Ann: Central signs 5.2 PJ pre-paid gas sale agreement-CTP.AX, page-43

Have been looking at this.  

Key details per the announcement:

1. Gas sales of 5.2PJ of prepaid to be supplied over 3 years, with option of 3.5PJ of further gas possible over 2 subsequent years

2. Central receives immediate payment for the pre-paid gas

3. Proceeds from agreement enable CTP to fully fund the deferred purchase price of $10m for the Mereenie oil and gas field....as well as new reserve growth activities. 

4. Saved $2.5m to $8.75m exposure to the production bonus

Ok, sounds fine so far but looking into it a bit further:

1. The 3.5PJ option over 2 subsequent years.  This appears to be at MacQuaries option at an agreed future price.  What is this agreed future price?

2. The recorded liability on balance sheet in Jun-16 of $11.8m for pre-paid 5.2 GJ agreement implies $2.07 per GJ on a discounted present value ex-field basis.  This is the discounted fair value of the gas that CTP is required to supply either in physical gas at Ballera (on an ex-field priced basis) or via financial settlement.   The risk of this agreement comes to light in Jun-17 with the liability blowing out to $21.8m, implying a discounted present value ex-field price of $4.19 per GJ...still a very low, ex-field gas value.  From what I can tell, this is unwinding at c. 14% and therefore, all things equal would imply an ex-field price of $4.80 and $5.13 per GJ at Jun-18 and Dec-18 respectively...

My issue is two-fold:

a)  I don't know about you guys, but i'm expecting an ex-field gas price of more than $5.13 when the NGP goes live and a price above $5.13 will further highlight what a bad deal this was - every $1 increase over the $5.13 will cost us $5.2m (5.2PJ x $1m)

b. The liability wouldn't be so bad if we were just supplying gas to MacQuarie as it would be more of a paper loss and effectively some expensive financing.  However, MacQuarie has the option to receive this the gas as a financial settlement - this would hit our cashflow fairly hard to the extent of c$9m annualised (and increasing through discount unwind) commencing H2 FY19 - this is at $5.13 GJ.  If MacQ choose the cash option, this leaves us exposed to having to find a buyer for the gas - if we don't, it comes out of a IPL cashflow.  The recent presentation so far indicate that we will be delivering the gas to MacQ however i remember reading comments from the chairman somewhere that our cashflow will initially be impacted due to the pre-paid gas arrangement....maybe he was just referring to the lower cash margin since we have already received cash.

In summary, the way i see it is RC foresaw the East Coast gas crisis and effectively shorted 5.2 PJ of gas supply at $2.07 a GJ.  Someone please tell me i have this wrong.