KPO (ASX) Ann: KPO TO APPOINT FINANCIAL ADVISORS TO SECURE DIRECT THIRD-PAR

Originally posted by djwally: ↑

Really positive step today. Most will probably still be digesting what the hell this all means but here is my take which will hopefully make sense,

1. Near impossible to 100% debt finance Saddle Hills especially in the current environment with so many scenarios and uncertainty in financial modelling. Siemens no doubt are keen to contribute debt financing but company would need an equity stake to catalyse it.
2. It would be highly undesirable and arguably impossible to do through our ASX listed KPO because the MC is smashed and it would be highly dilutive and probably impossible to raise the funds required.
3. The company has cleverly pivoted as per the last webinar and 4C to embrace highly favourable North American legislation which mean CCGT with CCS bolt on (zero emission (95% cuts actually)) generate huge carbon credits ($170 tonne) and also qualify for a 50% CAPEX rebate on the CCS. This is a new vertical to their waste heat recover business but it is enormously profitable. By being an early mover and securing 4 of the best sites it can demonstrate the economics on $3-5Billion worth of projects that will get developed because of their favourable economics). This clearly puts a demonstrable economic value on our holding company KDP where it had very little prior to CCS - there was too much uncertainty.
4. By agreeing to sell up to a 50% stake in KDP for say $50M and reinvesting in to KDP now gives the equity needed to hit FNTP on Saddle Hills so we can leverage the debt financing they sound like they have in place. This will then release all the funds invested in developing SH which are reimbursed. Plus the 4% fees, plus a free carry.
5. KDP and hence KPO (at least 50% flowing through to KPO) can start earning money giving KPO a real balance sheet and the credentials to then roll out its ambitious plan elsewhere. What is to stop KPO setting up a holding company in the US? Or Europe? Or Africa? Or Asia? Rinse and repeat
6. The best part for me is probably the point around a debt financing instrument for all of the projects. Giving a minority stake in KDP say to a large investment bank then provides the self interest to catalyse project financing. Having never had a decent self interested institutional investor has always hurt us. Those days end with a self interested partner pushing our barrow. I see it as a turning point in our evolution.
7. We know from the last 4C that BH are virorously pursuing the metallurgy on our heat recovery "product". They are committed to his vertical. All this happens parallel to the latest CCS news. Once it is signed off, KPO is the one who will be working with BH rolling this out worldwide. And we will finally be in a position to successfully implement it.
8. With OEMs currently being negotiated with over funding development of site 1 on the CCS, if funds are committed prior to an agreed valuation on KDP stake, this should enormously improve the valuation as it brings the projects closer and enhances their credibility further.
9. Given the history of Stephen White I'm betting he and his colleagues have done all this kind of stuff before. Thats what they were at Pristine Power.

Its a big step forward for mine. Others will no doubt try and undermine but look at this rationally. We deal in a very conservative industry here. THis is not ASX mining cowboys with a pumped up announcement on drilling. They dont come out and engage like this without knowing the way this will unfold. And they certainly dont come public with it in an announcement unless they are supremely confident

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I've always been positive on these guys, so don't take this as an attack. But why this announcement? An announcement to say that you have STARTED THE PROCESS to appoint financial advisors. Not even that you've appointed them. The real news then, is that the appointed advisors will have secured said direct investment. You said KPO don't do pumped up announcements - but why announce this at all? Isn't this 'process' just something we, as shareholders, would have expected is happening in the background all along?

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Ann: KPO TO APPOINT FINANCIAL ADVISORS TO SECURE DIRECT THIRD-PAR, page-6

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