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It is interesting to read the 2023 AGM presentation dated 9 August 2023 as it includes a slide which contains the following information:
Investment Structure & Waterfall –a path to sustainable capital growth
The investment agreement was designed by Scirocco to provide for distribution of returns on a sale or other exit event (not relying on distribution of dividends)
• Equity proceeds for distribution take account of any thirdparty debt secured at the asset level
• Net proceeds to equity are then distributed as follows:
• First to allocate proceeds 100% to SCIR until all outstanding loans including any accrued interest are repaid
• Second to allocate proceeds 75% to SCIR, 25% to EAG Founders until SCIR received 2.0x all sums invested including any accrued interest on shareholder loans
• Third to allocate proceeds in equity proportions 50% to SCIR, 50% to EAG Founders
• This waterfall ensures Scirocco gets paid first and delivers a preferred return from any distribution
On the 10 January 2024 Shareholders approved the sale of EAG/GGL and the presentation is dated 9 August 2023 so in a period of just 5 months we have gone from a situation in which the presentation shows that the EAG/GGL model is going to deliver value to shareholders to a situation where EAG/GGL was disposed of at a loss of 880k.
If you search for Energy Acquisitions Group on Companies House you will see some submissions dated 24 July 2023 which precede the presentation date by 3 weeks for registration of charges in favour of AIB Group (UK) PLC.
The sale of EAG/GGL would have taken many months to organise and it would seem logical to conclude that these charges were put in place to facilitate the sale of EAG/GGL at a massive loss yet the presentation shows that the AD plant model is going to be profitable.
AGE
Have a look at the presentation that the Board prepared for the 2023 AGM dated 9 August 2023 and you will see that it costs £428k pa to keep an AIM listing:
As per the RNS the single proposed resolution relates to the request for the Directors to put in place a strategy to distribute cash proceeds from the sale of assets to shareholders.
The Board have had plenty of time and spent millions in consultancy fees in order create value for shareholders but so far they have failed to do so.
I will be very interested to read the Boards circular as it is quite obvious that it is in the best interests of shareholders to return the cash from Ruvuma to shareholders and then we can decide what to do with the money rather paying for the costs of having AIM listing and Directors remuneration as well as highly paid consultants.
You do not need to keep an AIM Company going and pay Directors remuneration to a CEO for what is a part time job for SCIR as well as other members of the Board.
Have a look at the presentation that the Board prepared for the 2023 AGM dated 9 August 2023 and you will see that it costs £428 pa to keep an AIM listing:
Listing Costs
£k
LSE costs 20
Nomad, Broker,
FPR & legal 218
Audit costs 55
Outsourced accounting 90
Insurances 30
AGM 15
TOTAL 428
AGE
As you will have seen in the RNS dated 6 February 2024 Forest Nominees Limited who hold the shares on behalf of G.P. (Jersey) Limited who own 8.77% of the entire share capital requested that the company convenes a general meeting to vote on a resolution to return cash to shareholders.
The Board have advised shareholders to take no action at this time and that they are going to produce a circular containing an update on the board’s review of the strategic options and voting recommendations.
I am going to vote in favour of the resolution as the Board have so far consistently failed to increase shareholder value and monies have been wasted on the One Dyas aborted deal as well as the EAG/GGL acquisition so the cash from the Ruvuma disposal will be frittered away by the Board so the best option is for the cash to be returned to shareholders in the most tax efficient manner.
The 30 June 2023 accounts shows a loan of £1,522,000 to EAG Ltd and we are going to get back just £702k with a further contingent payment of up to £150k so even we receive the full £150k we will make a loss of £670k plus the associated selling costs so the total loss is in the region of £700k.
The £700k represents a loss of 46% of the loan of £1,522,000.
The Board spent 80k on solicitors fees and 100k on diligence costs for the EAG/GGL acquisition which completed on 25 August 2021 and shareholders approved the disposal on 10 January 2024.
The £700k loss increases to £880k when you factor in the £180k of costs relating to the acquisition.
In a period of just 28 months we have gone from what was to be an exciting new strategy into a complete failure and questions have to be asked about how good the due diligence was to say EAG/GGL turned out to be such a disaster.
AGE
29 January 2024
Chariot Limited
("Chariot", the "Company" or the "Group")
Operational Update
Business Outlook for 2024 and Morocco Onshore Drilling Update
Chariot Limited (AIM: CHAR), the Africa focused transitional energy group, today provides an update on the outlook for 2024 and near-term plans across its three pillars, Transitional Gas, Transitional Power and Green Hydrogen.
Transitional Gas
Onshore Morocco
Loukos Licence (Chariot, Operator 75%, ONHYM, 25%)
· First drilling campaign of two wells is on track to commence around the end of Q1 2024.
o Planning activity is well advanced including
§ signature of a contract with Star Valley Drilling, for provision of the 101 rig which is already operating in country
§ imminent approval expected of the environmental permit for up to 20 well operations across the licence area, allowing flexibility and efficient planning of future campaigns
§ delivery of long lead items to Chariot's newly established storage yard
§ land access approvals nearing completion, with site construction activities to commence thereafter
o Gaufrette prospect confirmed as the first drilling target
§ up dip of an existing gas discovery and supported by similar seismic anomalies to those successful in Chariot's offshore operations
§ success will potentially unlock multiple similar prospects totaling 26 Bcf of Best Estimate recoverable prospective resources (preliminary internal estimate)
o Dartois prospect has been high-graded as the most likely second drilling target
§ located along trend from a historic gas discovery which tested gas from the same reservoir interval
§ has the potential to unlock a trend of prospects with over 20 Bcf of total Best Estimate recoverable prospective resources (preliminary internal estimates)
· Early fast-track product from the 3D seismic reprocessing project has allowed identification of secondary objectives for the upcoming wells, which are under evaluation.
· Precise timing for the drilling campaign will depend upon rig schedule and further updates will be provided in due course, along with any further updates regarding the reprocessed 3D seismic data analysis.
· Work is also continuing with our partner ONHYM on success-case fast-track industrial commercialisation opportunities, with the possibility to deliver near-term cash flows.
Offshore Morocco
Anchois Gas Development Project within the Lixus licence (Energean, Operator 45%, Chariot 30%, ONHYM 25%); Rissana licence (Energean, Operator 37.5%, Chariot 37.5%, ONHYM 25%) - working interest post-completion of transaction
· Moroccan regulatory approval of the Energean partnership transaction is expected shortly. On completion, US$10 million will be payable to Chariot.
· Chariot and Energean technical teams are working closely together on the Anchois development project delivery,
EBITDA a popular quoted metric created to try and deceive shareholders into believing that a company is doing well when the reality is that it is not!
Any fool can sell products at a loss the key to being a successful company is that it needs to make a profit after deducting all of the costs of running it irrespective of whether they are cash costs or not!
AGE
Thinking about this again it is perhaps not appropriate to use an linear method of calculation as the additional £2.5m investment for the Bio Fertlilser add on enables the AD plant to provide a higher incremental rate of return!
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Highlandmatt in that case if we use £9m then £9m less £2..5m is £6.5m which is 2.5 times GT's valuation of enterprise value ?
AGE
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I think the £9-10m refers to having the Bio Fertiliser add-on, which costs £2.5m to build. But having stated this to be a profitable solution, that the investments are suitable for bank loans, and received $2.5m from Ruvuma, why hasn't this investment been made if the ROI is so good? It just doesn't add up
Highlandmatt in that case if we use £9m then £9m less £2..5m is £6.5m which is 2.5 times GT's valuation of enterprise value ?
AGE
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I think the £9-10m refers to having the Bio Fertiliser add-on, which costs £2.5m to build. But having stated this to be a profitable solution, that the investments are suitable for bank loans, and received $2.5m from Ruvuma, why hasn't this investment been made if the ROI is so good? It just doesn't add up
In case it is not clear in my previous post the Board have used Grant Thornton LLP NI to produce an independent report to justify selling EAG at an enterprise value of £2.6m yet the Board produced slides for the Annual General Meeting on 9 August 2023 that show an enterprise value of 5m.
The question has to be asked is why did the Board state that the AD plant has a Enterprise Value of £5m when they sought permission from shareholders to issue more shares yet now when they want us to approve the sale they state it is £2.6m and yet the Bank of England base rate has not changed in between the 9 August 2023 and 21 December 2023?
They state their reasons for selling at a massive loss as:
"Rising interest rates: the value of capital assets has decreased across multiple sectors as interest rates have increased since early 2022. As the risk-free rate available to investors increases, the expected or target return on fixed assets increases, reducing the price investors will pay for a series of cashflows. When the Company invested in EAG in order to acquire Greenan Generation Limited (“Greenan”), UK interest rates were 0.25% whilst the Bank of England base rate is currently 5.25%."
The above statement re interest rates increasing is factually correct however the AGM presentation was based upon a base rate of 5.25% and not 0.5% and it showed a sales enterprise value of £5m and not £2.6m?
Before making the decision to go ahead with the investment into EAG and providing the £1.2m to acquire GGL they would had a report produced that shows the amount of the investment/loan together with the expected cash flows generated by GGL and they would have discounted the future cash flows (DCF) using an appropriate discount rate and they would also have produced an Internal Rate of Return (IRR).
They would not have used the Bank of England base rate of 0.5% as the discount rate but rather 10% .
AGE
The Board produced a presentation for the Annual General Meeting dated 9 August 2023 and one of the slides contains the following:
"The optimum combination should be considered as a 0.5 MWe AD plant and associated BF plant requiring £2.5m of equity and delivering estimated enterprise value in the £9m-£10m range"
In the sales document they state:
They state the following:
"The market for a single 0.5MW AD plant is limited with a limited pool of potential local buyers, with investors typically seeking larger plants or managed portfolios of multiple installations." yet the optimum combination is 0.5Mwe AD plants!.
The example on the AGM slides shows Sales Enterprise Value of £5m so it appears as if the wording above of £9m-£10m is not correct as it must relates to two or maybe three AD plants rather than one.
The example shows Total loan balance on 31 December 2022 of £1.345m and
Sales Enterprise Value 5.0m
Corporate debt 1.8m
Net equity for distribution 3.2m
The Sales Enterprise Value of £5m has dropped to just £2.6m per the deal and yet interest rates have not changed in between 3 August 2023 and the date of the sales document which is dated 21 December 2023.
The Bank of England increased the base rate to 5.25% on 3 August 2023 and it is currently 5.25% and the presentation was dated 9 August 2023.
Just 5 months later and the Board have taken a complete U turn and they have produced a document giving a detailed explanation as to why shareholders should approve the sale and make a loss of 53.86% on the total loan of £1,578,000
AGE
Notice of a General Meeting of the Company, to be held at the offices of Pinsent Masons
LLP at 141 Bothwell Street, Glasgow, G2 7EQ at 10.30am on 10 January 2024 is set out in
Part II of this document.
The Board is holding the General Meeting in Glasgow rather than London where they have held previous AGM's & GM's thereby making it more difficult for shareholders to attend should they wish to do so.
AGE
The SCIR shareholders haircut is even larger than I stated in my earlier post as the loan to EAG is £1,522,000 and they are paying back just £702,267 so a haircut of £819,733 or 53.86%.
We therefore will never receive any of the interest that accrued on the loan from SCIR (UK) Ltd to EAG and will lose £819,733 of the money we lent to EAG Ltd.
As Ollie of Laurel and Hardy used to say "This is fine mess you've gotten us into!"
AGE
There is some interesting information on Companies House that shows that EAG Ltd and GGL have registered charges for loans from AIB Group (UK) PLC dated 18 July 2023.
AIB Group (UK) PLC carry out in-depth due diligence before lending money to EAG/GGL so if they thought EAG's and GGL's prospects are not good then why would they lend them the money?
Per the document produced by the SCIR Board:
"The receipt of a waiver by Allied Irish Banks PLC, as EAG’s primary lender, of any change of control provisions, or equivalent mechanisms, which may apply to the Proposed Transaction under the existing loan facility dated 3 May 2023 made between EAG and AIB "
The AIB loan facility is dated 3 May 2023 so just over 8 months ago.
If you look at the charge registered by EAG Ltd with the reference NI6650020002, you can see schedule 1 "assigned contracts" which include a number of feedstock contracts with Ludlow Bio Ltd dated 12 November 2020.
How is it that GGL is able to assign contracts between Ludlow Bio Ltd and other third parties?
AGE
Per the document produced by the Board:
When EAG acquired Greenan, the underlying NIROCs had 13 years
remaining. There is now 11 years remaining due to the passage of time. As a result, and due to
the absence of significant investment to grow revenue due to the lack of capital availability, the
value of the plant has reduced proportionally to the remaining NIROC profile.
2/13 x 100 is 15.38% so 84.61% of the life of the NIROC period remaining so plenty of time left.
AGE
The Board of SCIR/EAG must take SCIR shareholders for fools!
Voting in favour of the deal would be similar to Turkeys looking forward to Christmas!
2 Years ago the Board of SCIR convinced shareholders to vote for a major change of strategy having used their many years of combined experience as they had identified a new sector to invest money into.
They arranged the deal so that SCIR would loan the £1.2m to SCIR (UK) Ltd who would then loan it to EAG Ltd to buy shares in GGL a highly indebted company with negative net assets.
No interest was paid on the loan it just accrued in the books as an accounting entry and no part of the loan was repaid.
The amount payable to the sellers is £3 plus an amount of £702,267 in respect of the money that EAG owes to SCIR (UK) Ltd which is £1,270.000 so SCIR shareholders are taking a hair cut of £567,733 or 44.70% of the loan.
It is a sad indictment on the Board that in just a period of 2 years they have come to the conclusion that their decision
to loan money to EAG to invest in GGL was not such a good idea after all yet the IRR calculations were not based on a 2 year period but more like 20 years
I will be voting against the deal and all you turkeys who want to vote for the deal know what happens to Turkeys at Christmas.
AGE
the board of amc are a bloody disgrace, they metaphorically need a good kick up the ****!
age
Gwm121 we can only live in hope that they do but going on their past record of not answering messages sent to the CEO via the AMC website and leaving the announcement of the special dividend to the last moment and not providing shareholders with advice re the tax treatment of the special dividend I am not holding my breath.
AGE
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So hope amc board surprise us with transparency honesty communication ability to make deal.
I must say the Board of AMC have been as useful as a chocolate tea pot in providing assistance to shareholders in deciding if the special dividend is a return of capital or not!
You will not be getting my vote to approve any RTO!
AGE
Just noticed there was some spelling mistakes in my last post eg there instead of their
AGE
Gwm121 if you look at the consolidated statement of changes in equity on page 7 of the interim accounts you will see that the dividends declared of 31.284m USD are included in the column called accumulated deficit.
As I have explained before if AMC was a U.K. domiciled Company rather than a BVI domiciled company then under English Law it would be illegal for it to pay the special dividend.
Under BVI law it is allowed to pay the special dividend as long as it meets the BVI solvency requirements.
The charging of the dividends declared is an accounting entry however from a law perspective the special dividend is a return of capital.
HMRC may try and argue that if it is a return of capital then the special dividend should have been shown in the Share Capital Company column so that it is reduced by the 31.284m USD to then net down to 49.510m USD.
This argument is not valid because it is obvious to see that if there is a brought forward accumulated deficit of 40.529m USD then it is not possible to pay the special dividend out of the loss.
The service simplest way to demonstrate the principle above is that if you have 10 apples and you want to give someone 20 apples or 10 apples and 10 oranges then you can only give them 10 apples out of your holding of 10 apples you cannot possibly give them 20 apples irrespective of the fact there was a an accounting entry which shows that you have given them 20 apples.
Therefore if you want to give someone either 20 apples or 10 apples and 10 oranges and you only have 10 apples and 10 oranges you would have to give them 10 apples and 10 oranges despite what the accounting entries show that you gave.
Now apply the principle above and replace the share capital with oranges and the apples with accumulated losses and you can clearly see that if it was possible to have negative 10 apples you would not be able to give them 10 apples as you have none to give them.
Obviously it is not possible to have a negative amount of apples to start of with.
Obviously if HMRC try to run the argument that the payment of the special dividend is not a return call fof capital because there is an accounting entry in n the accumulated deficit then it will prove that they do not know there apples from their oranges!
AGE