Ann: Genex releases Transaction Booklet, page-18

Ok, the transaction booklet has been out for a number of days now. 300+ pages and a bunch of information we haven’t seen before and not one comment about any of the actual content. So I’ll get the ball rolling. Probably got at least half a dozen points of interest, but I’ll start with one.

The valuation of Kidston pumped hydro (K2H) seems farcical. The project is funded by equity contribution of $118m from Genex (+NAIF $610m concessional loan and $47m ARENA grant), and here is the kick in the guts… The independent export report (section 6.1.1) sets an equity value of the K2H assets at between $123m and $136m using a discounted cash flow method. Maybe I have this all wrong, but you’re gotta be kidding that all the advancement of the project since the capital raise in March 2021 is worth so little. Should have just put the $118m in an interest bearing bank account.

Sure there are some risks still to play out, but we are now getting so close to project execution and access to a rock solid fixed revenue from Energy Australia committed for 10yr with indexing and with possible further extension for another 20, then purchase of the asset or we continue to operate for the 80 year asset life. There is no mention of actual revenue or operating costs (both of which are locked in Energy Aus ESSA revenue agreement and 12yr Andrix O&M contract) used in the discounted cash flow valuation, but information from the quarterly indicates $60m in total revenue uplift when K2H comes on line. That’s a lot on the plus side of the valuation in any language.

Food for thought