in my view, AUZ ideally needs a partner who will buy half the project and fund half its share of capex.
Auz can then use the proceeds of sale of 50% as its equity contribution along with concessional long term loan from NAIF/ ECA and prepayment from offtake partners for its share of 50% output and senior/ subordinate debt with working capital facility. Given this will be the only income generating asset for AUZ, the volatility in commodity prices or delays in proect delivery will put a lot of pressure on WC. Having a partner with A strong balance sheet will take some WC pressure off and there will always bean option to further sell down the project once it’s producing to pay down debt quickly.
Yes, NPV of its 50% share gets halved but it seems like a better option for shareholders, rather than trying to raise large equity portion with 10-15% prepayment and 50-60% debt. You can also argue that if an offtake is signed with a significant financial commitment, the SP will re rate and lessen the dilution on capital raising.
Funding is one part of it, how they choose to construct will have a significant impact on the commercial outcomes and return to the shareholders. The BOD has indicated their preference of EPC instead of EPCM without any project management or execution experience. As a shareholder, I would like them to negotiate a turn key price ( yes, bit more expensive) and secure delivery of the project delivery and plant performance with bank guarantees .
all imo of course.
AUZ Price at posting:
1.6¢ Sentiment: Buy Disclosure: Held
