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In my opinion the main pertinent points arising from the discussion between board members and shareholders were as follows:
1. EWC has sufficient funds (debt finance and cash at hand) to finance its immediate projects, such as the expansion of up to 315MW of the Sengkang power plant and the 4x0.5mtpa LNG trains.
2. Sangkang gas reserves currently available are sufficient to supply 2mtpa LNG for up to 10 years. Drilling to confirm further gas reserves (estimated at up to 7 TCF) will be undertaken once the 4 x 0.5mtpa LNG trains are operating and LNG is delivered to customers.
3. Abbot Point gas pipeline and LNG plant are being actively pursued. The QLD
4. government is fully supportive of this development. Gas field operators and producers in the Bowen and Surat Basins are extremely interested in this project. Relevant financial institutions are keen to provide funds towards the cost of this project, as this project is assessed as being a very good and solid development. Gas reserves to supply enough gas to the proposed LNG facility/ies are available from either EWC’s own gas fields or third party gas field operators/producers.
5. Key Australian and international stakeholders in the LNG business are beginning to realize the fundamental merits and great cost advantage of EWC’s modular LNG train concept.
6. EWC’s low cost LNG production puts it well ahead in terms of cost and timeframe of other LNG producers which base their business and operational model on the m
7. ore traditional (and hugely more expensive and time consuming) approach of building large LNG plants costing US$3billion + for 4mtpa, compared to less than US$1billion for EWC.
8. Revenue from the first LNG deliveries will also be used to finance further drilling in Sengkang gas field as well as to fund further LNG trains and LNG developments.
9. It is expected that EWC will be able to start paying dividends in a few years time (I estimate that this will be part of the 2010/11 financial year operations., as ABN AMRO’s most recent calculation (28 October 2008) shows an EPS for EWC of 25.1cents for 2010/11).
10. While EWC’s management has focused exclusively on being able to deliver on its projects and to pursue new business opportunities, it has recognized that more attention is warranted to communicating its business strategy and project process/development to the market.
11. The issue re: current share price (around 30cents) was discussed. It appears that the June share placement (130m shares at $1.20) attracted hedge funds which consequently sold the share down. It is beyond management to ensure that institutions etc. taking part in share placements will not ‘short sell’ the stock. Fundamentally, Mr. S. Elliott believes that, over time, the share price will reflect the fundamental value of the company. Consequently, his prime focus is on the delivery of projects on time and on budget. Subsequent discussions with other shareholders seem to confirm that the recent downward pressure on EWC share price was compounded by margin calls, funds needing monies for redemption and ‘short selling’. Independent valuations of EWC share price in indicate a fair price to be $1.32 the current situation. Given the hundreds of millions of dollars of revenue EWC will receive, once the LNG facility/ies are operational, a share price well in excess of $5 is warranted (see ABN AMRO forecast above).