The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Simms, there are some things mixed up, so I try to answer as many of your qeustions as possible before I have to leave:
- "Haverton WTV Limited" is the name of the SPV
- "Haverton WTV Limited" does not own the land, yet. There is a conditional LPA RNS from February which explains the conditions.
- Kibo gets 6/11 of a nearly empty spv with an estimated value of 5.5m at a price corresponding to theier share. They get no land, no building. Just an an elaborated project and maybe some permissions.
- The 3m will surely be revenue
- Kibo have quite some (30+?) companies they own in part or whole. Better have a look at their y2020 Results RNS from June 2021. They know what they are doing and will bring the money.
- We don't maintain the land ownership and haven't paid the land. The SPV will buy it, once someone filled it with money.
- We are not diluted in any way: Our part is selling an Idea, IP, Equipment and O&M, not holding a part of the plant. Others will build and own the plant. If everything works perfektly, we'll not hold even one per cent, except maybe for controlling / insight purposes. Let the money develop new plants, instead. An interest of 10% p.a. is not what we are here for.
I expect there are other Investors in the background and that Kibo are a quick intermediate to get the spv out our books before it is filled with life and places a first order at EQT. Otherwise, we'd be selling things to ourselves due to consolidation rules.
And since they are in such a hurry, I expect things to get started at Billingham very soon.
I think it is great DP responds after every RNS and specifically to concerns raised on this board it seems. As i understand correctly Haverton owns the land for this project and this is outside of the SPC. Normally land can be 1/3rd of the enterprise value of any development so this is potentially a huge amount one day, assuming i am correct. This is key if someone can confirm as DP did not on the call. Secondly that Kiboo have essentially paid £3m to kick this off and that money presumably will all be paid to Eqtec to get started on the next phase or even to pay for some historic costs to reach their £15m target this year. Then Kiboo leads the finance for the project. This is slightly where i am not entirely happy in that Kiboo are very small and while they can probably do a £3m raise how are they going to fund the overall project? Presumably a lot of money will need to be raised and this would ultimately dilute Eqtec in this specific SPV, although we maintain 100% of the land ownership that i undertand we have paid around £8m for. This is not necessarily an issue as i would rather own 20% of a £150m project with dilutin and future income and most of that £150m will be payable to Eqtec over project development. ultimately when the project is sold our land value will be quite substantial along with our diluted stake in the project. I might be wrong but the biggest risk is Kiboo not really being able to raise all the finance to develop the project and leave this in limbo. i am sure the £3m is a no issue but the rest is the question for me as i would be a lot more confident with a bigger backed company that has the financial muscle. This is really what the market is concerned about i suspect as they might sense this project might go sideways waiting on Kiboo to pull it all together and they have little history of that. Hope to be corrected.
https://www.youtube.com/watch?v=fESnC-peZ90&feature=youtu.be
Very positive interview, lots in the oven cooking it would appear.
proactive interview now online Youtube
One thing i would add is the very reason i invested is i liked the business model and being a turnkey end-to-end solution from investing pre-planning right through to construction and part ownership and where someone else is injecting most of the capital injection that is largely all our revenue as we provide all the tech. By doing this Eqtec is a mile ahead of its competition and why Eqtec has close to £1bn in possible sales pipeline. Eqtec makes it win-win. Best of all keeping a decent stake or ownership in the project once it gets the 10 year insurance in place Eqtec can sell on the plant at market prices. Those Croatian projects and many many others will be sold at a good profit for capital injections into Eqtec and in the meantime we will get significant cashflows from these operations that are eye wateringly good as we get paid to take the waste and then can sell the power. Find me another company where your input costs are paid for? If Eqtec was just a supplier of tech then its just a margin game and less interesting. Eqtec are aiming to not only create a massive new market that never really existed until they offered an end to end solution but they are skimming the cream at every point. Back to Billingham we need to hear from the horses mouth exactly how this deal will operate but if we are left with nearly 50% its almost free carry. I do not know what the market value of Billinghal will be once operational but i would put it at a 6% yield so could be substantial and big energy companies will be strategically buying as they cut back on less CO2 friendly energy products. As i have always said issue is resources only to get these deals done and i have largely been correct that deals have slipped. This is almost expected but Eqtec need to increase their team to close deals.
Link to Eqtec telegram group
https://t.me/eqtec
Finally! some great communication from DP, this is now heading back up. Glad i bought back in this morning ??
Great posts in tweet by DP. Adding to explanations of business model. Thanks for sharing Der Sack.
A rerate of a similar magnitude of November- December last year is just beginning eh Duke? Except this one should be fully shored up all the way.
As part of due diligence, EQT ensured that KIBO has access to the £3m and more. It has substantial assets to use as collateral.
The £3m agreed, excludes the property.
Proactive interview being recorded today.
https://twitter.com/davidpalumbo/status/1439849371772891140?s=28
Thanks Martinu. Please take most of what I write with a pinch of salt as I am def not an expert on the business model!
Some great posts Der Sack and Rendj. I bought into Eqtec because I like the idea of making energy from waste, with minimum pollution. Unlike incineration. I am learning as i go about how the business model works. So appreciate posters taking time to explain the details. Danke schön and thanks.
https://ukinvestormagazine.co.uk/wp-content/uploads/2020/05/EQTEC-Deck-May-2020-v6-UK-IM-Present-E.pdf?mc_cid=c38fcfbd0e&mc_eid=af0e5c1880
Page 14 talks about a project being worth 2x to 3x the development cost before financial close. Has Kibo offered to buy into the project pre financial close and will also participate in the land purchase knowing that the SPV will be worth more at a later date. In exchange for this early investment, eqtec get access to their pipeline of African projects.
Not saying this is exactly what is happening here but it ties in more closely with the full year results where Billingham has a project value to eqtec of €30m. Project value being margin (profit) of the revenue at financial close, plus sale of land once owned plus 2 - 3x development costs (€16m + €8m +€6m)
Great analysis Dersack. I’m not an accountant and this is pedantic but will it count as £3m revenue to Eqtec?
Assuming the Billingham SPV was valued at zero before the transaction, its new value to Eqtec is 46% of the £5.55m valuation the KIBO £3m for 54% investment implies. In other words, isn’t the new value of the partially owned spv to Eqtec c. £2.55m?
The concern is less that the SPV is worth less than we thought and more that if Kibo (as majority shareholder) mess it up, we won’t be able to realise some of the revenues from tech sales and O&M. If our spvs are our customers, we need them to be in a position to buy from us. The market might be nervous that a Kibo led spv won’t be as good a customer.
Having said that, they will only be majority shareholder for a short period. At some point very soon, a bigger player will come in to make the main investment into the plant. All we need is for KIBO to not mess it up until the main partner or partners arrive. That feels like quite a low risk and the market is probably overestimating it.
Der Sack , Well done , a cogent explanation which hopefully will clarify the strategy for those with doubts , or unclear .
I think one of the problems with last weeks` selling was due the fact that Kibo has a somewhat jaded reputation and as far as people are able to see little capital which they will have to raise to develop the project .
As I tried to poinnt out in an earlier post ; that`s their problem not ours . If they are unable to meet their obligations in the agreement , our only penalty will be a delay to that one project . Hardly catastrophic and a vacancy that a n other will undoubtedly fill .
(I`m reminded of the 1849 California Gold Rush ~~~ it wasn`t the miners who made all the money , it was the suppliers of picks and shovels ! )
I think, some pi are here with wrong or different expectations how e.g. EQT will reach their predicted revenue and about the value of e.g. the billingham spv.
Re the 3m price for 54,54%:
Until now, the spv is a nearly empty hull with an idea, some permissions and a project. It is not worth the 170m some people talk about, it doesn't own the land and hasn't paid for the land, yet. And even if: the there would be a corresponding loan on the other side, so the land would not add value. Getting 3m in such an early stage should be ok. Specially if the agreement ensures that we are the partner of choice as follows.
Our gain is not to build and own the plant. Our plan is to sell our spvs in early stages to someone else who builds and owns the plant, as long as we provide
- IP
- Technology
- O&M
That is where we make our money. We live from installing and operating such plants, not from owning them. Best things to happen are projects like the Shannon plant, where we don't even need to initiate an own spv.
Holding a small part of a plant is ok to keep some insight, but not more. If aquisition is cheap, like e.g. for the refurbished plants, it is even ok to hold a bigger part. But I don't want millions of our cash locked in the ownership of power plants, then providing a profit of let's say 10% per year. One of my bigger fears e.g. is to have additional millions locked in North Fork to get it online, even if it means we own another 10% or 20%.
I want exponential growth with some better leverage and not an interest of 10% p.a.
People are always talking about revenue and targets. Where do the mourners think the revenues come from? From sales of power, gate fees, biochar? Not really. They come mainly from the points mentioned above: IP, Tech Sales, SPV sales, O&M. Besides the fact that we sell parts of our spvs, there is a simple fact, hardly anybody understands: Our spvs are our main customers.
By the way: For this year, we already have known revenues of more than five million Euros (€1,750,000 from the italian plant and £3,000,000 from the Kibo agreement).
That's the way we generate revenue.
And I am confident that we'll see more such revenue before the end of the year, even enough to reach the predictions.