The Investor Presentation released in 3 July 2023 contains the...

The Investor Presentation released in 3 July 2023 contains the following disclosure on page 13:

Therefore, the $39.1m cost of the TWE entitlements is covered by $9.3m from this disclosed sale transaction, the institutional placement of $7.25m and the underwritten component of the entitlement offer of $25m, with the $1.5m excess to cover underwriting costs, etc. Therefore there should be no need to increase debt to settle with TWE.

The non-underwritten component of the entitlement offer of $19m (i.e. $44m less $25m) provides flexibility to pay down debt or acquire other water entitlements. D2O are suggesting that if the full $44m isn't raised under the entitlement offer, the will have a shortfall offer open for up to three months to try and sell the full amount at $1.50 per share. The free option issue then occurs once this shortfall offer window has closed.

It makes good commercial sense that D2O is only paying an underwriting fee on the cash it needs to settle the TWE purchase.

Hopefully the entitlement offer is successful and there isn't too much of an overhang from the underwriters or the company looking to place the shortfall offer.

Back to the disposure on the $9.3m entitlement sale. This will result in tax payable on the gain of $5.7m and therefore provide a boost to the franking credits available to attach to dividends. Given entitlements recorded at cost (less any impairment) in the financial statements plus there will be income tax payable, the sale won't necessarily increase NTA too much because entitlements are revalued to market each month. For all that, good to see that D2O does have the ability to unlock gains on the book when these present themselves.