us power authority takes call option

Well this has really sparked some robust discussion. Is it because the announcement has left everyone saying, "What the???"

What the hell does it mean?

It's gotta be good right? I mean I for one had already given the whole scheme almost 100% certainty after one of the announcement late last year or early 2011. I think it was a Power Purchase Agreement ann or something similar. I should check...

Yep. Probably since December or so I have been bullish on the likelihood of them breaking ground. What with all the SCPPA, PPA stuff etc..

Lately the market is just having a hissy fit because progress isn't instant. Let's face it it'll be ages before they generate any income from the PPA. Well it's complete apathy really. The market is just ignoring EVM. Only a small bunch of believers are grimly hanging on - Myself included.

But hey! That's probably a good thing! Look at some of the overhyped stocks on HC getting absolutely smashed over the last week. The quiet ones are always the ones that go crazy.... No good to be chasing the bus with your ticket in your hand better to be safely seated and patiently waiting.....

Anyway, to expose my incredible stupidity. Let's have a close look at today's announcement.

A call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option.[1] The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or "writer") is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee (called a premium) for this right.

Alright so now that we all understand what that means, there's this...

The SCPPA call option to purchase the first EnviroMission 200MW Solar Tower planned for development in Arizona?s northwest was a term of the 21 October 2010, SCPPA Power Purchase Agreement (PPA).

So I think the "term" that they reference is a clause in the PPA. I had to read it three times before I stopped thinking "term" as in , "for the term of his natural life". Obviously a call option gets you thinking about time frames...

So with that segueway, let's talk "terms" - I mean "time-frames"

SCPPA would have an option to purchase the first tower (la Paz) after 10 OR 30 years of operation for "fair market value" OR for the remaining debt. So I hope that RD has done the numbers because it sounds to me like if there is 50k of debt left at ten years then SCPPA will pick up a cheap power-station. Mind you if it can't pay itself off in ten years is it worth having anyway??

How is fair market value determined anyway? Future power generation would have to be discounted to make the investment attractive but by how much?

(Annual power production x $ / watt) / discount = Price?

Is there any published figures on $$ / watt in the PPA? I glaze over with figures like that but to be taken seriously (EVM)they need to be available for study. Does anyone know?

Are these figures the additional information that is going to be drip fed to us , "....in coordination and consultation with SCPPA." Why does SCPPA want to keep any information under their hat anyway? Just tell us what you know!

I digress. The second call option is for power only from the second tower which will result in a 400MW PPA.

That's both towers, right? They are 200mw towers are they not?

I think the judicious use of a few commas and full stops might have made the announcement a little easier to understand. I've been following this company for some years and have a fairly broad based understanding of what they are trying to achieve and the regulatory requirements that they have overcome to get this far but this ann is hard work.

Admittedly I am hampered by my incredible laziness and lack of true insight into the hidden complexities faced by RD and his team but that is all the more reason to dumb these anns down into the equivalent of a HeraldSun sports story. At least it would percolate into the psyche of the masses - even if it was by osmosis. One read of today's ann would be enough to cause a layman to slip into a coma.

I'll wrap this up or I'm be just as bad.

This actually seems, once we delve into it, to be a really excellent outcome.
Obviously there are numbers to analyse (any volunteers?), but this deal provides us with a line in the sand and some additional security / certainty about the whole project.

Keen to hear any views on pitfalls of the "call option" avenue that EVM have chosen - or were pushed into?? - by / with SCPPA.

Anyone notice if any sells/ buys have been pulled / added since the ann?

Sorry to crap on, 431.