Ann: FY12 Production and Revenue Report , page-42

There are enough financial details in the FY12 financial notes (especially the last two tables in the 30/8 publication) on the status and repayment schedules on the two different ownership class structures to enable a pretty reasonable analysis of which assets flip when, and how long it's likely to take to reach stage 3 in each case. You can then model the group cash impact of the various portfolio stages. Some US assets are already in stage 2, some will hit stage 2 this year, some are 4-5 years away from hitting stage 2. It appears that the average time likely to be spent in stage 2 is some 5 years per asset portfolio.

I spent the afternoon running through this analysis, and I'm pretty happy that a WORST case scenario (tough trading conditions, no cost benefit from falling interest rates, conservative cash generation assumptions) would see the group need to raise no more than A$200m to cover the tightening interest cover in 2016. Remember the US assets were rumored to be close to selling at A$1bn+! To suggest the US assets are not salable is crazy. It ignores the fact that the assets throw off plenty of cash. Plenty of utility investments are made on the basis of limited or no cash flow in the first 4-5 years of a deal. The principle is no different here. So, if asset sales are required, of course they are possible. There is no reason why they would all have to be sold together. Each farm could be sold 1 by 1, so to cover A$200m is certainly doable.

This is all a worst case scenario. In my opinion a more realistic case would see no such fire sales required. They'd be line ball on meeting convenants, but not to the extent thank any banker would refuse a modest reworking of covenant terms - after all, a banker wants his money back - he doesn't want to bankrupt the group.

So, my analysis suggests this is an attractive long term value play. No doubt there is potentially rough water to sail in the short to medium term because there is plenty of scope for scare stories to be pushed before reality unfolds in due course. For those with a long term appetite for high risk, I think this could be a good play - not on sentiment, but on cash flow analysis. All IMHO, and DYOR an all that.