new tricom research note target 76 cents

TRICOM RESEARCH: Energy World Corporation Limited (EWC $0.20) – Development update

Reiterating BUY recommendation. price target $0.76/share

EWC offers excellent exposure to the Asian LNG market through its 100% owned Sengkang project in South Sulawesi in Indonesia.

The Sengkang project currently has 695BCF in 2P reserves and an additional 2.25TCF in prospective resources.

The expanded 315MW Sengkang Power Station is expected to consume only 340BCF of the gas reserves over the life of the PPA.

The remaining 355BCF of 2P reserves and the 2.25TCF of prospective resources will be consumed by EWC’s Sengkang LNG project.

We have assumed first LNG shipments commence in early 2010 with the ramp-up to full production expected to take just under two years.

The company has yet to secure a formal offtake for the gas however an MOU has been signed with Indonesia Power to supply up to 1.5Mtpa of LNG to power stations in Bali and Java.

We are reiterating our BUY recommendation on EWC but have lowered our price target from $0.85/share to $0.76/share to reflect some modest adjustments to our short and medium term commodity price and FX assumptions.

Key milestones for the company over the next six months include commencement of site construction at Sengkang, formal signing of an LNG offtake agreement and extension of the Power Purchase Agreement to allow an expansion of power generation capacity from 195MW to 315MW.