The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
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
Been locked off grid most of the day. Understand the concerns but personally am chilled. Naira was a one off charge, so frustrating but no more than that. Most of the issues have been discussed and can see both sides. AK has a lot to lose if this doesn't work out and when choosing an investment the CEO is right up there as possibly the most important consideration. I'm pretty much in the Zengas camp in terms of views today, and certainly not worried long term about this investment. Back on Monday when I'll have WiFi again!
Welcome Scotpak - I concur with rocky and zengas keenly your posts coming, and brilliantly articulated
Thanks scotpak, a very well thought out and reasoned post.
Please keep your views coming.
Thanks for the kind words RR. Will try to contribute on a more frequent basis.
WOW Scotpak - a member on here for 3 years and your 1st ever post today, and what a fantastic post it was. where do you get your vast knowledge from mate - it’s awesome. Thanks for your post today and will you be helping to keep the board balanced and informed by posting a bit more and sharing your knowledge and views with us? I certainly hope so as people like you help keep people like me motivated and sane.
Yes thank you all for your analyses I’m now a little cheered up after the most recent posts. My main concern is can the Nigerian business keep up with the debt and everything else and not going bust. It sounds silly but it’s a real risk.
I completely agree if we’re trading today we’d have been in the teens. If we come back without SS and no other deal I still think we’ll be in the teens. I know a lot of you don’t agree. I don’t trade so short term price doesn’t concern me as long as the business has a bright future. Good night.
Oh and I too would delay like to hear Komakino’s views along with the highly respected Porchefund. Come on boys get on your keyboards for 10 mins this evening.
After the great posts from scotpak (welcome and fab post) and Zengas and then I’ll try to get upbeat again but it will be difficult in the short term.
So, if we are struggling to refinance Nigeria debt (and I accept all the bad luck re the peg and Naira issues) are we struggling to finance SS from debt now? In the past we have always been told a big differentiator for SAVE is our access to capital. With the risks associated with the SS deal, given the war in Sudan etc, do we still have the same pulling power with access to capital? May be not.
And if we are struggling to finance through debt, maybe we could not get a large enough placing away either. Maybe one of the key work-streams is our funding of the purchase issue.
So maybe we are dragging the deal out, hoping for elevated POO and a huge reduction to the headline figure of $1.25bn. Could we be trying to wait long enough so that the deal is paid by a huge adjustment + $xxxM paid for from future production.
Maybe this is all pie in the sky and also maybe not. If so and the SS Govermenment would be fully aware of it, maybe that is why they are sniffing around alternative options.
Yes a lot of ‘maybe’s’ in this note put I’m just throwing it out there.
Let’s all hope that a bit of luck goes our way and that we get some positive updates during Q4.
Final point here - if we had re-listed today with this update and an Ad Doc pending shareholder approval and gov sign off what do people think the SP would have been. My guess would be 5p - 10p below suspension price.
Bon soir.
Thank you Zeng. Honestly you should communicate to AK on refinancing.
I will remain invested and Accugas must be kept sound with a 45p valuation on debt reduction or more with new contracts.
Gas contracts are increasing- should lead to increased revenues.
Also what happens post compression completion - possible new gas contracts signed pre or after that ?
Transaction costs gripes - yes agree and fair enough but given the prize of an asset(s) that were non recourse debt and capable of $200m+ FCF i'm not put out by these increased costs in trying to land them. Be different if we were doing it all from the original 3 contracts and revenues we had in place but we weren't. They end when the acquisitions end and heavier when your revenue base is lower - less so if we had 1-2 successfully under our belt ie higher income.
What's the REAL negatives/dissapointment here today ?
1) A large $56m hit for the currency devalution - pushing net debt up in the short term but to compensate we have to take into account the Cotco interest.
2) No real info on S.Sudan and relisting.
3) Both only added to the Chad issue all adding up to an outpouring of negative sentiment .
--------------------
I don't expect those costs to re - occur. Keep growing the Nigerian revenue on the space we have.
News on S.Sudan should be short term.
As Chad ICC nears - SAVE wait and see outcome - then if not in our favour surely the COTCo interest is not benefically core to us - though on the remaining 31% we own supposed to give us north of $25m/yr FCF on current throughput (but currently in dispute with the Chadians though not on their territory).
So sell the interest pro-rata and reduce the net debt in turn reducing the finance costs along with the principal ?.
DON'T refinance Nigeria - pay it down on the envisaged timeline and it's own growing revenues (Sell Cotco)?. Saves us $100m/yr what could be going to us as Shareholders or a future asset. In saying that we don't know what kind of additional contracts could be being considered with the spare pipeline capacity and buying in 3rd party gas, there could be $50m -$100m+ of new business potential so we're not party to future thoughts?.
If we land an acquisiton well and good - it should be able on it's own merit to entirely repay it's own associated debt. So again - i don't see the point in refinancing Nigeria unless there are fairly significant new gas opportunities on the horizon.
Reconsider/slow the renewables if an acquisition does not come through - or seek a separate listing for it down the road when the projects are ready to be sanctioned .
Niger oil - a lot of groundwork done so absolute worst case as said last week could offload for $100m region imo and knock the n/debt down further - doubt it, but it's there and think Niger situation will resolve. But if not, i'd want a producing acquisition at some point of 20-30k bopd to replace it and bought on it's own merits and debt.
Did malky get paid for that review. I wonder if he really is aware of some of the seriousissues he fails to mention. In Niger to talk about iy being merely a delay is misleading to the point of being dishonest. I stopped reading malkys reviews years ago and although i am a SAVE holder I think the positivity of this review ignores too mant issues
Hi Guys
Like many here I'm also an investor and appreciate all the great contributions from the likes of ZENGAS, RR etc and long may that continue. Have not contributed to these forums before but felt it was justified given some of the statements I am reading today. Just some quick points from me:
1) on the Naira devaluation, this along with removal of fuel subsidies was a very important requirement which has put Nigeria on a positive fiscal path. This will allow Nigeria to reduce its fiscal deficit, boost FX reserves and as was mentioned before boost naira liquidity. On the liquidity aspect this is happening but slower than expected. The markets have also taken a positive view on these events with Nigeria USD bonds rallying hard and Nigeria CDS (insurance against default) tightening from a high of 1,250 (may ) to its current level of 757. Yes its still high, but much improved
2) Accugas gas contracts are long dated (15 years) with stable pricing which is denominated in USD. This will help with the refinancing. If you ignore all the exploration/ M&A stuff and just focus on core biz, its pretty solid stable stuff.
3) Yes the big FX loss is very frustrating and Im annoyed that such a large proportion of their cash balance was held in Naira and not all held offshore in USD, but it is what it is. This was a one-off hit and does not reflect the cashflow generating abilities of the Nigerian gas assets which continue to do well. As you will have seen, post balance sheet date, new contracts continued to be signed. EBITDA also increased by 8%
4) on the risk of refinancing. The accugas debt facility (USD denominated and majority of bank loans) matures in Dec 2025. Thus we are not quite in panic stations yet. There is still amply time to explore various finance options. If mgmt are saying they already have a termsheet prepared with a group of lenders than that is a good sign. In theory FX risk should not affect this business given contracts are USD denominated, and currently the biggest chunk of the debt is in USD. The problem arises from the requirement to accept Naira from local customers on those USD denominated gas contracts which creates a short term liquidity risk. Yes that risk hit us hard, but this huge Naira devaluation enacted by the Nigeria Central bank was a massive on-off and unlikely to be repeated.
5) yes the company has alot of debt but Net debt/EBITDA is only 1.9x. Given the long reserve life of its gas assets, stable pricing and 15yr contract length, that’s not a very high net leverage figure. When I got involved with this company in 2020, net debt/ EBITDA was closer to 6x.
6) Alot of the cashflow in H1 2023 was eaten up by adverse movements in working capital mostly related to a big increase in receivables. Results point out that this is expected to reverse in H2 which should help with free CF generation and debt reduction
Anyways chin up lads, hope ive added some decent colour. Good luck all.
Our CEO needs to lead from the front and show us that he is accountable for where we are at the moment.
When was the last time he appeared at an AGM or even gave PI’s the chance to ask live questions on a WEB cast? To the best of my recollection it was on a call about 5 years ago.
AK needs to show some accountability, deliver a WEB cast to us and allow us an hour to ask live questions. As you know I’ve written to IR and can’t do any more than this.
All I ask for is a 1 hour presentation followed by 1 hour of Q&A.
AK is on a tremendous package and needs to earn his corn by showing some respect to PI’s. I relish the opportunity should it arise and rest assured my questioning techniques will be radically different than Malcy and Justin.
Good weekend to all and let’s see what Q4 brings.
How much do these renewable projects costing us? The more I read the rns the more worried I am. Can we afford to finance all these projects from our Nigerian business alone? I know that’s the worry some posters have talked about for a while. I am super worried.
The mind boggles 🤔
This is indeed a very strong operational performance and the figures tell the story. Production was up 12% and Total Revenues and EBITDA up 8% were incredible in a highly competitive market. Add to that new and extended gas contracts with strong momentum carrying through to H2, note Notore, since extending their contract in July for another 12 months have already taken more than twice their daily average nominated amount of gas at 26.3 MMscfpd vs 10 MMscfpd, and up to 676 MW of renewable energy projects now in motion across three countries as SAVE moves quickly towards up to 1GW+ of projects in motion.
As ever there is much going on at Savannah, we have seen the first disclosure report for Sustainability Accounting Standards Board published today which ticks another important box. Also as previously announced the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan which should be another really valuable asset.
It is also worth mentioning the $1m investment in Fenikso, (formerly Lekoil) which has turned out to be spectacularly successful. The restructuring of the agreement has meant that Savannah will receive up to $16.3m over the course of the next nine years and have already fully recovered the initial investment with payment from Fenikso of $1.3m to date.
Savannah are continuing to do extremely well despite some current political tensions in Africa, such as in Niger where the recent coup has resulted in some delays to the well test programme. Despite this I think that CEO Andrew Knott and his team consistently deliver on the strategy and are building a substantial and important business on the continent.
https://www.malcysblog.com/
“ the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan”
I wonder what these various work streams are? I wonder if they will only allow approval once SAVE have refinanced their debt as SS will want reassurance that their operations will not be interrupted?
Zeng, you should email AK on that.
I’m with RR, not terribly happy, rather worried.
Where’s zone? Where are you? Would have expected your posts.
CYB - TY as I don’t understand that stuff very well. Here is another summary note I just found on here. I’m looking hard for some positives here but am struggling to find any:-
Savannah Energy PLC - London-based energy company, with projects in Cameroon, Chad, Niger and Nigeria - For the six months to June 30, pretax loss widens to USD56.9 million from USD11.3 million a year prior. Revenue climbs 44% to USD123.7 million from USD85.8 million. However, expected credit loss increases to USD33.8 million from USD5.9 million. Finance costs increase 41% to USD51.8 million from USD36.8 million. Notably, Savannah incurs a foreign translation loss of USD54.0 million in the first half of 2023, ballooned from USD846,000 a year prior.
Hi, Rocky
I think the expectation was that the removal of the peg would result in a liquid currency. This would have allowed management to switch the majority of the Naira spot into dollars and pay down a decent chunk of the debt. The result would have been less fx exposure (obviously) but also a more modest interest expenditure burden. We'd have continued paying down aggressively as the Migerian customers paid on the contracts.
However, it appears that despite the significant devaluation, Naira remains illiquid and off-loading spot in size (for anybody) isn't really happening. The ongoing difficulties in restructuring the debt would appear to back this up. The local banks don't want the Naira either, it would seem.
After the huge devaluation when the peg was removed, Naira appears to have stabilised. Maybe someone more familiar with Nigerian domestic business can advise if that is expected to remain the case. Is central bank intervention keeping it there?
I remain skeptical on the ability to secure the debt restructuring.
The company is not managing well at all its messaging to the investor base. Instit-to-board member conversations must be quite frank here.
Nick Beattie: where are you?
From the SAVE website investment case at the start of 2021 we have through to 2037 - 'Contracted Cumulative Revenues' of around $4.3 billion based on the Take or Pay basis of the 3 customers which are Lafarge (Unicem), Ibom Pwr & Calabar.
-----------------------------------------
F/yr results in June - "At end 2022 we had over US$3.8bn of future contracted revenues with contracts having average weighted remaining life of 15 years" ie to Calabar, Akwa-Ibom and Unicem.
We are looking to refinance from the 5 year term (now down to about 2.5 remaining) but about $350m figure i think - its about 10% of the contracted revenues.
How much additional revenue (not long term fixed) is able to come through from the additional contracts beyond the 3 cornerstone ones ?
Mulak still too small but DCQ up to 2.5 mmcf/d variable but im not including this figure.
Post period end contracts (both renewed extensions & new)
CHGC up to 10 mmcf/d.
Notore up to 20 mmcf/d (though July -September 2023 ran at 26.3 mmcf/d).
FIPL - (Afam, Eleme & Trans Amadi pwr/stations) up to 65 mmcf/d.
Supplying 80% of the gas for those extended contracts = 68 mmcf/d and if you add that to the fixed contracts it just exceeds 200 mmcf/d on a TOP basis. Now not all of that gas isn't always taken, but invoiced and it has to be available but it's why i think we are at our limitations on contracts until the compression project is completed next year.
In addition -
SPDC also extended - i can't find the original mention or rns of this ?
New agreement with SHELLs SNG started August last month - size not stated.
We have a contract to buy in up to 20 mmcf/d from Amocon and i think we've been using 18 mmcf/d so given the area AMOCON is in - is this what we are supplying to the Shell contracts (SPDC & SNG) ???.
In real terms we are still reducing the net debt as said in my previous post (taking into account COTCo interest) but i'm getting to the stage of really just thinking it would be better paying off the existing finance debt asap in the original timeframe for Nigeria. (Perhaps this may have been considered in the projections from the oil acquistions and put on hold but Chad ran into problems barely 8 months ago).
Instead of financing costs and debt for Accugas/Nigeria -it would turn in to an immediate additional $100m+ net positive per year on top of growing revenues at a time of limited capex once the compression facilities are completed next year. That's cash that could pay down oil assets when combined with their cash generative power at $65/b+ or instead pay a very significant dividend.
TiL - if you were a new potential customer for Accugas to transport your gas and you read todays report, would you pay all the connection costs to the pipeline and sign a contract with Savannah? Or would you bide a bit of time to see how the next few months work out?
On another note, how on earth can we possibly count the $44.9m for the 10% sale of Cotco as received?
Rockyride - I am not disputing it i was just putting it out there for debate. I fully conquer there is a lot of work that needs to be done. If I was AK as a minimum KPI he should be able to re-finance the accugas dent no questions whats so ever if not he needs to explicitly say why ?
then he needs to continue with additional gas contract that utilise full processed capacity up to 200 mmscfd and so additional third party gas as well......