there is enough scope for upside to vote NO and stay in for the ride rather than taking the cash now. Of course, DYOR.