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Billingham – Technology Warranty Insurance Proposal Received from specialist underwriter, happy with it – Expect premium to reduce in future projects. THIS IS WHAT HAS PAVED THE WAY FOR THESE PROJECTS TO PROCEED. ANY IDEAS IF THIS HAS BEEN OBTAINED THROUGH PROVIDING RESULTS THROUGH ALL THE UNIVERSITY TESTING? - OUTSTANDING ACHIEVEMENT
This has helped gain traction with knowledgeable investors – Term sheet in issue
Full quotation for grid connection received, far less than expected - Increases viability
“Billingham not just fully transformational project for EQTEC, but also for the waste elimination infrastructure in the UK”
In the process of producing the Legal documentation with COBRA - THIS MUST BE FINAL STAGES SURELY?
This actually could become a serious advantage for EQT.
It’s clear from DP’s comments that this insurance is financially important to the economics of any project therefore assuming Eqtech can deliver the Billingham project to standard over the coming year its likely they will have a significant “Insurance Advantage” over incoming companies without a commercial track record. Perhaps this is an upside paid for by dilution and delays in former times?
It was interesting I thought that it was the first thing DP mentioned when asked about progress. Normally the most important thing comes to mind first - an indépendant vindication of the tech by typically rather pedantic folk (underwriters)...
Totally agree David.
Additionally, what im seeing, is, David is quite content to keep the lights on at the moment by taking on some of the smaller projects, where cash flows will be recognised quicker, whilst doing the heavy lifting to enable the large RDF projects to dominate the pipeline.
Billingham + the 2 in Greece make this a very exciting time.
Also having a proven track record for the supporting issues like insurance most likely cuts the project timelines which is especially important for smaller cookie cutter projects where the capital needs to start paying for itself as soon a possible.
Hell I am starting to like this stock!
Add the revenue of just a couple of these large projects, factor in the PE ratios for similar companies the Green Energy sector & work out an MCAP & share prices for EQT, makes you think
PE’s in the 20s?
That sounds prudent.
Take a look at the revenues & earnings in PHE & ITM though. This sector is attracting a huge premium just now.
Probably but I think that long term underlying earnings growing a PE of 20-25 makes sense.
Much more important is when EQT can become a carried equity partner in a stream of projects all with 40 years revenue horizons.
That’s when the crazy numbers make sense and Mr Palumbo gets his £50m bonus!
Agree
Short term these are massively inflated due to the emissions requirements & EU Green deal David spoke about.
His quote was winter is coming for the old infrastructure - Brilliant!
Very nicely put!
?
The last thing I want to be is some Jonah, although I do admire the sheer enthusiasm for the stock but I fear it is misplaced
The Billingham site is in a region awash with fully consented sites , about a dozen maybe a quarter of those will get done
Pity plant not in South East where it is needed
And that quarter will have enough financial resources to fund it - might get 50% gearing at best so say £100m in equity
However the wholesale price of electricity fallen through floor in fact you had to pay to get rid of it the other weekend up to £40/Mwh
So a story of untold wealth from EQT may not be on the agenda
Arseclepius I have nothing against people from the South (born in London grew up St Albans happy memories) but this is a classic "Southernist" attitude. If it aint below watford gap whats the point. I hope this succeeds even more now let's hope you stay on 1 post for the immediate. GL all genuine holders. MFU
Its nothing to do with what the South Easteners is but that most WtE plants are situated in the North , planning approvals for waste South East is notoriously very difficult if not impossible , but that's where they are needed - so waste gets trucked by the 1000 or on trains,with Rotterdam now being effectively shut to our RDF exports given taxes
Waste companies are well aware of geographic imbalance
Welcome to LSE asclepius. I see you are Newbie to the site.
I really do welcome your input. Purely because I have a lot invested in here, & I am constantly questioning if I have missed anything!
On to your post. The point I was making was the progress that's been made. EQT have clearly provided meaningful test data on the feedstock to have the offer made.
This alone must have took a lot of hard work & effort from David & the team.
This data can now be rolled out to & used for projects world wide. David is systematically breaking down each & every barrier in order to be in a position to deliver projects of such scale.
You make some interesting points, I'm sure the project will need to work at a microeconomic level before this proceeds. Although, with less & less countries accepting UKs waste I think the government are very motivated
for this tech to succeed. EQT seem well placed now to prove their technology works to the extent required to make the economics work & progress to this point.
Furthermore, the macro economic debate of north Vs south England is probably not going to be relevant in USA, Spain, France, Greece, the Balkans or anywhere else interested in this tech
What we do know for a fact is that right now we are in discussions for 2 more of these in Greece. The progress here can only help those discussions.
Firstly thank you for your cordial words
I have been retired as a Director from WtE sector a number of years, but came across an LSE posting which was somewhat extravagant in praise for sector which I couldn't leave alone
Gasification and its cell mate pyrolysis has had a problematic pedigree as maybe be seem from https://ukwin.org.uk/files/pdf/UKWIN_Gasification_Failures_Briefing.pdf ; Teeside /Billingham still seems to attract loads of interest but there would be totally insufficient feedstock for all - you need a 20 year supply deal written in stone.
Investment losses have exceeded £1b with the best of them loosing money, which encouraged plagued by a number of "undesirables"
But projects have got a lot bigger which saw the back of them,
More recently gasification are becoming mainstream as in www.cogenuk.com/ who done a number of gasification using Japanese and other technologies however all the partners involved in their projects have to financially guarantee construction & operating performance maybe up to £200m to £300m so big boys only need apply- good credit essential
But gasification is also competing with incineration (moving grate) a known technology with much lower risks and subsequently much lower cost of capital. New incineration projects are announced every week see www.letsrecycle.com/news/latest-news/ although burning waste is not always welcome as you know
But given lower risks of incineration you can get a lot more debt at a cheaper cost than equity maybe exceed 75% gearing with proven players , partners and technology; and each partner be it an EPC or O&M must financially guaranting up to cost of project, you may be able to cover some by insurance but they can't fix outages!
For Gasification funders may want sponsors to put up to 75% in equity even if team has list of projects as long as your arm
However I cannot see any project working at £25/Mwh current wholesale spot price www.nordpoolgroup.com/Market-data1/GB/Auction-prices/UK/monthly/?view=chart - this is whole new territory
I don't know of the Greek projects or EQT in anyway but roughly only 40% of some UK WtE projects is attributable to developer of that may get c10% to 20% GP
Remember this is not without competition I could easily name you a dozen gasification cos in UK & EU
As said I don't think its an Amazon!
I hope that helps
I call b u l l s h I t Asclepius, I recognise your style from a previous banned poster and fear we may see a lot more of you.
Thanks for the detailed reply Asclepius.
As Newboy says, you do sound like a previous poster who has now been banned, many believed was Ian Price. With the new account, only 3 posts, knowing nothing about EQT but finding posts on their chat board does seem strange. However, you do clearly have detailed knowledge on this & a passion for the sector so your future posts will no doubt prove your reasons for posting.
Regarding your post, it sounds like information that the previous leader should have known, that clown tried to win the £100m projects all on his own. Needless to say he failed miserably & is a laughing stock in the sector now.
I would imaging your points are the reason why David has got into bed with the big boys. Cobra, Agrigas etc. I'm also investing under the assumption that David Palumbo knows exactly any future financial commitments EQT may have to undertake & have a solution in place for these. I'm aware that he has spoken about running the financing for certain projects through an SPV that roles up to EQT as parent. This would allow any funding partners a strategic way to invest in specific projects. Possibly Altair spring to mind.
You make an excellent point on the current electricity spot price, this is def worth further investigation.
Thanks again for the post, looking forward to having your expertise on board to discuss the positives & negatives of EQT & future developments.
Nice piece of analysis here with a touch of realism as to some of the challenges which given EQT is chasing a small part of the market it should overcome. The EU spending €750bn on a green stimulus certainly adding to the impetus.
Feels like the massive volumes have come to an end and the stock is now moving on retail buying with occasional stale bull sellers feeding the market plus a few momentum players from a week ago happy to move onto their next “Big Idea.”
A few days of upward consolidation and then a move on the next operational update or contract win. Looking good.
To the Analyst
Firstly I am a new to this forum but I am surprised by the gratuitous rudeness and accusatorial style coupled
with wild assertions in this forum
It is the latter which served as a catalyst to respond although it seems to have attracted the ire (and a large serving
of cognitive dissonance) from many private Investors holding the stock bar the 2 corporates – holding 38.79%
of stock per Bloomberg yesterday at 0850
The WtE sector is a complex one even after 30 years in it, but there is no need whatsoever to believe what I have written.
Go to any of thousands of experts in sector from Private Equity, VC’s or top 4 accountants ; PWC alone has > 100 qualified
Renewable corporate finance experts. Together they see thousands of WtE opportunities each year cost maybe £500 to
£1000 for an hour , a small price to pay
But for free external referencing look at Tolvik WtE stats 2019 report dated May20 and there is a good emag “Lets Recycle”
And then you can google UKWIN gasification failures to square the circle
You mention business partnerships Cobra etc but the project will be there project if they have any significant role. What is EQT’s role?
A project SPV is de rigueur but as I have said no investor or debt provider will put a penny up unless there is a strong project pedigree, proven team, highly experienced business partners and a totally secure supply of feedstock with a project IRR in this sector 15% to 20% All must have very strong financials as a full 100% wrap will need to be provided
I don’t know EQT nor what projects EQT have successfully completed
Generally only 1% of opportunities get funded, for WtE its much less than that
Just to get a WtE project investment ready with all approvals, permits, reviews and contractual framework etc costs upfront a minimum of £500k and up to £3m in professional fees etc
Per project that written off if no completion You cannot get funding on just an idea as you might well know
But at present most funders are focused on saving the supposedly “safest bet ” solar & wind projects where they invested billions effected by low power price and exacerbated
By being funder by debt ; one of biggest UK funders, £500m + a go, has said come back in 2 years.
For Billingham over 20 years the low Mwh price means a loss of power revenue N of £100m – you can do the sums yourself .
Then to create the perfect storm feedstock gate fees are a disaster at present, with any volumes grabbed by recyclers leaving the incinerators etc short of input and prices just ridiculous waste food per tonne down by 75%
So all in all WtE is a problematic market in a number of ways at present
Fair Asclepius, it sounds like you do know some stuff. But you also say you don't know anything about EQT.
That's akin to me saying 'most businesses fail, so every stock is likely to fail even know I have done no research'.
Hi Asclepius,
Thanks yet again for the detailed response. Please understand, if you come on to this chat board, with zero posting history at all, predicting doomsday for EQT then what do you expect? You are automatically assumed to be a disgruntled ex-employee, competitor etc. Essentially, you haven't build up any credibility.
Your message is clear. No point in trying. However, let me counter, the world appears to have changed since you were involved here. In the last 6 months, this arena has exploded.
There is a clear blue print in order for companies to be successful in this space. To put it simply it is to have good tech & partner up with a 'big boy' as you put it. We don't determine the valuations on this chat board, the market does, & it's there for all to see.
Please refer to PHE, a partnership with Peel has put them into the £100m MCAP region.
Please refer to ITM, a partnership with Linde pit them into the £1.5bn MCAP region.
EQT have the tech, have the partnerships, finally have the CEO. There is no reason why EQT cannot follow the well written blue print.
Despite all your reasons why this will fail, the market, pricing EQT at over 100% up over the last few days, seems to disagree with you.
Thanks again for your message, its been taken on board & will be considered going forward.
If there's nothing else.....
I did check out the report suggested and interesting reading. What I saw was tonnage of waste processed in the UK up 9.9% year on year and EfW plants in the UK represents 45.5% of the overall UK residual waste market. As this relates to Eqtec, growing market and still plenty of growth capacity in the UK. However Eqtec's big play is largely outside the UK where the market depending on where in the world the project is probably less well developed and growth opportunities are larger.
Clearly large scale projects like this are difficult to put together and get commitment. Eqtec is an engineering company with clever and effiecient technology they are looking to deploy on client projects. Typically we are not an operator but on some projects the company is providing help and consultancy on the operational side. That is why the range and scope of cooperation with large scale operators as we have in the US is vital and absolutely the right way forward.