I have got a bit slack with my overview of results, this post looking at FY2021. The FY2022 result will be released in 10 days. So I plan a rather more prompt review of that.
For those who came in late, a 'scenario analysis' is not an historical record of what happened. Instead it answers the question, what would happen if current dividend policy acted on the historical results of previous years. The purpose of this is to get a measure of how future results might change, if the weather events of the previous four years were superimposed on today's investment policy.
For this analysis I am using the most recent dividend policy (FY2021) of paying 80-100% of cashflows. For modelling purposes I will 'split things down the middle' and assume 90% of free cashflows are paid out. Contact have also said they will base their level on dividend payments around the last four years of results So for the purpose of this exercise, my timeframe ia from FY2018 to FY2021 inclusive.
|
FY2018 |
FY2019 |
FY2020[/TwwwD][TD]FY2021 |
Cashflows from Operating Activities (1,2) |
$457m + $85m |
$466m + $85m |
$390m+$85m |
$475m+$85m |
less Stay in Business CAPEX |
($78m) |
($60m) |
($52m) |
($75m) |
less Net Interest Expense |
($84m) |
($70m) |
($55m) |
($50m) |
equals Operating Free Cashflow |
$380m |
$421m |
$368m |
$435m |
Operating Free Cashflow (OFC) x 80% |
$304m |
$337m |
$294m |
$348m |
Modelled Dividend per Share OFC80% (based on 806m shares on issue (3)) |
38cps |
42cps |
37cps |
43cps |
Operating Free Cashflow (OFC) x 90% |
$342m |
$379m |
$331m |
$392m |
Modelled Dividend per Share OFC90% (based on 806m shares on issue (3)) |
42cps |
47cps |
41cps |
49cps |
EBITDAF-DA-I-T (Normalised NPAT) (4) |
$131m + $45m |
$175m +$45m |
$127m + $45m |
$183m + $45m |
Normalised forecast 'eps' (based on 806m shares on issue) |
21.8cps |
27.3cps |
21.3cps |
28.3cps |
(1) From slide 6 of PR2020: "Projected EBITDAF uplift of ~$85m p.a. at wholesale price of $80/MWh" on commissioning of Tauhara.
(2) The definition of 'Operating Cashflows' has slightly changed between FY2019 and FY2020. This has affected the 'Operating Cashflow' figure that I have used, which from FY2020 is different to that in the latter cashflow statements. In AR2019 the 'interest paid' is reported in 'Financing cashflows' and the 'interest earned' is reported under 'Investing cashflows'. By contrast both are reported in 'Operating Cashflows' in AR2020. For consistency I am using the earlier definition of cashflows in the above table, with no interest charges deducted or added.
(2a)
FY2020 'Operating Cashflow' for FY2019 is listed as $466m in AR2019 and $401m in AR2020. Why the difference? In FY2020 the FY2019 figure has been reduced by a net interest figure of $69m -$4m = $65m (Figures relating to FY2019). Applying the same adjustment logic to FY2020, where the net interest paid was $49m, this explains why 'Operating Cashflows' for FY2020 are listed as $390m in my table, but only $341m in the FY2020 Integrated Report.
(2b)
FY2021 'Operating Cashflow' adjustment. The net interest figure paid over FY2021 was $43m. This explains why 'Operating Cashflows' for FY2021 are listed as $475m in my table, but only $432m in the FY2021 Integrated Report.
(3) Following the capital raising completed on 12-03-2021, and the subsequent dividend paid on 30-03-2021 (with the DRP operating) on all shares issued (including those raised in the March 2021 capital raising), the number of shares on issue to jumped to 776,122,070 shares at the EOFY2021 balance date. I expect the DRP will further increase the number of shares on issue in the future, I predict at a rate of 2.5% per year (compounding). This will see the total number of shares after four years to increase as follows:
|
No.Shares |
Year 0 (EOFY2021) |
776,122.070 |
Year 1 |
795,525,122 |
Year 2 |
815,413,250 |
Year 3 |
835,798,581 |
Total/4 = Average |
805,714,716 |
(4) I shall assume with Tauhara commissioned Depreciation will go up by $14m per year (the same jump in depreciation that occurred when Te Mihi was commissioned). There is $180m of new incremental debt funding associated with the building of Tauhara. At a 5.0% borrowing rate, this will increase the annual interest bill by:
$180m x 0.05 = $9m
The projected NPAT increment as a result or Tauhara coming on stream is therefore:
0.72x ($85m -$14m -$9m) = $45m
Tauhara Discount Factor for Future Earnings
This incremental increase in NPAT should perhaps be discounted back because it will not occur for three years time, at the point where Tauhara comes on line. For future discounting of profits, I use a 5.0% discount rate, which equates to the long term Gross Yield I am prepared to accept.
1/(1.05)^3 = 0.8638
$45m x 0.8638 = $39m