Strawman68 Thanks for your input. I have at times spoken to...

Strawman68 Thanks for your input. I have at times spoken to parts of management. In these latest discussions which are always very complex and I cannot say I understand everything I raised an interesting point.

You have to surrender LGC's based upon our sales of Twh. If the market is as they (ERM) are stating becoming far more competitive and also far shorter in contract horizons is it not better to pay the penalty as if you have supplied the certificates but your usage drops you have a banked LGC but no need to have surrendered them.

I got the impression that this was not a case of we have been caught out but rather that we took a considered view of a multiple of factors directly related to ERM and that this was the best route for ERM.

I took the following from the results:

1. The new half yearly dividend is $8.825 million so the franking credits used are a total of $17.6 million - By paying $37 million in tax they have $123 million of dividends they can frank. That's around 7 years at same level. The recipient gets what is equivalent of 5c So the company saves around $7.56 million in cash flow each year.
2. The forward hedges mark to market yielded a very large unrealized profit.
3. Dont ever think that this company is not run with one eye on the impact for the St Bakers. Even if their holding is in a company they would have had to pay tax on an unfranked dividend. So they are neutral to receiving 3.5c franked vs 5c unfranked.
4. Dont also think that St Baker went into partnership to purchase a coal power-station without understanding the risk of not having a down stream user like ERM. Both seem to benefit from the deal.
5. The companies future growth actually lies in the USA.
6. With electricity prices climbing and the market becoming so volatile I am not surprised they didn't just want to pop these LGC's on the table.
7. I would not be at all surprised to see a sale of the Australian business given the hedges they have versus the shorter contracts people are purchasing. I think the country is in a mess and in fact once a few more coal power stations close I think the prices can only go up...

I dont think that this management team is just reactive certainly not in dealings I have had with them and really I am not of the opinion this was just a finger up the nose to the government agency.

Yes it came out of left field but I think they want to conserve cash - are no longer of the opinion that their load will keep increasing. Look at the SME load barely worth all the effort ... margin better but load very low.

Is there some input you could give to my thoughts?