what a dog, page-17

EPS is a statutory number and the first half is only 6c the back half will probably be around the same.

The big issue is that dividends can come from a few sources:

1. Profit turned into cash flow
2. Capex vs Depreciation.
3. Liquidation of an asset.

In the old ERM model - as the business grew they needed guarantees to enter into forward electricity contracts. As these contracts were greater than 1 year you had to pay significant up front forward costs plus you also have to provide a credit guarantee to the electricity producers. This consumed cash - The Sunset power deal and the much lower cost Liberty guarantee deal will reduce the business need for upwards of $70 million over the next 5 years. In addition the EGO sale will liquidate around $23 million.

I dont see any capex in the mature electricity supply business and Neerabup and Oakley are unlikely to consume capex. The USA plus the change to become a more cohesive energy solutions business is unlikely to cost any more than the money coming out of EGO.

Then there is the profit - If the business growth plateaus here there should be no need for increased cash underpinning a guarantee. The USA as I understand it is much more competitive so its unlikely to consume the same degree of cash underpinning.

So I am looking to a transition in which the business can pay you the net depreciation of around 9 c per year per share - only if the strange accounting standards dont kill the statutory profits. I think they can walk that tightrope. The annual release of cash will be around $20 million ( reduction of restricted cash and utilising the liberty guarantee) and that could fund small share buybacks which help improve the forward eps. I however think that the USA will quickly become self funding after another injection of around $15 million.

You can pay out 100% of cash flow if you have no need to build and in fact the growth has gone per their statement today.