M3, I'm no expert, but here are a few views that have been put forward in the forums.
Firstly, CNP owns 51% of CER. So there is an argument (that to me is petty persuasive) that any capital raising by CER would require CNP to stump up a whole lot of cash it doesn't have to keep control. So CNP would veto any desire by CER to do a capital raising.
You use the term "...if things turn our worse than expected". I think the time of deterioration has passed, and if anything is going to turn out, it will be better than expected (in terms of asset values), which would reduce the need for a capital raising.
CNP owes billions, but generates bundles of cash through management rights and can service the debt it has. CER can too - So once the bankers are confident that asset values will not fall further, there shouldn't be any problem rolling over loans. CER has not had to offer any debt for equity guarantees to extend loans, whilst CNP has.
CNP is to me the business with the big buck potential for growth, but it also has in my view the most question marks surrounding it.
Suggest you read a few threads in the CNP forum that deal with the subject.
My hard earned is split 50/50 CER/CNP, which just goes to show that I can't decide which is the best bet. But each has its fans.
Cheers.
CER Price at posting:
20.0¢ Sentiment: ST Buy Disclosure: Held
