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Agreed I do not read “restrictions on the repayment of shareholder loans and
dividends until the facility is fully repaid” as a ban on dividends but the clause will be there to ensure the lenders get their fair share of any surplus cash. The cash sweep is an important part of the Term Facility and in my view a reason why we have seen slow progress in Niger.
We do not know the details of the cash sweep but the $30.9 cash restriction on the December 2020 cash balance for scheduled principal repayments could be an indication of the cash sweep liability and its impact on true cash availability. This figure is high in 2020 because of the improved liquidity from better debt collection and efficient expenditure management.
Accugas will not achieve that level of cash surplus in future years until the new contracts start to bear fruit and when they do most shareholders will want the surplus cash to be used for growth, dividends etc and not used to accelerate debt repayment.
Cash management until the debt is refinanced is imperative and I think the board should be applauded for their cash management to hopefully achieve the refinancing objective.
When the Accugas deal was finalised in November 2019 AK prioritised debt restructuring giving a 12-to-18-month window to prove the serviceability of a longer-term debt at an improved coupon rate.
In the last Proactive interview AK said he expected significant progress with refinancing in the first half of this year. The end of Q2 is now only six weeks away and I believe the lifting of cash use restrictions from Accugas refinancing will be the trigger for development and acquisition growth.
No Idea how much merit is actually in any of what I write below but if somebody were to offer this to me as potentially having merit, i'd say it could easily be reasonable thinking :
Conceptually, it's very understandable that towards getting all the pieces of the Nigerian National grid and indeed wider energy sector generally working far more effectively towards helping the nation progress than has previously happened, trusted partners need to be in place across the end to end of sundry sector jigsaws. Those partners will of course be strongly bought into for eg Ministry co-ordination towards optimal macro progess.
Save.l is a trusted partner and it being financed by local Nigerian banks - and the terms of that lending for eg - is one part of the framework for ensuring the strength of that trusted partnership. And this for eg might easily see plenty more lending available to them for appropriate acquisitions in and around Nigeria going forward.
Also, generally speaking, the more revenues/profits generated within the sector that are re invested back into the sector the better it is for Nigeria progressing its general power provision going forward. Niger being close to Nigeria might see that as a valid avenue for re-investment of Nigeria generated reveunes/profits too also.. and indeed see Nigerian banks being interested in offering financing for sector advancement there too perhaps..etc. equally it might not be either
Nigeria would absolutely rather see re-investment of revenues/profits generated in sector there instead of seeing strong dividends /share buybacks to westen world II's/PI's for eg or the acquisition of non West African asset acquisitions with revenues generated from Nigeria for another eg.. etc..
This re investment could see the future sell on values of save.l enhanced/ highly revenue generating/profitable Nigeria asset portfolio to the next generation of trusted partners easily be very significent indeed versus original purchase prices.. and that's why playing the long game here could be very fruitful for Investors... and render short term dividend payments potentially missed out on for eg as academic by comparison to asset sale valuatiions achieved in say 5 years time for eg..
The only direct reference I can see in the Supplementary Admission Document on dividends is in part 7.3:
"Dividends
The Enlarged Group has previously announced its intention to commence payment of an annual
dividend. The Enlarged Group intends to provide further information on its intended forward dividend
policy in due course, however there can be no assurance as to the level of future dividends. "
No reference to being linked to pay down of Accugas debt.
I think it meant interest payments.
I'm sure that it says somewhere in the Admission document that there are restrictions on dividends until the Accugas loan facility is fully repaid.
Most financial institutions don’t want you to pay it off quick akin to any credit, in turn they make more cash themselves.
I think it’s AK demonstrating they can service debt at this level for debt restructuring/new asset acquisition
....especially coming from a new poster with 4 previous posts on this entire site. That alone should raise eyebrows.
Load of rubbish if you ask me , this sort of thing is why save need to release news . Any loanee needs to repay , however what they do with their cash is naff all to do with financing house , AK has said in the recent past they could flow money into Niger if required but prefers assets to be stand alone
Nothing to see here ,switch off and have a great weekend
Perhaps the wait for news is down to trying to box off a refinance of debt, which once the final conditions of that are known dividend policy would be able to be communicated.
It is certainly important to understand the provenance of that information. It would appear that few if anyone knew about that.
Surely Zengas would have picked up on this? He doesn’t ever miss anything.
I see plenty of merit in that point curiousobserver.. and in that broad school of thinking, in due course maybe, and especially when I have less wine in me than tonight, I might add more of my thoughts on why AK and Nigerian banks - and indeed the Nigerian state through that ministry - might be very open to AK significantly increasing the companies locally sourced debt instead of just paying it all down in shortish order.. and that theme also feeding strongly into the basis of of the companies previously outlined ongoing acquisition growth strategy.. but it also limiting save.l to acquiring Nigerian assets only via any increases in such Nigerian sourced debt..
Tier, sadly AK deals in smokescreens; care is needed here.
Then why kept talking about paying dividends? It sounds like the money has to be used to pay off the debt only (which isn’t a bad thing). No one seemed to have picked this up until now?
Really interesting post, CO, and I've just read your back posts that I would recommend to everyone. Thank you. There seems to be a clear problem that the massive long-promised cashflow is not resulting in actual hard dollars to spend, and you may well have nailed it. My concern was always that promised cashflow would just be absorbed by increased trade receivables (i.e. rise in unpaid/late-paid invoices); and this still may be part of the problem, hopefully not. However, with the rise in the price of oil, the government can probably afford to release more payment - and hopefully this will result in enough actual cash for Save to both meet its debt commitments, and progress in Niger. The next results may give some indication of how this is going.
None of which reduces the value of the assets, just the recognition of that value in the SP.
I think that Accugas does produce lots of cash, but it's not 'Free' cash flow in the normal sense as the banks won't allow it it to flow anywhere until the Accugas debt payments are cleared. So Niger investment, Plc dividends or share buybacks are off the table until the Accugas debt is rescheduled (or settled).
'Surely this is no longer a credible issue '
Z, that would be my concern still. I really hope it is not, but that explains to me the lack of progress over almost 18 months now. The accounts should give some indication even though reporting a period 5 months back. From a strategic point of view it is clearly insane that they have not pushed ahead in Niger, for if the cash is coming in then their seems no logical excuse for the delay. (Though you might be correct that cash is being diverted into an acquisition fund instead). So, progress on Niger will indicate to me cash (and TRs) is no longer the issue. And that is my entry point I've been waiting for, if I've funds available (got hit by TXP and Panr falls recently). You are right, it is a waiting game, and hopefully not much longer (my expectation for news on Niger is sometime Q3). It will happen.
“ I see a lot of missing posters who were kee earlier in the year but seem to be silent so maybe sold and waiting to renter on news ? ”
I can only speak for myself but I’m still here and staying put. There is nothing ‘new’ out there at the moment on the internet re research into SAVE. No new podcasts or Malcy interviews so I’m just sat waiting patiently for an update from SAVE. As long as it’s a juicy update there will be plenty to talk about and posters will come out of hibernation once again.
Let’s hope it’s been worth the wait.
8 weeks now (18/3) since the Proactive interview though can seem like an eternity.
Mentioned short term - additional gas contracts.
Expects to be contracted or supplying 15% of Nigerias gas yr end compared to 10% now.
Credit rating expected mid year.
With C.R then progress on debt refinancing.
Mentioned possible debt/partner for Niger so maybe trying to encompass a major amount of exploration rather than just the EPS. Doesn't want to divert cash from Nigeria (oil revenue there). I'm sure some of those things are inter dependent.
New Senior Treasury manager post recently appearing due to expected short-medium term growth so imo thats a positive for the direction they hope to go or an opening vacancy like that wouldn't be needed until in the bag ?.
No point as i see it asking the PR people, they can't tell you anything of importance good or bad. Really there to placate you and keep you onboard i suppose.
Have to expect a comprehensive update of what their plans are going forward/where we are and then can be challenged come agm on concrete expectations/deliverability. I think AK is well aware of the need to deliver and a lot of these contracts can be down to when signed on the dotted line. He's had 12 months to think about Niger and at the time said subject to finance and the oil price we would have an EPS within 18 months - so that's this year end. We know it needs just $6m or so net cash, the other $8m in leasing costs over 2 years. Surely this is no longer a credible issue given our income, previous $50m loan availability unused from an oil trading group and likewise the oil price is well on our side from an assumed $50/b. He can't sit out oil cycles otherwise the time would never be right or why be in this game at all. So come the agm i think he will have little room to not move on this as it will be wearing thin and he surely knows this. He also has to update on the dividend expectation as a decison was to have been made on this and from what action and timeline will investors see some return? Again this part i beleive is linked to the reduction in interest payments/refinancing.
As for Niger, if we were closer to nearer toctual restart of operations we could get renewed interest. I see a lot of missing posters who were kee earlier in the year but seem to be silent so maybe sold and waiting to renter on news ? A lot of the nearby prospects are already derisked given the very close proximity to CNPC discoveries as well as our own 5. There's is oil up and down the length of the basin. Save even made a discovery where the chinese had previously drilled and missed outside of structure. Imo it shouldn't be too hard to add significant further discoveries so for now nothing other than a waiting game for me personally.
I may be too close to this one but i don't see it as much of a gamble. The gamble is the territory we are in. In Nigeria we know there is gas there, we're not an explorer. We have spare capacity to sell that gas. We have contracts worth $4.3bn over the next years. The macro picture is an energy hungry nation with a growing population and investment in infrastructure. In Niger we are more of an explorer. We are 5/5 and there is little doubt there is more oil to be find. Trouble is we haven't had an update there for a while. I think AIM prefers a gamble. The Accugas business alone supports a higher SP. The Niger story is what usually gets AiMs juices flowing. I think it was Zengas comparing us to Recon the other day. We need to get the story out there. It's not wild cat drilling. We are 5/5 with billions being mentioned. If that story warms up we will fly.
I'm coming to the conclusion that the Accugas business is just not very sexy for AIM. I'm hoping the annual report will demonstrate a run rate and allow a rerating. Or a dividend there will definitely drive a re rating. It's not nice to see the 25% reduction but i am very optimistic it is temporary
Note that many stocks are taking a hit today and I think the negative pressure is largely not SAVE specific but is exacerbated with the lack of news and pent up frustrations translating into some holders selling. I note that the US Treasury bond rate rose to 1.68 which is never good news I monitor this as if it gets above 1.77 things could get bad for Stocks in general. I am not an expert but I understand the importance of that metric
Spawny Its the story of my life- Oooh never mind - Lets see what you would have won
Good luck with your strategy hope you decide to get back in when you are comfortable to do so
That's exactly it snaffleman re 'there's the gamble'. I don't like gambling on good news at some point in the future and that's kind of what this one has turned into last few months. I'm out of this one for now. GL all. I may kick myself if spectacular news comes in but I've run out of patience for now and can always buy back in.
One’d expect after the dreadful 2020 our CEO would have learnt something but nope. Still a bad communicator. Still a little stuck up. Let’s hope the wait is well worth it.