apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

There have been offsetting movements in Board estimates of commercialvalues for Genesis, Kordia Group and Solid Energy since 2010The total reported aggregate SCI value of the SOE portfolio is unchanged from lastyear at $19.6 billion (excluding KiwiRail Group). The SOE portfolio, however, includessignificant differences from 2010 with respect to the estimated value of:• Genesis: $496 million increase in commercial value – $456 million relates to theincrease in value of the existing generation business. A further contribution comesfrom Genesis’ view of the long-term wholesale electricity price.• Kordia: $87 million decrease in commercial value – owing to the loss of two years’revenues associated with the analogue network (change in planning assumption)and a resulting impairment on assets of $29 million (before tax).• Solid Energy: $503 million decrease in commercial value – owing to “Mine Plan”changes at Spring Creek and Rotowaro, and slower growth and lower pricesforecast for its renewable energy business.The independent valuations largely confirm SOE Boards’ estimates ofcommercial valueVariations between the Boards’ estimates of commercial value and the independentcommercial valuations are to be expected, as the independent valuations arebased only on publicly available information rather than detailed business plans. Inaddition, the valuer and the company are likely to make different assumptions withrespect to market and company growth, future prices, capital investment and alsothe appropriate Weighted Average Cost of Capital (WACC) to discount forecast cashflows (requiring assumptions for the risk-free rate, asset Beta, leverage etc).For the SOE portfolio, there is a $1 billion difference between the total estimated SCIcommercial value of $19.1 billion and the independent valuations of $18.1 billion.Given the potential for differences in valuation assumption and levels of availableinformation we do not consider this difference to be significant. However, thedifference in total commercial value does include some large variances between theSOE Boards’ estimate of value and independent valuations. In particular:• Genesis: assessed its commercial value as being $357 million higher than theindependent valuation by Macquarie Securities (Macquarie). However, Macquariealso considered an earnings multiple approach (EBITDA to equity value) withpage | 29