Member Info for loopin

the doc makes it clear that today thats newshares hopefully rest is debt

That’s not how contingency is used. Basically in any estimate of capex there are known things that are quantified and costed(some with committed bids) some known unknowns that are basically estimated based on extrapolations from other things you could price, and the last item being contingency to cover those things you didn’t have listed for estimation. There are set norms that enable contingency to be sized based on experience and the current level of design definition. You should treat contingency in an estimate as already committed even though you task your team to not spend it.

In our early estimate sxx wrapped up contingency and escalation to numbers that were too low vs design definition. Credible engineers who joined the co have been heard frankly sprouting bollocks about contractors and risk one should be able to price into your rates etc. This saddened me at the time (early days of the project) as an investor but since then sensible steps have been taken.

i would have thought not. that which can be fixed price i think the SP already factors in. some fairly hefty items are still target price and so we as holders still have capital risk on.

i posted about the contingency and escalation levels states a year or so back, the additonal 400m has not suprised me at all. that said the fact is further unknowns may emerge as the design and the build continues so the SP in my view will not derisk from the projetcs perspective for a while. i see a step upwards once ST2 is resolved, and another in a years time once the project is moving properly.

this is a big shift in my industry. looks like our mts contract would move from JEC to WP

" The risk of significant cost overruns have in my view been mitigated by the type of contracts that have been used. In the majority of cases any cost overrun will fall on the contractor and not Sirius so any cost overrun should have little or no effect on the SP. The same is true of delays in construction."

We don't know enough yet to state this. For sure the MTS base capital cost risk is still with the company. lots of things can delay this project and any delay will effect the timing of revenues and thus the shareprice, we are still a one trick investment. As the project eventually derisks then the price will rise. I have a few earlier posts about the contracting strategy and the light contingency levels that also covers escalation. The direct labour pool in the North East is not that dependable for certain construction pricing. In summary plenty of real construction contracting risks to go yet, and I base this on detailed knowledge of Teesside, the local engineering capability and as a current Proj Director of a much larger project. We aren't out of the woods yet. Soon though...

not by my measure. but i try to share observations where i can. ineos already have an ethane cracker in the uk at grangemouth. it runs on imported shale ethane which arrives by ship from the usa. sabic followed suit and converted its naptha cracker at wilton to run on a mixed fuel and also imports ethane via ship from the usa to north tees. both locations now (in last 5 years) have vast liquid ethane storage tanks. some of ineos’s cracker network in mainland europe is landlocked without direct access to deep draft ships. there is a today and for the mid term/decade an input cost /price advantage to running such a machine on imported shale gas. thus this project scheme makes commercial sense. it follows for the same reason that both companies recommend the uk directly access’s its considerable shale reserves. we are sitting on them with cracker assets in optimal locations and direct use would give a worldwide cost advantage. instead we wait for the usa to build more cracker assets to do the same before us. (shale gas out of ground is lots quicker than building a crackerj

this wouldnt be Teesside as there already is a surplus of ethylene available produced by sabic. most likely in norway.

wilton could certainly fit another PE plant.

Stokey,

it’s way to early to know if any material ammounts of construction costs are saved. the overall project risk model still has unknowns and ive previously posted about their stated levels of contingency and escallation.

if they know what they are doing they will keep silent on this matter. ive seen too many clients fanfare savings only to blow them later on..

banks make their money on the co repaying the loan at an agreed rate. the co pay this back (and the premium for the borrow) prior to any money making its way to the shareholders. as such dilution (effect of spead of the mine over an increasing no of shareholders) has no effect on the banks. thus your statement that more dilution equals less for the banks is wrong.

Would be nice if the minister could spell Teesside.

pressed send too early! because the courses only ever have disaster projects as casestudies.

As a mega project Project Director i certianly hope that your comment on proj courses fails to be true!