Sept Quarter, page-17

Hi Folks,

The cost benefit of a pumped hydro system is complex and you have numerous revenue streams to consider when valuing the asset (stick with me). These include price arbitrage which is buying energy at low cost from the grid and selling at a higher cost later in the day ( taking into account the trip efficiency losses), the project providing ancillary services the the FCAS market to stabilise the network (a market which will get more sophisticated in time providing more opportunities for further revenue), capacity contracts which are effectively insurance contracts to provide usually retailers energy at times of high market prices. This is just to name a few but let’s say this is a electricity traders dream asset with a huge amount of flexibility and when you add to the above the choice of whether the solar or grid energy is used to pump the water to the top reservoir the mind truly boggles..

If I could have my pick of any power asset in the market today it would be the hydro assets of snowy (and I was lined up to invest in this one before the plug was literally pulled) because of the inherent flexibility and longevity of the asset. Longevity is also a key consideration I previously worked for a company which had a hydro asset which had been operating for well over 100 years!

GNX is a complex beast but if you can get your head around it has the potential to become a hugely important part of keeping the north QUEENSLAND market stable and keeping the lights on. Someone earlier pointed out to a pumped storage plant in Wales which is 2GW - literally a power station inside a mountain. In the uk this asset is hugely valuable - it can respond faster with more capacity than any other asset - in fact I understand that the National Grid (our AEMO equivalent) have a red button in their control room for this asset which is pushed at key times - for example when England go out on penalties to Germany and everyone switches the kettle on a the same time - research it if you think I a kidding!

Apologies for the long winded post - GNX is not an easy one to value but with NAIF funding secured, grid connection secured, development approval secured its up to management to decode the revenue streams listed above and lock in enough PPA’s and get this project under construction. As alway DYOR and GLTAH.

Megavar