Oh and I should add that the cover ratios I cited are project coverage ratios and not corporate. Corporate would be higher. I'm also using one brokers numbers and consensus numbers are, as Lidiard said, higher. But consensus is too high although the interest charge sounds about right. That assuming none of the debt is amortising. So the problem is the ebitda which is way below, clearly, what they expected. I mean miles below. Bet they had modelled say £1.8 or £2bn of something like that. They have or had an EV of say £11bn so £2bn isn't out to lunch. So bluntly they have hugely screwed up project delivery.
Ha! Well that was a good switch! I just wish I'd listened to my own voice of reason a bit more but hey ho I knew it was a punt and sometimes things don't work out. But I'm still in this pile of poo with some capital and it'll either be worth something or nothing. Onwards and erm who knows!!
I think that summary from seifert is entirely fair. Leverage can be very good but in Essar's case they have levered against construction assets which if they operate properly offer sound long term cash flows appropriate for debt to equity of maybe 70/30 assuming decent ppas and availability. But construction has been slower, availability generally poor and so the interest covers now look terrible. On power projects I've done with merchant risk, ebitda debt coverage has been up to 2x whilst with long term ppas with say a floor, the ebitda cover can be as low as 1.4x. But 1.1x and you are generally screwed and banks will start triggering default. But I agree will the banks want a bunch of power stations? Probably not. Will they let Essar cure this if interest covers seriously look like they might get back to respectibility? Possibly but that might take a higher interest charge. So it looks grim and its a pure punt now. You simply can't analyse something so tight.
I think your comments are very valid concerning some posters on this particular board, it is a bit disappointing that some posters continued to be bullish on this company when the sp was around 1.50 and now even at 70p, only to be now told they have been shorting the stock. to be honest I have been in and out of essr over the past 12 months and I have made a decent profit, mainly down to pure luck. the last batch I had was 100,000 shares at 1.39 which I sold a couple of months later at the same price, the main reason being that I wanted to get into Thomas cook so sold out here, thank god, again pure luck. to be honest the only person I have ever followed on here is parkside, he has been consistent all way through, and his post's earlier in the year did make me think about being invested here and whether it was wise to have that amount of money invested in this company, I am now glad I took his point of view over the forever bulls on here.
The cracks began manifesting themselves firstly through debt sustainability, compounded by external exchange rate influences to the downside, and aggravated by an apparently poor strategy by management who increasing looked inept. As time wore on, these once containable cracks and now beginning to seem structural. Escaping from a structural malaise if far more challenging that solving accounting problems. The reason is you are hit on all sides at once, and this can overwhelm a company even with a capable management. I know this must sound grim to stakeholders who are long here, and can see (as I do) the apparent potential in a well run company, even with debt to service. But I have been caught out and lost big time in playing the wishful thinking card. I am also not invested here and can afford to sound alarmist, and investors who know far more than I do about this company can point to aspects I am not familiar with. Just know that you are in a risky set up at the moment, and this invariably draws in the speculators who only concern themselves with minute-to minute trading, not any 'long term' view. This kind of action can leave some with the false impression of its prospects (positive or negative). I just hope all PI's remain on their toes, and hope that the speculators, in their binge, can push this up to a level where you have the choice of baling out, or staying in. This is my final post here. Good luck.
1) Has Essar Global Fund Limited started selling 41million shares to meets the UK listing authorities' minimum free float requirement of 25 percent. 2) What progress have they made with "cafe coffee" on the retail front. 3) Has the retail sales picked up since the deregulation of diesel subsidies, if not when do they expect this to happen. 4) On the Coal supply, any update. 5) Update on the dollarized of the rupees loan. 6) What would the cost be now, to build similar assets.
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