An interesting little aside here on 'discount rate'.
Under 'Property Plant and Equipment' valuation comments GNE AR2016 p46
"...unobservable inputs in the valuation model were:
<snip>
Discount Rate. Pre-tax equivalent discount rate of 10.8%. Discount rate is independent of wholesale electricity prices and generation volumes."
Under "Goodwill and Asset Impairent Testing", from the CEN AR2016 p66
"Determining value in use involves estimating future cash flows for each CGU ('Cash Generation Unit'). The cashflows are adjusted for future growth based on historical inflation and discounted at a post tax discount rate of 7-9% to arrive at present value, or recoverable amount of each CGU."
8% (to take the mid point) and nearly 11% is a huge discrepancy in assumption between two broadly similar (?) companies operating in the same market. A 3% discount rate valuation difference represents nearly a billion dollars in asset valuation (or a non-trivial $1 per share, spread over the one billion GNE shares in existence) booked on the Genesis Energy balance sheet. Has anyone got an inkling as to what might cause such a discount rate valuation discrepancy between the two companies?
SNOOPY
PS Genesis AR2016 p46 (again). The wording of the sensitivity analysis seems to say that if the discount rate rises from 10.8% to 11.8%, then the result is an increase in asset values of $373m. I would have thought that if the discount rate increases then the value of those generation assets should fall by $300m. Am I reading that table correctly?