"Show me the incentives, and I'll show you the outcome", Charlie...

"Show me the incentives, and I'll show you the outcome", Charlie Munger.

Goldman Sachs get paid essentially a performance payment based on increasing the takeover price relative to the starting bid. Considering it started at 23c, first they are going to be super keen to see a transaction take place so they get paid the big bucks. And secondly, they are going to be on the phones to every man and his dog wanting long duration energy assets to drum up interest. Internationals, nationals, and super funds I presume would be high on their list. The fact that J-Power and EnergyAustralia/CLP Group are involved won't stop Goldman Sachs from calling competing energy companies, but my guess is it will be investment funds that are most likely to bid. See last week that the Ottawa Teachers Pension Fund paid 32.8x EBITDA for Spark's teclo towers? I'd probably start with them.

Management get paid decent money, sure. But the big incentive for them is the share-based compensation. In 2019 they collectively got given 14.5m options with an exercise price of 34c.That's worth $4.93m. To put that in perspective, it's the equivalent to around 1.5yrs of their collective salary. To be clear, I don't have a problem with these incentives - I am completely aligned with share-price based incentives, as that's what drives my returns too. In 2019 they got huge share based compensation on closing FID for JSP, which I think was egregious.



No doubt management and the Board will be looking at (1) a takeover price of at least 34c, and (2) maintaining their job in the new entity. To get to 34c, the bid needs to increase from $500m including $300m to shareholders and $200m of debt, to $650m (+28%) including $500m to shareholders (+46%) and $200m of debt. Not out of question imho considering the forecast enterprise value by my calcs is ~$1.2bn in FY26. So if Skip won't meet those demands, Goldman Sachs will surely be calling people that will.