ECT_Rep - Q&A Session - Letter, page-25

SatinTape,
ECT is not a bank or a financing business so we don't judge our performance on the net interest between our lending (in) and our loans (out).
That being said, if you take the net position of 15% out and 10% in and that 5% net interest on debt is your basis for suggesting we are being "overly generous" with the lender's rates, I'd ask you to do someone research first and take a reasonable sample size of similar (non financial) company's and see what their net debt interest figure is. Also, another measure is how does this rate compare to a company's weighted average cost of capital (WACC). Equity cost for a company like ours is 25%+, so we often aim to raise debt at 10-17%. Obviously our preference is for a lower rate but testing times for the company doesn't add to the leverage that one has with asking for rates at the lower end of the spectrum, but the way we see it we need to beat the cost of equity and where we can use pre-existing equity as the security (that is ELF stock that isn't paid back by borrowers), then that's even better.
Our company is targeting cash flows from sales of steam and boiler packages and developing projects for Coldry, Matmor, COHGen and others, not by creating a interest rate surplus of lent funds against borrowed funds. That is not our business model.
Regards
ECT_Rep