Unlocking CTP's potential, page-5

They haven't said, so this is speculation on my part, but my feeling is that there are grounds for optimism that this lack of capital is a temporary problem that may be able to be resolved as the east coast gas market heads deeper into crisis.

COE has shown there is capital available for projects supplying gas into the east coast market.

It's hard to know exactly why CTP was apparently unable to do it when COE was able to, but I suspect that assuming RC tried as hard as he claims to have tried, it was the pipeline transport costs that hampered CTP's ability to find funding.

Now, ask yourself one question - why is Macquarie (hardly known for being charitable) offering 20c plus CVN for a company which RISC's independent expert report valued at 15 to 21c? It's clear that Mac believes CTP is worth much more than the IER, because otherwise they wouldn't be bidding. Mac would have carefully defined investment metrics before they sign off on a bid and the proposal would have to pass an IRR hurdle.

So is the IER wrong? I don't think so, it values CTP quite fairly, if conservatively, under the current pipeline regime. But if the pipeline regime changes then CTP could suddenly be worth a lot more. If CTP can sell its gas under backhaul as far as Mt Isa then it will only cost $3/GJ in transport costs instead of $5.20 to Wallumbilla. That really changes the value proposition for CTP, particularly with the LNG netback forecast to be around $9.

Macquarie, IMO, is relying on those changes to make a profit from its 20c bid. But if the takeover fails and CTP remains independent, and those pipeline changes happen, then CTP stands to benefit just as much as Macquarie, because suddenly the economics of CTP improve significantly and investors start lining up at the door to buy in.

Whether CTP can survive until then if the takeover is rejected is an open question. The debt load is heavy and shareholders could end up getting a lot less than 20c for their shares. But the NT domestic market appears to be showing signs of life (CTP stole a march on PWC with the most recent GSA) so IMO there is hope that CTP can stay afloat til capital becomes available. OptionCo presumably agree.

And if the mood on HC is anything to go by, shareholders would rather roll the dice than accept 20c.