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Welcome Ian. RR beats me to it and explained beautifully.
I’d say AK will only announce if the new deal is all done and dusted. I doubt he would want another prolonged suspension. I’m hoping two done deals announced at the same time, or ver close to each other in a matter of days.
Ian - I’ll have a go in my layman’s terms as I am no expert in this area but my understanding is as follows:-
In simple terms, if a company tries to acquire another company larger that it’s own it is deemed to be a Reverse Take Over (RTO). The rules that determine a RTO seem to be very complicated and there are quite a few of them. However, as a rule of thumb I tend to think of it as being if the market cap of the assets being purchased are larger that the company buying - then this is a RTO.
If a RTO is triggered it comes with a mandatory suspension until a new admission document is issued or the deal fails. Upon either of those two scenarios occurring then trading can resume.
My concern here is that if SS should fail and we immediately sign another SPA with another company larger than ours, we could possible go directly in another back to back RTO and subsequent suspension for another 6 to 12 months.
I’ve got a lot of capital ties up in this company and have been frustrated by not being able to adjust my position (in either direction). One thing I fail to understand is why the shares were actually suspended in the first instance. In other bid situations on the main market, shares almost always remain traded, allowing holders to take a view either way on the likelihood of a corporate action succeeding (and the likely impact on the share price).
Can someone explain why this situation is different?
FinnCap gave some costings on the renewables last year. (Page 4-5 July 22)
For the mix of solar & wind and 750 MW they had a 13p valuation which was unrisked until in development and up and running.
They estimated 75% would come from debt financing such as specialist infrastructure funds suggested by AK - the remaining 25% provided by SAVE.
For wind the cost was estimated at $0.7m MW. For solar $0.5m MW - an average of $600m GW on a 50-50 wind/solar basis ?.
SAVE were aiming for 1 GW in motion by this year end and 2 GW end of next.
It was to be mid -late next year before the up to 250 MW Niger will be sanctioned with 1st revenues in 2026. On the basis of the F/Cap estimates - that would mean a cost of around $175m of which SAVE would need to find around $44m of their own money but likely spread over 2 years.
Overall on the F/Cap estimate for the 2 GW to be in motion by the end of next year - the cost could be around $1.2 billion with $300m needed from Save although the first 1 GW up and running is likely to self finance a proportion of that with maybe $200-$250m needed to reach 2 GW ?.
Save is aiming for 2 GW by end of next year so it wouldn't surprise me to see projects for 4-5 GW by the end of the decade given the massive target market of an estimated 240 GW across Africa by 2030 from memory.
FinnCap are using about 13p for 750 MW for the mix of wind and solar last year net to SAVE.
That would suggest that a 50/50 mix of wind/solar could be about 17.3p per GW - so if they build out to 2 GW maybe over 34p and if long term there's something like 5 GW about 86p - if reasonably close this would indicate why AK sees it as once in a lifetime opportunity on top of the value from Accugas and the separate hydrocarbon acquisitions and Niger.
On project financing and an average cost of $600m per GW (50/50 Wind/Solar) - we'd need about $150m of our cash per GW.
Obviously a proportion of that becomes self financing when the earlier projects are up and running to help fund later projects.
The net debt profile on Nigeria should still be on track to be cleared in around 2 years (taking into account the added ownership of COTCo interest) - so you'd think should provide a significant level of freed up cash. Over the next 2 years id be disappointed if they haven't increased gas sales by another 25-50% or another $50-$100m sales.
If they can land that crucial and sizeable oil acquisition that can throw off $2-$300m FCF such as Petronas S.S which must be already significantly discounted since the effective deal date - this i would think will be able to build future cash reserves and cover our contribution to grow the renewables. Most of these divestments have a pay back time of 3-4 years from effective date and earlier at much higher oil prices and why i think they're crucial to the entire game plan.
Interested to see the response you get from your strong email rocky that you sent on Friday
TiL - I hope so too but having said that PI’s are always hungry for newsflow and never think they get enough. Although I think AK will only release a bare minimum and what he has too. And while he seems to have “an excellent relationship with Nomad” , i think it will be in the main his decisions what news is released.
As I’ve said before at the very TOP of my list is true refinance of debt so that we eliminate the material risk of remaining a going concern.
Amazing really (but I clearly understand the fx issues - well at least I partly understand the complexity of it all) that it’s not more straightforward to restructure $443m of debt when we have $3.7bn of World Bank guaranteed gas contract in place over the next 14/15 years.
Some excellent photos of the vast Accugas infrastructure too:-
“We consider Savannah’s operational performance in the first half to be strong with the company also confirming continued successful expansion of its renewables division,” comments @ShoreCapital in their research note this morning following #SAVE’s half-year 2023 results.
Read more here: bit.ly/3rvJqyW
Strong momentum continued post-period end with #SAVE signing contract extensions with Central Horizon Gas Company Limited, First Independent Power Limited and Notore Chemical Industries PLC in Nigeria for a total of up to 85 MMscfpd.
#SAVE delivered gas to eight customers in H1 2023 and signed a number of new and extended contracts, including an agreement with Amalgamated Oil Company Nigeria Limited to purchase up to 20 MMscfpd of gas for onward sale to our customers, a new agreement with Shell Nigeria Gas Limited for gas supplies, which commenced in August 2023, and a contract extension with Shell Petroleum Development Company of Nigeria Limited for an additional 12-month period.
We are proud to announce the continuation of our strong safety record, with our Nigerian operations recording one million hours without a Lost Time Injury, in line with Pillar 2 of our sustainability strategy “Ensuring safe and secure operations” and UN Sustainable Development Goals 3 (Good health and well-being) and 8 (Decent work and economic growth).
Rocky - let’s hope there is sustained newsflow in the lead up to December 15th………….. surely not another 2.5 months of silence……. From the company………………
Positive mental thinking!
I know it’s a while from having a decision made but…
Should we win the ICC cases (good initial judgement indicators but a long way to go with a few swings from various court decisions up to decision date) that would be our current net debt of $443m wiped out, so long as we had a credible, reliable way of obtaining the award amounts.
Rocky - If the benin starts the pipeline that means ecowas restrictions will be lifted so continue to look out for what happens there..................................................
1) restructure accugas debt
2) If benin start the pipeline than I hope savnnah aggressively move to drill and flow testing well in short order and work up plans to connect 5,000 bopd to pipeline.
3) I believe they will be working on other deals in the background we know they are looking at Nigeria and Congo both being offshore assets, and i am sure there is plenty of other opportunities they have already worked the technicals on.............
Brilliant insight Scotpak thanks let hope we get some news on accugas debt restructure in October...............
Sp - TY and let’s hope it completes sooner rather than later. The next big thing for me is adding the successful compression project in Nigeria in order that we can continue to to expand our existing customers and add new ones too. I just saw this bit in yesterdays report which is very promising although i do not know when the expected completion date is for the compression project:-
“ Savannah continues to progress its US$45 million compression project at the Uquo Central Processing Facility. Following the front-end engineering and the associated order of long lead items, detailed design work has commenced and is on track to be completed in Q4 2023. The compression project remains within budget and startup is planned for mid-2024.”
Once debt refinance is secured and now I know compression is still on track, I will restart thinking a bit more about M&A. However, I must admit I’d love to see one or two new SPA’s land soon so that we could be working on 2 / 3 M&A targets inc SS simultaneously. This would cushion the blow if a couple of others landed should SS fail.
Am not even thinking about niger or renewables at the moment but I am looking forward to the ICC decisions which I hope will land sometime next year. Not sure how true the rumour is of a June 2025 date being set for the judge led hearing.
they mentioned that we will get an update on niger plans in q4 and i believe it will be driven by this ecowas restricting. china will force benin hand................
talon seeks to reassure xi jinping over cnpc-agadem pipeline
the fate of the export pipeline for cnpc's crude, one of the most important potential sources of revenue for the new junta in niamey, now lies in the hands of patrice talon in neighbouring benin. he is under pressure from ecowas to delay its launch.
behind the scenes, the beninese president patrice talon is continuing to assuage chinese concerns over the export pipeline for agadem crude, whose launch may be delayed following the coup in neighbouring niger on 26 july.
though oil is a central pillar of chinese-beninese relations, the subject went unmentioned in both countries' official media coverage of talon's visit to beijing in september. but although the minutes of their talks were similarly silent on the matter, oil issues were indeed discussed by the beninese leader and his chinese counterpart xi jinping at their meeting on 1 september.
according to our sources, the latter expressed his concern at the potential repercussions of the coup in niger on the pipeline that exports the oil of the state-owned china national petroleum corp (cnpc) via benin.
his main worry is that the pipeline transporting crude from the agadem region to the beninese port of semè will not come on line in october as scheduled, economic community of west african states (ecowas) sanctions on niger having led to the closing of the border between the two countries. talon did his best to reassure his opposite number on this point.
ecowas pressures talon
meanwhile, the new nigerian president and current ecowas chair ahmed bola tinubu, who is hoping to orchestrate the return to power of the ousted nigerien leader mohamed bazoum, is pressuring talon to block the launch of the pipeline, which would throw a welcome financial lifeline to the junta if it comes on line rapidly.
had the situation not changed so suddenly in niamey, the pipeline was to have carried nearly 96,000 barrels a day. the putschists and their leader, general abdourahamane tchiani, are hoping to negotiate a compromise with ecowas so that the crude can flow to its destination.
on 8 september, tchiani, who appointed mahaman moustapha barké as minister for oil, mines and energy in the government of ali lamine zeine on 10 august, signed a decree featuring the name of his new adviser on oil, mahaman laouan ***a. having served as secretary-general at the oil ministry during the presidency of mahamadou issoufou, ***a held the same job title at the african petroleum producers' organization (appo) up until 2020.
A termsheet will usually specify the applicable interest rate, loan maturity, any amortisation payments, loan collateral and any associated loan covenants (rules the company must abide by to maintain availability of the loan). If they already have a termsheet complete with a consortium of lenders, then usually completion is only 5-10 days away max. But thats from my own experience. Dont want to give anyone false hope.
Scotpak - getting to a term sheet sounds good to me. From your experience how likely do you think the debt refinance will complete now that we have got this stage? Hopefully we will see some his resolved during the early part of Q4.
The FX losses themselves were not the "one-off". The one-off was the massive Naira devaluation enacted by the Nigerian central bank. Please see my previous post for more info one why this was done.
In terms of what the company are doing to reduce this risk. The main thing is completing the refinancing of the $300m+ Accugas bank facility (matures in Dec 2025) using a Naira denominated local bank facility. Once this is achieved, the companies largest debt liabilities will have a currency which will match the local currency gas invoices (main source of revenues).
Yes, until this done, FX risk will remain, but the recent huge FX loss is definitely a "one-off". Not in terms of frequency but in terms of size.
Rockyride - I am personally hoping for more newsflow in the period leading up the the December 15th date personally I think it's poor if they go silent for another 2.5 months like they did since 27th July update...................................
Whatever that news flow is we need some rns to keep the investor base appraised. it's a 2 way partnership between us shareholders and the company. Happy to not to be informed about south sudan if it jeopardises the deal until the company is comfortable to do so but at the same time we deserve sustained newsflow and comms as well, not constant new blackouts...............................
I hope AK and IR are cognisant of this matter of fact
PART 2
Finally let’s hope AK has decided to get all the bad stuff (a lot of bad luck), warts and all out in yesterdays update. If so we have a new baseline to work from as we move forward. Let’s secure debt refinance and then build on things from there. If we could complete the debt deal and bring in SS I would be a happy bunny again.
Sorry for the downbeat stuff yesterday but I did find the report very poor on my first assessments of it.
Onwards and upwards and here’s hoping for a strong Q4 and an even better 2024.
PART 1
1 In the interims we announced a $30m CAPEX reduction from $60m to $30 due to re-scheduling of projects in Niger and Nigeria. We know the Niger part will almost certainly be the 2023 Q4 well testing program but does anybody know what has been put back in nigeria?
2 We announced 676MW of renewable projects underway. I know about 450MW in Niger and 75MW in Cameroon. does anybody know what the remaining 151MW relates to?
As we move forward in to Q4, No 1 priority for me is to see the debt restructure RNS and I can’t bloody wait to read a successful outcome. In H1 2022 our average interest rate was 10.7% but due to US LIBOR rose to 13.4% in H1 2023. The difference in rates on $443m of debt is costing us about $12m pa.
Re SS M&A - I can’t really see the SS Government having any other credible options apart from ours. So I would guess it would be a binary decision for them - either they keep the status quo and don’t approve SAVE (I’m biased but that is not a very clever way for them to go) or we win. Obviously I am staying very hopeful on this but I would not want even guess a % win chance.
From what I was told, should SAVE sign an SPA for another M&A deal they would have to RNS it. Having said that they seem to be able to convince NOMAD they don’t need to update the markets on material stuff for some reason. This is a very subjective view of mine but it could possibly be linked to not wanting any info out in the public domain due to SS M&A or the 2/3 ICC cases we are involved in.
Clearly Africa is a tough continent to work in and even tougher at the moment with the political landscape in many countries. However, AK must be mightily frustrated and trying to deliver his main KPI’s for 2023:-
Close SS
Add at least 1 more hydrocarbon M&A
Refinance Accugas
Have 1GW of renewables underway (now slipped to Mid 2024)
With regards production down H1 23 vs H1 22 but revenue and EBITDA both up 8%, could this be due to contracts simply taking less under their TOP contracts but still paying for it? I don’t know how much gas we owe people under these contracts but I am very keen to know more on current throughputs on pipeline and processing and how the compression project is going. I hope none of the $30m CAPEX reduction is due to compression project being put back in the work schedule.
In the RNS it clearly states “ During the period, Savannah also received US$44.9 million from SNH in relation to the sale of a 10% interest in COTCo.” Personally, I found this very surprising and does anybody know how this can have possibly happened?
Has anybody got up to date on the progress on the $4bn Chinese Niger to Benin pipeline progress? Hopefully as Z alludes to the situation in niger will hopefully improve at some point. It seems that completely dislike the French but hopefully the Chinese and ourselves will be seen more favourably as it’s in the countries interests to see the current 100kboepd rise to 100/100kboep
Old news but just to show SAVE active on Twitter with this recent Tweet:-
“We consider Savannah’s operational performance in the first half to be strong with the company also confirming continued successful expansion of its renewables division,” comments @ShoreCapital in their research note this morning following #SAVE’s half-year 2023 results.
Read more here: bit.ly/3rvJqyW
Anyone see a pattern here on Naira devaluation? This is not new, or a one off, so to me SAVE should have mitigated this issue a long time ago:
2023 Half year:
“ Foreign Exchange loss
Foreign exchange losses amounted to US$54.0 million (H1 2022: US$0.8 million). These losses are unrealised losses which occurred following the harmonisation of the various exchange rates which was implemented by the Central Bank of Nigeria in June. The impact of this decision saw the official Naira/US$ exchange rate move from approximately 460 to 755 at 30 June 2023 and this required Savannah to revalue its Naira denominated assets and liabilities at this new rate when preparing US$ denominated financial statements.”
2022 Half Year Results
“ The interest cover ratio, on an Adjusted EBITDA(2) basis is 3.1 times (H1 2021: 2.9 times).
Foreign Exchange loss
Foreign exchange losses amounted to US$0.8 million (H1 2021: US$10.9 million). These losses were realised losses arising from US Dollar gas sales invoices which are settled in local currency, and from the translation of Naira into US Dollars to service US Dollar denominated obligations. Realised foreign exchange losses can be recovered through the "true up" mechanism in the Calabar GSA
In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rates and there is typically a differential between this rate and the Central Bank of Nigeria exchange rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.”
2021 Half year results
“ Foreign exchange losses amounted to US$10.9 million (H1 2020: US$7.1 million).
An unrealised loss of US$7.0 million (H1 2020 gain: US$1.7 million) was mainly a result of revaluation of monetary items held in Nigerian Naira following the devaluation of the Naira from approximately 380 Naira/US$ to 410 Naira/US$ in May 2021. The realised losses of US$4.0 million (H1 2020: US$8.8 million) arise mainly from US dollar gas sales invoices which are collected in local currency and then converted at the Central Bank of Nigeria ("CBN") official rate to settle US dollar invoices. In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rate and there is typically a differential between this rate and the CBN rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.”
2020 Half year results
“ Foreign Translation Loss
The net foreign exchange loss of US$7.1 million (H1 2019: nil) comprises a realised loss of US$8.8 million and an unrealised gain of US$1.7 million. The realised loss arises mainly from the fact that US dollar denominated gas sales are collected in local currency converted at the Central Bank of Nigeria ("CBN") official rate. In order to purchase US dollars to service US dollar obligations, Savannah is obliged to use the Nigerian Autonomous Fore
Apologies, for context I should have said my copied post below was in response to my joint post of the day - alongside scotpak's here - from the 20 + boards I've been on today:
From poster 'johndough' over at Zephyr BB :
Malcy “remains highly confident” & says patient buyers at this level will be amply rewarded. Exactly as he did at +7p. GLA. (zephyr closed at 2.6p today btw )
Snaffleman, I cut and paste my post just now on the Zephyr board here:
Malcy is a funny guy
Agreed Komakino - The accugas business is resilient I think most on here would agree that H2 numbers will bring the net debt number back towards the downside as the baits charge was a one off.
I guess most on here now that there is still value in this business with Nigeria alone to be greater than our suspended price.
A lot of the sentiment is frustration around going into suspension without anything to show for……………………
Also one would hope with the number of individuals that have joined the business from lawyers to geologist to corporate staff to field staff that there would be significant news flow that would correspond to the headcount build. Granted AK May be focused on closing deals. But I expect others within their business to pull their weight as well specifically in Nigeria…………………
I believe the thought process for the continued extensions are AK knows this is probably the last window of suspension he will get to bring in a significant deal in successfully. Otherwise there would be major push back to come to market without a deal and then ask for a suspension again which takes a few more months. So I believe the thought process would be to extend the current window to bring a deal home. Now we can all guess whether that’s South Sudan or another asset but I believe that’s probably the high level thinking
Scotpak a warm welcome and your early input is balanced articulate and well informed. I hope you continue and become a regular contributor and join the existing "gang" who provide so much quality research and keep us well informed