@PioupiouThe 95m figure was based on the mininum NPAT required...

@Pioupiou

The 95m figure was based on the mininum NPAT required for the 16% LTI gateway hurdle to be met. This is stated as a requirement for any LTI, regardless of the NPAT CAGR.

However, based on CCP reporting 14% ROE today, its not the starting equity, but the average equity over a given FY used to calculate (makes sense). The 88.1m is 14% of 629m equity, not the 594m June 30 2020 equity I made the mistake of using.

In fact, to meet the hurdle management would have ended up needing 100.6m NPAT in FY21. This is 14.2% above today's figure.

Instead, the board decided to relax the ROE gateway in light of a 'strategic decision' to retain capital, the 11% CAGR being hit and reward the bounce back above expectations. (Pg 44 AR)

It does read as if the next couple of years 50% LTI uplift offered to KMP, in light of a the expectation FY21 LTI would not vest, may now be wound back which would be fair to shareholders. (Pg 45 AR)

Top end of guidance is 95m for FY22, on the ending equity for FY21 that would result in ROE of 14%. Given equity will likely average higher over the FY, it will be much lower. Even basing the ROE hurdle on FY21 ending equity gets a 107m NPAT hurdle for FY22. That alone is 12.5% above the TOP END of guidance.

Either a significant amount of capital is planned to be deployed, or the board is going to give another pass to management on the ROE hurdle.


I accept the idea about retention risk and not wanting to penalise management for not over paying (managment could hit the ROE by putting up high bids tommorow) However, I'm not sure how I feel about continuing to pass over the ROE hurdle, it is fairly unique to see in rem reports and good for shareholders.

At this stage it does look like the board will do the same next year given the guidance is so out of whack with the hurdle.