Ann: Impairment of Moomba Sydney Ethane Pipeline, page-8

@Hopeful9,

While, in quantum, this asset impairment is not material, I believe it does inform the overall perception that the market has of the stock, namely that while it has historically been a highly predictable business with reliable surplus capital generation (which ended up in the bank accounts of the owners of the company), that reliable and predictable surplus capital stream is no more, due to:

1.) the gas pipeline business being mature and likely to suffer death-by-a-thousand cuts (of which the announcement in question is one), and

2.) deploying of the company's capital into new business initiatives for which there are limited precedents that demonstrate acceptable return on capital.

So, it basically boils down to a "Trust-Us" exercise on the part of the company's current crop of managers, as they dial up the borrowings to - hopefully - re-invent the company into something else.

With the attendant uncertainty around the financial outcomes of that "something else".

As opposed to placing the business into long-term run-off mode and simply harvesting the free cash flow, which would be easier valued as a bond proxy, with an observable yield-to-maturity.

But doing the latter would mean the directors and senior management would not be able to justify their existence (I mean, how much do executives need to earn for simply signing distribution cheques twice a year?); so, the cynics might be forgiven for thinking that is a large part of the reason we see the former happening.

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