Ann: Kalina Announces Gas Tolling MOUs, page-17

It may be something to look at down the road.
These projects were initiated when the Canadian Government announced it was introducing a carbon tax and was supporting
Carbon Capture and Sequestration (CCS) as a clean energy option it would encourage.The projects are being developed using
proven conventional gas fired power technology to make financing easier.The introduction of waste heat collection and power conversion
would introduce added risk making financing more difficult..
The Government has now passed legislation for CCS and is expected to clarify the legislative environment for Saddle Hills type projects before the
end of this year.
The CCS play is an opportunistic move by the Kalina Development team to take advantage of the massive incentives being offered by the Canadian Government to promote CCS as a clean energy alternative.Because they were early stage movers, Kalina were able to secure sites that were
close to gas transmission pipelines, power transmission lines and designated sequestration areas.
It is a very different business path from commercialising new technology which remains ongoing .But it is not the focus of the business here and now.
Now that the legislation has been passed Kalina must lock in gas supply deals and power offtake deals.Armed with those it should be able to attract funding partners.Each project will cost circa $900 million and targets an EBIDTA return of around 15 per cent or about $100 million a year based on simple tolling arrangements.
Kalina has indicated it wants to end up with about a 15 per cent carried interest after selling down equity in the projects.
So the better the gas tolling and power offtake deals it can negotiate,the more it will get for the equity sale and the higher its carried interest.
The simple maths is that each project is worth $100 million for Kalina or 8 times the current share price for each unit.
More importantly good partners will held rebuild KPOs shattered credibility brought on by eternal delays and no news.
Progress on the CCS projects also means that KPO will become an attractive acquisition for power company as it would be able to expand a development
pipeline and access the KPO substantial tax losses.
We live in hope!