Member Info for Contrariwise

CHR155 is right that the share price has lagged, but I view that as an opportunity: the offshore wind market is growing strongly and the recent order flow demonstrates that Tekmar can profit from it. Would you rather buy the shares now when they are unappreciated? Or later when the market appreciates them and the price has gone up?

Opportunity for Tekmar?

https://www.carbontrust.com/news-and-events/news/offshore-wind-accelerator-publishes-new-design-recommendations-to-prevent

I topped up. The last month has seen constant flow of new contracts. Hopefully the market will start to take notice after the interims in June

Thanks Tribalhound & Foggy100. I am not really after a Green Energy fund though. I like Tekmar because its a supplier: like Levi Strauss selling jeans to the gold miners. I have had a look on the UK wind energy association website and almost all their members are either non-British or privately held - none seem investible. Tekmar is not a member. I think I may just buy more Tekmar.

I think that we now have 2 swallows: second positive update in a row. But I take your point.

I thought that this was a very positive update. Ghana operations solidly profitable. Operating profit of £3m, annualised = £6m. At the current market cap of £12m that puts the company on a PE of 2 (OK, operating profit is not net profits, but still). Above all Kilimapesa no longer a drag, and the company seems to be on a path to consistent profitability. Why aren't the shares flying?

ZagEgypt, you are right. Thankyou. I have tracked down the relevant RNS:

As set out in the Announcement, as part of the terms of the Funding Agreements, on the earlier of (i) 60 days after the date of spudding of BPC's Perseverance #1 well in The Bahamas; (ii) 31 December 2021; or (iii) such other date where a reconciliation is permitted under the Funding Agreement (the "Relevant Assessment Date"), BPC may be required to make a cash payment to the Investor to the extent that the Investor's aggregate return from a sale, if any, of those new ordinary shares has been less than 115% of the subscription price. BPC is only required to make a payment in the event the Investor sells shares for, in aggregate, an average price of less than 2.3 pence per share (being 115% of the subscription price), with the payment being the difference between 2.3 pence per share and the average sales price. No payment is required for any shares that the Investor continues to hold at the Relevant Assessment Date. On the basis that the Perseverance #1 well spuds on 20 December 2020, the Relevant Assessment Date would be 18 February 2021. There is no capacity for any such payment to be made in the form of shares, such that the level of dilution to BPC under the Funding Agreement is fixed and knowable.

I read that to mean that Lombard Odier can only sell shares and expect BPC to pay them the difference after 60 days have passed from the spudding of Perseverance #1. This is an absolutely extraordinary agreement. I have never seen one such like before. In essence BPC have gambled all on Percy1 being a success. Here's hoping.

Qnard, if you are referring to the Lombard Odier agreement, then yes. They should not be selling at a price of less than 2.3p according to the agreement I believe. If there is bad news it leaks out and people sell, good news they buy. I will be watching with interest tomorrow morning to see how the share price moves.

As various people have said Perseverance #1 must be approaching depth, which means some company people will know whether it has been a success or failure. That news will leak out into the share price. On that front I'm afraid the omens do not look good. Someone dumped 2.2m shares at 2.0155p just before the close, and the shares were down 9.5% on Friday. I hold this and would love the well to be a success. I will be watching the share price. If it starts to tick up I'll add to my position, but not if it continues to drift off like this.

I have a large position in Tekmar (ticking up nicely) and would like to invest in other UK companies in the offshore wind supply chain, but I can't seem to find any. There are a few consultancies like RPS Group and Wood Group, but I can't find any listed equipment makers. Any ideas?

The 32% income tax figure is from the annual report:

. The current income tax charge of $7.2m was incurred by R.V. Investment Group Services (“RVIG”) in Azerbaijan. RVIG generated taxable profits in 2019 of $22.6m which were taxed at 32 per cent. (the corporation tax rate stipulated in the Group’s production sharing agreement).

Thankyou KingSuarez, that is admirably clear and well explained. Just to be clear:

If revenues are $100m and profits $50m.

Under the current arrangements: royalties are 12.75% so net revenue to AAZ is $87.25 minus costs of $50m = profits of $37.25m minus income tax of 32% = $25.3m received by AAZ

Under the final royalty regime: of $50m of profits 49% is attributable by AAZ = $24.5m minus income tax of 32% = $16.7m received by AAZ

These figures match yours. Hence, profits will drop substantially when the full royalty scheme comes into effect.
Many thanks for your help.

Thanks. That is helpful. I never knew the Azerbaijanis were so honest.

Am I right in the calculation that when all the development costs have been offset against revenues, and the Royalty agreement comes into full operation that AAZ will only receive 1/3rd of net profits post tax: 100% minus 51% = 49% * (1-32% corporate tax) = 33.3%

Harsh

Hi, does anyone understand the Royalty agreement between AAZ and Azerbaijan and how it is accounted for? According to the annual report Azerbaijan get 51% of revenue once the costs of development have been paid back, and currently receive 12.75% of revenues. However, I can't see how this is accounted for. According to the website: "The Company is entitled to a maximum of 75% of the sales proceeds of minerals to set against all operating, deemed interest and capital costs. Thereafter, the remaining proceeds are allocated 51% to MENR and 49% to Anglo Asian.

A tax on profits, and no other profit or sales tax, is payable at the rate of 32%. However losses can be carried forward indefinitely. The costs of fixed and movable assets other than buildings are depreciated at a rate of 25% of declining balance. Double taxation relief provisions are included."

Does this mean that the revenues due to Azerbaijan are not seen by the company and therefore not accounted for?

Thanks for your help