Member Info for scotpak

Https://www.premiumtimesng.com/news/more-news/831121-nigerian-govt-sets-up-committee-to-review-gencos-outstanding-debts-official.html

see above link for full article but key quotes were:

"The federal government has constituted a committee to address the payment of outstanding debts owed to power generation companies (GenCos) and to establish sustainable payment mechanisms to prevent future accumulation."

"Mr Mamman (minister of power), represented by Evangeline Babalola, a director in the ministry, said the committee’s mandate was not only to clear existing debts but also to ensure financial sustainability in the power sector."

HXUL mate, ya need to chill with this ramping!!

No problems being Rodney if it ends up being true!!

Some marginally positive news. Maybe it helps getting the genco bond over the line:

South Africa, Nigeria among countries off financial crime watch list | MarketScreener https://share.google/KmCaI1Qlhd6HGtNPj

Im sure most are in the know, but just in case, this is non-independent research/ marketing communication. One of the companies hired brokers. Nonetheless they do provide some useful colour.

Panmure broker note (paragraph on valuation):

Savannah continues to offer deep value based on the scale and depth of its asset portfolio. We recognise that investors may be feeling wary of investing given that the shares have been suspended for the bulk of the last couple of years but would argue that the company has changed its asset base substantially and consequent outlook. The pivot towards renewable energy projects has accelerated and the recent acquisition could deliver new growth in countries in which the company has never operated previously.

We feel that the share price is entirely underpinned by the core Nigerian upstream business, with the value of that (plus corporate adjustments) equivalent to 7p. In effect this suggests that the Accugas midstream business is a free option, with investors ascribing little to no value to the renewables business. Given the early-stage nature of most of these projects and the long timelines to any possible revenue generations we can understand this. Nonetheless, our TP implies upside of 358% from current levels. We would anticipate the shares being re-rated in the near future around newsflow on renewable project milestones and further development activity in Nigeria. We reiterate our BUY recommendation.

Their target price is 33p (reduced from 37p) reflecting dilution and higher debt.

Completely agree with all your points RR. They really dropped the ball with their accounting controls. Hopefully this will be rapidly addressed as its crucial in obtaining investor confidence. And I also agree that they wasted sooo much time in acquisition hunting, when they should have been focused on their core businesses. As for using the term, "We", I guess I was referring to all the shareholders as we are in this thing together. 100% not a savannah employee. I work in finance, and Im sure some of the people here met me in the coffee morning. (scottish Asian guy).

I think its very difficult to use H1 Free CF to make any big conclusions. There are sooo many moving parts, recent acquisitions whose profitability is still not fully reflected and lots of one off costs not adjusted for etc etc Very difficult to calculate the recurring free CF that savannah is expected to generate. The near term positives I can see are the positive differences between June 25 and Sep 25 balances. For example, cash has increased from $50.4m to $101.8m. Trade receivables have fallen from $528m to $493m. Cash collections for 6 month to June were $147m, whilst this has increased $241.6m for the 9 months period to Sep 25.

Would also be important to remember we still have $142m debt sitting in the balance sheet which relates to the Chad acquisition with only $37m being recourse to the group.

I would also agree with a previous poster who said this is a recovery story and not a growth story. SAVE has suffered 2 major events that were out of their control. 1) Chad biz nationalisation 2) Naira going from 400 to 1600 vs USD, causing the HUGE swelling of the receivables. If these 2 events hadnt occurred, perhaps our profitability and balance sheet would have reflected a company that had been on a decent growth trajectory for a number of years. But we are where we are. The chances of the receivable repayment are very high now given the nigerian govt has sanctioned the $2.8bn bond to repay all the gencos and gas companies (incl SAVE). And the likelihood of a successful arbitration against Chad seem to be pretty decent. Chad have themselves publicly stated that they will need to make a payment (obviously not mentioned amount).

Would staying as a public company not make it alot easier for the likes of AK and NIPCO to realise and make cash profits from their shareholding. Obviously they could take cash dividends as a private company but it would not be easy to align all shareholders in terms of timelines, cash dividend vs reinvesting etc etc.

Thanks Zengas.

Just to clarify your intro, are you more concerned now or were you more concerned in june?

Via AI:

Accounts with a "disclaimer of opinion" are ones where an independent auditor cannot provide an opinion on whether the financial statements are accurate and reliable. This typically occurs when the auditor cannot obtain enough evidence due to limitations imposed by the company or other circumstances, potentially undermining stakeholder confidence. A disclaimer doesn't mean the accounts are wrong, but that the auditor was unable to verify them.

What a disclaimer is not

A disclaimer is not the same as an adverse opinion, which states that the financial statements are materially misstated.

It is also different from a qualified opinion, which is issued when the auditor is able to give an opinion on most of the accounts, but has a concern about a specific issue.

>> so obviously disappointing but not a catastrophy and fixable. They obviously need to improve greatly in this area. They did mention they would be starting an internal audit function to help rectify this situation.

I'm obviously a bit biased due to my own positioning, but would be silly to sell around 7p, given you have to huge game changing trigger due in the near term. 1) Payment of receivables, if a material payment is made via govt, and report suggest this would be done by year end that would be very positive for the balance sheet 2) Chad arbitration results could be known as soon as March 2026. There are various other triggers but those are the most material.

If these 2 hit, shares will be easily trading at several multiples of 7p. Obviously thats just my opinion, but if you have already endured so much pain, why not hang on for a few months more.

SAVE's customers were making their payment in local currency (NAIRA) on a timely basis. But contractually they had agreed to compensate SAVE from any deviations from an agreed about USD/NGN rate. This is what is referred to as the true up mechanism, which was a clause in SAVE's gas sales contracts which allowed them to recover FX losses. Given Naira (vs USD) increased over a short period of time from 400 to 1600, you can imagine that the balances related to the true-up mechanism swelled up very quickly to a materially higher amount ($400m+). The customers were not making the payments linked to that part of the contract. The positive here is that the FX revaluation is now behind nigeria. It was a required painful adjustment Nigeria had to make to align the street FX rate with the official rate, thereby re-opening channels for foreign investment (& was also a chief requirement for the IMF)

Notes related to receivables

> 80%+ of receivables balance reflects the true up mechanism

> For remaining payments (not linked to FX adjustment), 100% of payments have been on a timely basis (vs 40% for their Nigerian peers)

> Expect to get paid cash for receivable, not promissory notes or free assets

> Receivables could be in the form of a $100m cash payment, with the remainder balance being linked to a payment plan

From my coffee morning notes, all I had was as follows:

>

Yes, I was thinking about the potential payment plan (mentioned in coffee morning) which could be a 50% payment + payment plan for the rest, but was hoping this development superseded that theory and that we could be getting a full payment of arrears. But as you stated regardless of the path, its a big positive development.

"“The meeting concluded with a consensus on the way forward, which includes conducting bilateral negotiations to finalise full and final settlement agreements that balance fiscal realities with the financial constraints of the GenCos."

Dont like the use of term "negotiations" and the use of the word "balance", but do like "full and final settlement"!! Fingers crossed for all.

Https://punchng.com/tinubu-approves-n4tn-bond-to-clear-gencos-debts-power-minister/

President Bola Tinubu has approved a ₦4 trillion bond to clear verified debts owed to power generation companies (GenCos) and gas suppliers, as part of a sweeping plan to stabilise Nigeria’s electricity market and restore investor confidence in the energy sector.

The main positive here in relation to your concerns is that the CEO has alot of skin in the game. He is bought a material amount of stock in the open market at attractive levels in recent months (pre-suspension obviously).

On a positive note, it is a good signal that SAVE are confident regarding their balance sheet, liquidity, solvency etc. It also further diversifies the business, which is important to bring bigger institutional investors into the picture.