A bit of consumer advice first. If you are sitting an examination, don't take a steam calculator in with you. Shovelling the coal into the boiler will only get your fellow students covered in coal dust and it will take about three months come up with an answer. So I expect your examiner will have gone home by then. The good side is that after a couple of hundred years of development steam calculators have become quite reliable. So here is the 'first iteration' answer to the question that I posed to the machine back in early May.
This table refers to the just completed FY2015. I have split Genesis up into the Kupe bit and what is left (the Gentailer bit). Profit for the year is assumed to be $90m NPAT (9cps), the mid point in the profit guidance issued on 29th April 2015. My Kupe valuation is the sum of the 'liquid fuel' valuation (post 1674) and 'gas' valuation (my thread post 1642).
Division Value Earnings Dividend Capital Return Dividend Gentailer $1.24.6 + $0.034 $0.09-$0.026=$0.064 $0.034+$0.036 Kupe $0.19 + $0.25 $0.026 0 Total $1.72 $0.09 $0.07
So what is the above table about? Genesis are on record as forecasting a profit of 9cps,while paying a dividend of 16cps. Where is the money coming from to make up the dividend payment? The table is my way of explaining it.
Net profit from oil and LPG is predicted at 2.6cps. But net cashflow is much greater, with an additional 3.4cps flowing into Genesis's coffers. This money is a pay back for writing off some of the Kupe development costs on Genesis's books. It is real money, but it is not profit. You might think of it as Genesis paying some of their shareholder capital back to shareholders as a dividend. I have called it a 'capital return dividend'.
To make up the total dividend payment a further 'capital return dividend' of 3.6 cps is required. You can think of this as surplus capital on the books not related to Kupe. This way all the number add up. But it is clear the 'real dividend' isn't as large or sustainable as the headline figures make it appear!
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