Member Info for Itsriskythat

Agadem. All you can do is speculate what stabilise the company meant. I have taken it as simply getting paid for gas. Hence I view the RNS on 12th December as extremely positive, because any uncertainty about cash collections was removed. No prior RNS has provided this information. As it was in an RNS the statement was verified by the NOMAD before approval. There is also comment in November's Q&A about the asset, but nothing about the financials. Existing analyst reports are of no help in this regard .

I’ve just watched Malcy’s interview of Andrew again.

It was recorded alongside the “operations and financial update” RNS of 12th December. My own worry over Malcy’s interview is that Andrew isn’t asked about Savannah’s guidance given for cash receipts within the Accugas business, which was to me the most important part of the RNS.

My other observation is that when discussing Accugas, Malcy says to Andrew that if “you combine costs down by 18% and production up by 33% that makes the profitability and the cashflow”. It isn’t true, as all three of Accugas contracts to supply gas have a Take-or-Pay volume of supply in the gas sales agreement, and in particular it is cash received from its largest customer under the Calabar GSA which is the main source of funds for Accugas. This doesn’t go up or down with the volume of gas supplied to Calabar NIPP. Only Ibom, the smallest customer is above Take-or-Pay.

The power plant at Calabar is owned by NDPHC. Despite Calabar taking an increased volume of gas in 2019, NDPHC has been and will continue for the foreseeable future to be invoiced by Accugas as if it had received the Take-or-Pay volume of gas. This is what makes Accugas very profitable. It is immaterial whether actual production goes up or down, because historically Calabar NIPP’s plant has not required any more gas than the Take-or-Pay volume set in the contract with Accugas. Indeed should supply to Calabar exceed Take-or-Pay in the future, then the excess will be ‘make-up gas’ so Accugas receives no additional cash as NDPHC has paid for unused gas in prior months.

Malcy has never mentioned Take-or-Pay in any interview with Andrew or queried how the cash collection model at Accugas has been working during the long period between announcement of the Seven Energy acquisition and its completion. Through this period Accugas has been relying on NDPHC paying the invoices it has received each month. The invoices will have been for the contracted Take-or-Pay volume of gas at Calabar NIPP and NDPHC has paid these despite the liquidity problems existing in the power sector.

Indeed Accugas has considerable leverage on NDPHC because, under the terms of the Calabar GSA, payment of Accugas’ invoices is guaranteed by JP Morgan, the World Bank and the Sovereign Government. A default in payment would be a Sovereign default.

As mentioned above Malcy could have asked about Savannah’s RNS’s guidance for “expected cash receipts of $190m” which is an extraordinarily high number compared to its historical cash collections. The $190m was sufficient to fund both operations at Accugas, as well as payments on the Accugas debt, resulting in a larger than expected $40m reduction in debt at the year end.

Interesting that you should mention Alaoji as a new customer as Andrew Knott said in an RNS in December 2018:

"The planned addition of the Alaoji power station as a new customer to the Accugas business (alongside other new customer discussions which are ongoing) diversifies our near-term customer mix while also serving as the start of the roadmap we are seeking to establish to enable a third train to be built at the Accugas Central Processing Facility."

If the deal was oven-ready back then and it's still being baked, it has to be an electric oven.

Typo: converted on Friday at 18381p and was sold in several tranches at 20.0p.

I'd be very surprised now to learn that Savannah had repaid the $5.35m to RG and YAG on Friday 17th January when the loan matured. I now expect a notice of conversion by Riverfort Global and Yorkville Advisors Global was received by Savannah on Friday.

The trading pattern in the seven days leading up to the 17th was steadily downwards and the lowest daily VWAP was on the 16th January at VWAP 19.764p (from the data available on ADVFN).

With the low trading volumes since the New Year and the absence of positive news from Savannah, a downwards trend was easy to predict. I don't know when RG & YAG knew of Savannah's intention not to pepay the loan, but they decided to convert half of the loan plus interest at the earliest opportunity.

This is the evidence:

The O trades between 13:33 and 14:59 on 17th Janaury were 1,000,000, 1,043,403, 91,593, 2,659,692, 2,445,057,, 214,635, 1,000,000, 2,659,692 for a total 11,114,072

0.93 * VWAP = 0.93 * 19.764p = 18.381p

Total value of shares converted was £2,042,862

Mid FX GBPUSD was 1.30944 (from the data available on ADVFN) so the value of shares in US $ was $2,675,005.

Double this amount is $5,350,010 which is precisely the amount due to be repaid. So I'm pretty convinced that 50% of the loan that matured was converted on Friday at 19.764p and was sold in several tranches at 20.0p.

So I'm expecting an RNS on Monday to announce the RG and YAG loan wasn't repaid, and also the reason. This now raises questions about funding of the two segments of the business, the overheads in London, and the cash for any dividend.

We will update on the loan facility as soon as possible (when the power comes back).

https://www.blueprint.ng/20000mw-projection-suffers-setback-as-national-grid-collapses/

I learnt about the investor call whilst on holiday in Kenya.

I emailed to ask if was possible to use the conferencing facilities from abroad through any internet app to avoid the cost of using a phone.

Before the call I sent in some questions in the hope they might be asked, but I didn't get a reply and I don't even know if they were answered as I terminated the call due to the cost. Calls to the UK from Kenya cost several £'s a minute and, when I tried to dial in, I couldn't avoid the charges.

I do hope Savannah doesn't have any retail investors in Niger or Nigeria who wanted to participate.

I now read here that several UK investors sent in questions, but weren't available at 9:30am to listen to the call so they don't know if any were answered.

It's been a poor outcome and it speaks loudly to not caring about retail investors that so many questions are left unanswered and a recording isn't available.

A great deal. Well done everyone. Smiles back on faces, there's now plenty to shout about.

Since being re-elected Buhari has rapidly approved three new deals: firstly a deal such that the Nigerian government operated power plants will be funded and operated within the private sector; secondly a deal to upgrade the electricity distribution network; thirdly a deal so that the stranded oil and gas fields on OML 13, which surround the Uquo gas field, are developed and at pace. This last deal was the reason that Andrew Knott wanted to restructure the Seven Energy transaction: OML 13 gas has only one route to market through the Accugas CPF and transport in the Seven Energy owned pipelines.

The potential growth is clear from the production targets for OML 13 production: “The GMD (of NNPC) disclosed that the OML 13 acreage had over 926 million stock tank barrels (mmstb) and 5.24 trillion cubic feet (tcf) respectively of oil and gas reserves, adding that the Financing and Technical Services Agreement was for a period of 15 years while the $3.15 billion ceiling funding would be provided by SEEPCO with a 10-year capital investment period and five years for cost recovery. First oil of about 7,900bpd is expected from the project by 1st April, 2020, while production is expected to peak at 94,000bpd and 542mmscfd within four years.”

Growth in the sector is going to happen and happen fast, judging by the renewed energy by Buhari to get the deals done. So it seems that Andrew Knott spotted a fantastic opportunity and is justified in his excitement about the prospects for the Seven Energy business being acquired. This Seven Energy transaction, whilst much smaller than the other deals is still the most important link in the chain.

Nigerian Press:

10th July - President Buhari approves the Nigerian government agency BPE to privatise the ten National Integrated Power Plants, which include Calabar NIPP and Alaoji NIPP which are both Seven Energy gas customers

https://guardian.ng/news/bpe-set-to-sell-10-nipps-nigcomsat/

22nd July - the deal with Siemens approved to upgrade the transmission and distribution infrastructure:

https://www.pulse.ng/bi/politics/nigeria-signs-deal-with-siemens-to-upgrade-the-countrys-electricity-supply-to-11000/db28lff

24th July - the deal between NNPC and SEEPCO approved for the $3.1 billion financing of OML 13 development:

https://www.pulse.ng/bi/finance/nigerias-state-oil-firm-secures-dollar315-billion-financing-for-oml-13/syg5ty6

https://nipc.gov.ng/2019/07/25/nnpc-signs-3-15bn-deal-financing-for-oml-13/

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The more you uncover about this Seven Energy transaction it gets better and better.

I began to ask myself why Andrew Knott risked a long delay in the approval of this transaction due to the Nigerian election process and pressed on in changing the ownership percentages, when the deal had been signed off already by the Minister of State in October last year. So I’ve been monitoring news in the Nigerian gas to power sector, and found that, with the benefit of the Nigerian election being out of the way, new deals are now being signed by President Buhari and these deals are huge in terms of dollar investments and target the reliability and gas production growth in the sector. The delayed power sector recovery has found a new injection of pace.

Last December Andrew Knott said that the original deal for Seven Energy was a proposition to release the value trapped in the Accugas business, along with the strategic value in the pipelines and the upstream hydrocarbon assets. That during the summer and autumn months last year it became clear to the Savannah team how to achieve growth from a restructured Seven Energy deal taking majority control of the midstream Accugas gas business, the gas pipelines, and the Uquo field. With the benefit to Savannah that it would have proportionately more asset free cashflow as well as gaining further from future growth in gas sales. So the often criticised decision was taken to amend the terms of the deal, resulting in 75-80% ownership of the Accugas CPF, the pipelines and the Uquo gas field, as carved out of OML 13 licence.

The important point that it has been easy to overlook, whilst focussed on this revised deal being signed off by President Buhari, is that Buhari isn’t idle. He hasn’t wasted time in signing off on some important new deals in the sector. This is a sector that more than ever requires several efficient parts in order to grow the megawatts produced rapidly over the next few years: a reliable electricity distribution network, with the Nigerian bulk energy trading company (NBET) as middlemen to buy the electricity from the power plants and process payments to power plants, reliable power generation plants working closer to nameplate capacity, access to additional capacity in pipelines, further trains being added within gas processing facilities, and the tapping of more gas resources. This has long been recognised as one of NNPC’s seven critical gas projects: tapping the stranded gas in OML 13 and bringing it to market through the Uquo CPF.

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Costs for time delay .. I wonder how you measure the damage to Egdon arising from N Lincs knee-jerk obstruction?

I think the World Bank and the NSIA will both be pressing Buhari for completion of the 7E Transaction.

The facts are that the World Bank’s investment arm, International Finance Corporation (IFC) took equity in Accugas in 2014 and also supported Accugas by subscribing for $50m of its senior secure notes. It is still invested in Accugas so the World Bank has an incentive to call on the Federal Government to protect its own investments. Furthermore the World Bank's Partial Risk Guarantee with Accugas is signed and supported by a sovereign guarantee from the Federal Government of Nigeria. A default in the Partial Risk Guarantee would not only significantly impact Nigeria’s borrowing ability in the International Capital Markets, but also increase Nigeria's cost of borrowing.

The Nigerian Sovereign Investment Investment Authority (NSIA) will also be pressing for completion of the transaction. The NSIA also made an investment in Accugas in conjunction with the IFC in subscribing for senior secured notes, in order to help Seven Energy to develop gas infrastructure and help to get Calabar Power Plant to operate. Now the power in the Calabar area has improved significantly, those investments have yet to produce any returns from Seven Energy.

For this reason the World Bank, and the two Sovereign bodies, the Investment Authority and the Federal Government will all be lobbying Buhari to get the transaction approved.

Will he or won't he support fracking?

https://drillordrop.com/2019/07/23/boris-johnson-on-fracking-and-what-campaign-groups-say-he-needs-to-do-now/

A recap on progress of the Seven Energy Transaction as stated at the AGM:

The former Minister of State for Petroleum Resources has already signed the transaction off and transmitted it to the President's Chief of Staff, but Presidential sign off of ministerial decisions from his previous cabinet does not occur until the full new cabinet has been appointed after which Buhari gets back to business as usual.

In this interview on the One on One TV Channel the former Minister Ibe Kachikwu discusses how he worked with the President. He spoke about how the DPR, himself and the President jointly assess an application for petroleum licence renewal and how the President's approval is achieved.

https://www.youtube.com/watch?v=zGjP8vkj0PY&feature=youtu.be

Watch from 50:35 to 52:50 and on approval of the President at 51:50

I find the whole video of interest as background to what the former Minister says he and the President achieved in the first Presidential term.

You saying that all the 1.5m at 11.6p was picked up by you or a major part of it?

https://www.google.co.uk/amp/s/punchng.com/ministerial-list-senate-gives-buhari-five-days-to-sign-seven-energy-deal/amp/

I'm also of the opinion that the Council will lose. So common sense says the councillors remove their objection, but pride comes before a fall ...

Egdon has never been known for getting excited. So to say they are "looking forward to the next update" on Biscathorpe-2 must mean the company's pulse rose a little today. There could still be life in the company.

Hope some people found that useful?

I asked the question at the Savannah GM in Mar 2019 about the impact on the balance sheet of taking a larger share of the Accugas Facility and the associated risks. In answer to the question, it was said the Accugas business has borrowings under the Accugas Facility, but this is non-recourse to Savannah Petroleum plc. I've subsequently researched that the Accugas banking syndicate comprises Ecobank, FCMB, FirstBank, UBA and Unionbank and, whilst requiring semi-annual amortisations of the debt, the syndicate have agreed to allow Accugas to retain sufficient capital for pre-agreed maintenance and expansion. Amortisation payments will be made only after the Accugas payments have been made to Savannah's other Nigerian subsidiaries Uquo (SUGL) and Stubb Creek Hold Co. The important point that is easy to overlook is that Savannah will always receive the payments from Accugas for the gas it is supplying from its Uquo and Stubb Creek fields. There are some figures for the Asset Free Cashflow net to Savannah from the two fields, which are in the 2019 Annual Report page 8. The net effect of this cashflow certainty is that the cash position of Savannah is increasing year on year. Mirabaud puts the cash on the Savannah balance sheet at $58m in 2019, $58m in 2020m $113m in 2012 and $269m in 2022. In terms of the security of payments to Accugas by their largest customer Calabar NIPP power station the payments to Accugas are underwritten by the current World Bank's partial risk guarantee.