Quarterly update always sounds very bullish, but management has...

Quarterly update always sounds very bullish, but management has a tendency to spin their capital management. While we see multiple de-risking events at the operational levels (e.g. Kidston Pumped Hydro construction on schedule), it's the capital allocation and financial management that continues to concern me. I'm on the record for saying the financial close of Bouldercombe has come at the cost of shareholder returns - that is, they have had to dilute shareholders to fund the project, at time when Genex's CAPEX needs are already fully utilised for Kidston pumped hydro. So here are a few things I noticed in the 4c:

Revenues from existing operations (KS1 and JSP): Cash receipts from operations look good at $7.8m. But recall in the 31 Dec 2021 quarterly we saw $6.8m revenues with only $4.7m of receipts - most of this is just a timing issue. Revenues were up from $5.1m in Q1, $5.8min Q2 to $6.4m in Q3, continuing the trend of increasing prices. Energy production in Q2 and Q3 was relatively stable. Good news here, but not so material.

Net cash from operations: This is lumpy as it is based on timing of cash flows, as noted above. So I don't put much emphasis on the $1.6m for the quarter, but rather focus on the normalised operating cash flow. Currently the cash flow from operations is less than the government tax incentives and rebates the company receives - so that's a bit concerning. A big increase in corporate costs (+$700k) presumably due to the cap raise. My base case however is that we will see operating leverage as they expand, with staffing / admin / corporate costs increasing slower than revenue.

Capital expenditure: A huge quarter of $100m of property plant and equipment expensed - bringing the total to $197m for the year. As we can all appreciate, this is very lumpy. However, put this in comparison to the comment of "Genex finished the Period with a strong cash position, with cash at bank of $62.4M as of 31 March2022.".

Debt levels: This quarter saw $77m of the $100m CAPEX funded by NAIF, and only $3m was funded by loan facilities, with remainder from the capital raise / bank accounts - so this is the cost of Kidston Pumped Hydro. Loan facilities are essentially at "max" (though they got another $35m for Bouldercombe), with about another $450m remaining on NAIF that can only be spent on the Kidston Pumped Hydro scheme.

Capital Raise? In Q2 management said "Genex finished the Period in a strong cash position, with cash at bank of $36.6M as at 31 December2021" and then announced a cap raise weeks later to fund a new initiative of BPP. I remain uncertain whether there is sufficient capital available for the existing pipeline, let alone new initiatives, despite the "strong cash position ... of $62.4M". Love to hear others thoughts on this.